SEC Regrets Database Deficiencies on Adjudication Memoranda

The SEC expressed regret that its internal systems "lacked sufficient safeguards surrounding access to Adjudication memoranda" and said that it is committed to preventing similar lapses in the future.

Building on its initial April 2022 report, the SEC shared additional findings related to last year's discovery that that databases overseen by the SEC's Office of the Secretary ("OS") were not configured to prevent Enforcement staff from accessing memoranda drafted by the SEC Adjudication Group. The SEC said that internal deficiencies in the OS databases, allowed SEC Enforcement administrative staff to access Adjudication memoranda that either (i) pertained to a specific SEC Enforcement matter or (ii) described procedural actions that the Adjudication Group recommended to the SEC. The SEC said that because the OS database was not structured to prevent access by the Enforcement staff, some memoranda were uploaded to Enforcement Division databases. This supplemental report is based on an investigation by the Division of Examinations under the supervision of the SEC's General Counsel.

The SEC concluded that Enforcement staff accessed Adjudication memoranda specific to 28 matters. The SEC clarified, however, that there was no evidence for that suggested that access to the Adjudication memoranda impacted any Enforcement filings or decision-making in those matters.

In addition, the SEC found that in some instances, the OS, which released weekly reports on the status of outstanding recommendations from the SEC Enforcement Division, inadvertently included "limited information briefly describing Adjudication staff’s recommendations." The SEC stated that this was a result of the OS database's failure to adequately segregate Adjudication memoranda.