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Iowa's Senator Grassley urges hearing on SEC security lapse

By Sarah N. Lynch

WASHINGTON (Reuters) - Senator Charles Grassley on Tuesday urged the Senate Banking Committee to hold a hearing to examine the U.S. Securities and Exchange Commission's failure to encrypt some computers containing highly sensitive stock exchange data.

Grassley, an Iowa Republican, wrote in a letter to Senate Banking Chairman Tim Johnson that the panel has "a strong role to play and responsibility in ensuring the safety and security of our exchange platforms," and he urged Johnson to hold hearings on the issue.

Grassley has built a reputation as an SEC watchdog but he is not on the banking panel.

Staff for Republican Senator Richard Shelby (Alabama) said last week that the issue merited an oversight hearing.

On Tuesday, a Democratic aide for the Senate Banking Committee referred to a statement from last week that said the panel would continue to examine the situation.

The security lapses were detailed in a non-public August 30 report by Interim Inspector General Jon Rymer. The report has been reviewed by Reuters.

The report found that some staff in the SEC's Trading and Markets Division did not encrypt computers, iPads and other devices containing confidential data from the exchanges and clearing agencies they were overseeing.

Those employees were responsible for reviewing the cyber security policies and practices at the exchanges. They urged exchanges to tighten cyber protections at the same time they were using unprotected computers.

The SEC has said that two of those employees had left the agency, and that it has tightened its policies regarding information technology and cyber security.

The agency said last month that it had hired a company to look into the matter and that the company had found no evidence that any of the data had been compromised.

A source familiar with the matter said in November that digital risk management company Stroz Friedberg had done the checks for the SEC.

The inspector general's report said that "several select laptops" from among 28 had been tested for potential breaches.

The New York Stock Exchange has hired former Homeland Security Secretary Michael Chertoff to help look into the matter.

(Reporting By Sarah N. Lynch)

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