SEC Administrative Law Judge Rejects Recommended Discipline Against SEC Officials in Both Pequot and Bear Stearns Matters

The ruling does not yet appear to be available online but the AP reports that on Friday, the SEC’s chief administrative law judge, Brenda Murray, rejected the recommendations by SEC Inspector General H. David Kotz that SEC officials be disciplined in two separate cases. Murray reportedly declined to order any discipline in connection with the investigation of investment bank Bear Stearns as well as in the Aguirre/Pequot matter. Murray’s decisions are final, the AP reports.

In the Bear Stearns invesigation (previously discussed here), Murray said the SEC’s “processing of the investigation was not exemplary, but the evidence does not show malfeasance or negligence. Rather it shows that delays occurred in the … investigation because of workload and personnel changes.”

Murray said Kotz failed to provide a legal basis for his recommendation of action against David Nelson, the head of the SEC’s Miami office. “The record does not show that Nelson failed to vigorously enforce compliance with the securities laws in connection with” the investigation, she wrote.

In the Aguirre/Pequot investigation (previously discussed here), Murray reportedly dismissed Kotz’s recommendations for disciplinary action against SEC Enforcement Director Linda Thomsen and enforcement official Robert Hanson.

In dueling statements coming from the same building, SEC IG Kotz stated “We are surprised and disappointed by the administrative judge’s decisions…. We believe her findings were flawed and not supported by the evidence. We also have serious concerns about the process utilized in arriving at these decisions. We stand by our comprehensive and thorough reports 100 percent.”

SEC spokesman John Nester, however, said Murray “conducted a thorough and objective review of the (inspector general’s) findings to make determinations regarding appropriate personnel action.”

Read the AP article