The Financial Times recently reported that the SEC may have destroyed over 9,000 documents related to the legal investigations of various financial groups, including SAC Capital, Bernard Madoff and Goldman Sachs. Sen. Charles Grassley (R-IA) is quoted as saying “If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame, and to what extent its actions were consistent with the law.” Apparently this is not the first time that the SEC’s actions have been scrutinized. According to the article, Sen. Grassley “has repeatedly questioned the agency’s enforcement actions and procedures.” While it is unclear how or why the SEC destroyed the documents, the accusations are alarming, especially during this time of economic turmoil. Moreover, there is a hint of irony to the story in that the organization responsible for holding financial organizations accountable for their services is unable to account for its own actions. Herein lies the one of the problems with the financial and securities regulation sector in general – no best practices, guidelines, or standards exist to guide these organizations in the management of their investigative records, that is, evidence collected and created by investigators and litigators.
It is clear that large amounts of evidence, in all forms and formats, are placing strains on financial and securities organizations. Within the financial and securities regulator community there is no established set of best practices or international standard that guides these organizations on how best to manage their investigative records. Such a document may provide the necessary guidance for these organizations to, among other actions, offer best case management practice, establish the necessary measures for proper chain of custody needed to protect the authenticity of the document, and determine appropriate retention and disposition periods. Following an established set of guidelines, best practices, and/or international standards instills a level of accountability among any organization’s community and peer institutions. This documentation should also lead to the creation of internal documentation by each organization, such as policies and procedures, leading to the education of staff to better manage their records, the creation of necessary units or departments to handle the flow of evidence within the organization, and, most importantly, the support of senior management (or at the very least senior management sign off on the documentation).
The unfortunate attention that the SEC has received highlights the need for a set of best practices, guidelines, and/or international standards for financial and securities regulators. A recent project conducted by the author as part of CiFER entitled “Guidelines for Managing Records Created in the Investigative and Litigation Process” resulted in a White Paper proposing an initial set of guidelines for these organizations. These guidelines merge legal and recordkeeping requirements, drawing on a variety of sources such as academic literature, legal requirements, interviews with individuals for several financial and securities organizations, and relevant documentation. By adopting these recommendations, financial and security regulators will strengthen the management of their investigative records. These practices will enable regulatory organization to more effectively and efficiently respond to legal challenges and be able to better justify their actions when they come under close scrutiny by external groups, such as the Congressional Committee led by Sen. Grassley.
The proposed Guidelines may be found on CiFER’s website: http://www.ciferresearch.org/products_service/products buy kamagra online
Donald C. Force
August 23, 2011