June 5, 2023
More on “Another Control Deficiency for the SEC”
Speaking of control deficiencies, Dave blogged in April about the Commission’s improved transparency around its own issues. At that time, the SEC announced that they had determined that Staff in the Division of Enforcement had been able to access a database that contained certain memos prepared by the Adjudication Group. That access is not supposed to be possible, and the SEC has been conducting a review and implementing remedial measures.
On Friday, continuing its communication on this matter, the SEC released a lengthy statement from the review team, as well as 5 exhibits detailing 28 affected matters. Here’s an excerpt that summarizes findings so far:
In all instances, the review team found that the Enforcement administrative staff accessed the Adjudication memoranda as part of an effort to track and upload to the Enforcement Centralized Database all Enforcement memoranda recommending Commission action in enforcement proceedings. Consistent with this effort, the overwhelming majority of the memoranda accessed by the Enforcement administrative staff were memoranda to the Commission submitted by Enforcement staff. But because the OS databases were not configured to prevent Enforcement staff from accessing Adjudication memoranda—and the Enforcement administrative staff did not distinguish between Enforcement and Adjudication memoranda—those administrative staff included some Adjudication memoranda in their effort to continually upload relevant materials into the Enforcement Centralized Database.
As part of the review, the SEC’s investigative staff from the Division of Examinations, under the supervision of the Commission’s General Counsel and with support from a consulting firm, interviewed more than 250 current & former staff members and considered over 500,000 pages of emails and attachments, as well as hundreds of case files and 25 million rows of data from access logs of various systems. The Commission says that it will release additional findings from the review team as appropriate.
– Liz Dunshee