The Securities and Exchange Commission announced on Friday that it had dismissed 42 pending enforcement cases after discovering that enforcement personnel had improper access to materials intended for commission officials ruling on those cases.
The decision comes after the SEC completed a lengthy investigation into a problem that was first raised in April 2022, when it revealed that some of its databases had inadvertently allowed SEC enforcement staff to view legal materials intended for officials with its in-house court.
In such cases, the SEC’s enforcement and internal ruling arms are supposed to be kept completely separate from one another. The SEC apologized for the lapse and stated that it was committed to correcting it.
The SEC described the unauthorized access as “accidental,” as administrative staff in its enforcement arm worked to track and collect all relevant materials, but some databases were not adequately safeguarded to keep adjudication materials out. It went on to say that in most cases, the problematic materials were not made available to enforcement personnel until after a decision had been made.
According to SEC officials, an internal SEC review found no evidence that the improper access had any effect on decisions made by either enforcement staff or officials reviewing those cases.
Nonetheless, the agency decided to drop all pending cases, primarily against individuals and small businesses affected by the unauthorized access. The SEC also stated that it had agreed to lift industry bans on 48 people who had petitioned the SEC for such relief and whose cases were also affected by the error.