The SEC announced on Friday that it had dismissed 42 pending enforcement cases after discovering that law enforcement officials had inappropriate access to materials intended for committee officials adjudicating on those cases.
The oversight agency, now led by Gary Gensler, initially admitted last April that some employees in its enforcement department in 2017.
Access to those files was to be limited to commissioners and attorneys who advise the SEC on rulings.
Nevertheless, the agency has now admitted that an internal audit found that administrative staff within the enforcement division had improperly accessed documents that involved 28 additional cases inside the internal court system.
As well as, the review uncovered evidence from 61 other cases where enforcement officers had access to memos that were “widely utilized in many pending cases” within the court system.
An internal SEC review found that there was no evidence that inappropriate access had any influence on decisions made by law enforcement officials or officials handling these cases, in line with SEC officials.
“We deeply regret that the agency’s internal systems lacked sufficient safeguards regarding access to award memorandums, and we proceed our work to make sure that adjudication staff’s work product is satisfactorily protected in the longer term.” the SEC said in a statement.
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“We take this control gap very seriously and are committed to each informing the general public in regards to the extent of this issue and stopping similar deficiencies in the longer term,” the agency added.
Law360 was the primary to report the SEC disclosure.
Considered one of the primary cases affected by the breach, Cochran v. SEC, was settled within the Supreme Court last month.
The country’s highest court has ruled in favor of accountant Michelle Cochran, clearing the best way for defendants who’re the goal of enforcement actions in internal litigation on the SEC and FTC to challenge their constitutionality in federal court.
“It is the equivalent of a litigant gaining access to a judge’s file from their lawyers” – Attorney Nick Morgan told the Wall Street Journal last yr. “This violation reinforces the issue with the SEC’s administrative process, where the committee has complete discretion to deprive parties of the power to resolve cases in federal court.”
The SEC said its audit team’s findings are based on intensive document review and interviews with more than 250 current and former employees within the law enforcement department, the clerk’s office, and the overall counsel’s office.