Bloomberg News

SEC Watchdog Finds No Improper Motive in Document Destruction

November 02, 2011

Nov. 1 (Bloomberg) -- The U.S. Securities and Exchange Commission’s internal watchdog found no evidence of improper motive behind the enforcement unit’s policy of destroying documents from initial probes that were closed without becoming formal investigations, according to a report released today.

SEC Inspector General H. David Kotz found that agency staff destroyed records that should have been preserved as federal records, according to a 59-page report on his investigation released today. At the same time, there was no evidence that a particular probe was harmed by the document destruction, Kotz’s office said in a summary of the findings.

Kotz initiated the review in response to allegations by SEC enforcement attorney Darcy Flynn, who cited the improper disposal of records in a 2010 complaint. Kotz said the SEC should’ve been more forthcoming in response to inquiries from the National Archives and Records Administration about the document destruction.

The report urges the agency’s director of enforcement to counsel employees on giving full and complete responses, and to take steps to determine when documents must be retained.

“We appreciate the Inspector General’s review of the decades-old document retention policy that was discontinued in July 2010,” John Nester, an SEC spokesman, said in a statement. “As the report notes, the old policy was discontinued when the National Archives and Records Administration voiced concerns. We will continue to work closely with NARA to resolve any outstanding issues.”

--Editors: Gregory Mott, Lawrence Roberts

To contact the reporter on this story: Gregory Mott in Washington at

To contact the editor responsible for this story: Lawrence Roberts at

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