The Securities and Exchange Commission's caseload was decimated by the terrorist attack on the World Trader Center, the home of its New York offices.
While its main office is in Washington, D.C., its New York regional office at 7 World Trade Center was the hub of its regulatory case building practice. All but eight of its 330 employees were accounted for. The collapsing building took with it computer files and documents relevant to a large number of the Commission's ongoing investigations.
That doesn't necessarily mean the SEC's lawyers will have to start again from scratch--some documents are also held in Washington, D.C., some computer files are backed up offsite--but it will slow the already sluggish pace of the SEC's conviction and punishment.
The New York office, the largest outside the capital, traditionally handles insider-trading cases and allegations of small-cap fraud. However, at the time of the attack it was also working on allegations into sell-side analysts flouting of rules governing IPO asset allocation. Because of the size and importance of these cases, citing high-profile investment banks such as Credit Suisse First Boston and others, many of the files were backed up at head office. Some smaller cases are thought to be too damaged to recover.
However, SEC Chairman Harvey Pitt vowed to continue all investigations despite the loss of its New York office. While some important information has been lost and some cases will have to be reprioritized, the SEC will carry on, he told the United Kingdom's The Times after attending the opening of the New York Stock Exchange on Sept. 17.
In other news related to the disaster, Stephen Cutler, the SEC's director of enforcement, announced last week that the agency is looking into reports that those associated with the terrorist attacks may have sought to exploit the markets to profit from the tragedy.