Did the SEC improperly destroy documents?

Friday - 8/19/2011, 11:16am EDT

By Vyomika Jairam
Federal News Radio

The Securities and Exchange Commission is under scrutiny for allegedly destroying records without authorization.

A whistleblower in the agency's enforcement division reached out to Sen. Chuck Grassley (R-Iowa) alleging that documents related to thousands of preliminary investigations had been destroyed.

Darcy Flynn, a lawyer within the SEC's enforcement department who helped manage the agency's enforcement records also reached out to the National Archives. NARA says they reached out to the SEC a year ago after they heard the allegations but said in a statement that they were "satisfied that the destruction has stopped."

A Rolling Stone magazine article about Flynn then prompted Grassley to reach out to SEC Chairman Mary Schapiro for more information.

The destroyed documents are reports from MUIs - Matters Under Inquiry - which is the preliminary step to a full investigation. According to Flynn, a directive on the SEC's intranet mandated that all documents from terminated MUIs (preliminary inquiries that do not result in full investigations) be destroyed.

Rolling Stone reports that Flynn has told officials he believes the directive dates back to as early at 1993. Among the records destroyed are MUIs reviewing AIG, Morgan Stanley, Bernie Madoff and Lehman Brothers.