SEC suspends destruction of enforcement records (Reuters)

WASHINGTON (Reuters) -The top lawyer at the Securities and Exchange Commission this week ordered the enforcement division to cease destroying all investigative records after an internal whistleblower complained the agency was wrongfully discarding important records.

The order, which was disclosed in a September 7 letter from SEC General Counsel Mark Cahn to the whistleblower's attorney Gary Aguirre, is the latest development in a saga that arose from allegations that the agency has been destroying important investigative files.

The whistleblower, SEC attorney Darcy Flynn, first raised concerns about document destruction in July of last year. At the time, his concerns were focused on documents known as "matters under inquiry," or MUIs, which are preliminary investigative records.

Flynn referred his concerns to the National Archives, which last month issued a statement saying the SEC had destroyed the records without the proper authority, but that it was working with the SEC to prevent future problems and was satisfied the destruction had ceased.

But in a letter sent to SEC Chairman Mary Schapiro and SEC Inspector General David Kotz on September 6, Flynn's attorney raised new concerns that the SEC is still wrongfully destroying records.

This time, however, the allegations extend beyond just preliminary investigative records to include documents from formal probes, such as records pertaining to closed investigations.

In light of this latest complaint, Cahn decided to suspend the destruction of all investigative records until further notice.

"We have been working with (The National Archives and Records Administration) for records retention, and have determined to suspend the current policy out of an abundance of caution until a new policy is in place," SEC spokesman John Nester said.

The issue of the document destruction has recently drawn scrutiny from numerous members of Congress, including Republican Senator Charles Grassley, who sent the SEC a letter last month seeking an explanation.

Kotz is also investigating the destruction of the preliminary investigative records.

It is unclear if he will expand his probe to look into the allegations in the September 6 letter.

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)

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