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SEC Inspector General Report on London Whale Settlement Deliberations Leaked

Several news sources recently obtained an internal report by the SEC’s Office of the Inspector General relaying the results of an investigation into leaks regarding Commission deliberations on the J.P. Morgan “London Whale” settlement in September 2013.  Two days prior to the issuance of the public order approving the settlement, Reuters ran an article reporting that the Commission had approved the settlement by a split vote in which two Commissioners recused themselves.

According to the Inspector General’s report, Commissioner Michael Piwowar raised the issue with Chair Mary Jo White following a call by Reuters reporter Sarah Lynch to a Piwowar staffer in which Lynch recounted “precisely” statements made by Piwowar during the meeting, despite the fact that the public order had not yet been issued. Reuters subsequently published a second article that listed specific concerns voiced by Piwowar not previously made public. 

The Inspector General was not able to pinpoint the source of the leaks, but found that Lynch spoke to several individuals at the SEC in the days following the closed meeting.  The report noted several lapses, including the failure to clear the room of staffers not involved in the matter prior to the Commission deliberations, apparently due to confusion about the Commission’s policy. The report also noted that deliberations could be heard through the closed meeting room doors.

Seemingly not amused by the irony of the leak of an Inspector General report on leaks, Representative Jeb Hensarling, chairman of the House Financial Services Committee, criticized the SEC for not doing more to protect confidential information in a letter to Chair Mary Jo White last week. The letter questioned media and confidential information policies and procedures, and the potential for such leaks to reduce the Enforcement Divisions ability to present settlements. Hensarling also cautioned that “[m]ere intellectual curiosity is not sufficient justification for an employee to stop his work and attend a closed meeting.” Hensarling requested that White provide the non-public OIG report along with the Commission’s planned response to the report, including any plans to soundproof the meeting room.

The letter from Mr. Hensarling can be viewed here. The internal report published by the OIG can be accessed via The Hill here