The Securities and Exchange Commission (SEC) dismissed proceedings in 42 enforcement cases after disclosing improper staff access to restricted records at the agency occurred on a wider scale than initially identified.
The SEC acknowledged the issue in a statement Friday that revealed the results of an extensive investigation into the improper access first disclosed in April 2022. Then, the agency shared details on two cases where enforcement staff had access to certain restricted documents; the new statement offers descriptions on 28 affected matters.
The agency’s review, supported by consultant Berkeley Research Group, found no evidence the improper access affected the actions of investigators regarding the cases. However, the SEC still moved to dismiss 42 pending cases to preserve resources, it said.
The 42 cases were proceedings against individuals and companies being handled within the agency’s in-house courts. Among the group was the agency’s case against Jeffrey Wada and David Middendorf, two individuals involved in the notorious KPMG cheating scandal.
The improper access at the SEC was the result of databases maintained by the agency not being configured to restrict access by staff from the Enforcement Division to memoranda drafted by staff from the adjudication group in the Office of the General Counsel. The SEC said it has since enhanced controls to ensure enforcement staff would no longer be able to access the memoranda.
“We deeply regret that the agency’s internal systems lacked sufficient safeguards surrounding access to adjudication memoranda, and we are continuing our work to ensure that, going forward, work product from the adjudication staff is appropriately safeguarded,” the SEC said. “We take this lapse in controls very seriously and are committed to both informing the public about the scope of this issue and preventing any similar lapses in the future.”
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