Thursday, September 13, 2001

Washington - The destruction of the U.S. Securities and Exchange Commission's field office in New York is likely to hinder, but not halt, major investigations by America's top market regulator, former SEC officials and lawyers said Wednesday.

Probes such as the inquiry into initial public offerings involving the U.S. unit of Credit Suisse Group will be set back by the loss of any documents stored at the SEC's northeast regional office, they said.

The office was located in 7 World Trade Center, which collapsed on Tuesday, along with the neighbouring twin towers that were hit by hijacked jetliners.

SEC staff members got out safely before their 47-storey building came down in a cloud of dust and flames, an SEC spokesman said. But valuable case records were likely lost in the wreckage, forcing the SEC to somehow recover or recreate them.

"There, of course, will be substantial loss in paperwork and computer records, assuming that there's been a total physical loss in that office," said former SEC chairman David Ruder, now a law professor at Northwestern University in Chicago.

"But the New York office, as a regular matter, communicates with the SEC office in Washington ... So I would expect that a fair amount of paperwork has been saved in the Washington office," Mr. Ruder said. "Certainly the loss of interview notes and details of ongoing investigations are extremely serious."

The SEC northeast regional office oversees enforcement and regulation in 13 states and Washington, D.C. It is the agency's largest field office, with more than 300 employees.

Asked whether lost records could halt some cases, Mr. Ruder said: "Not necessarily. It may mean they will have to delay many enforcement cases and perhaps make some choices about which ones they will reinvestigate."

An SEC spokesman declined to comment.

The agency has been probing alleged violations of laws governing initial public offerings of stock, or IPOs, involving Credit Suisse First Boston, the investment banking arm of Swiss bank Credit Suisse, and other banks.

While electronic documents generated by SEC staff could likely be salvaged, paper documents obtained by subpoena from companies may be harder to reproduce, lawyers said.