Resolution:
L024: Security Error: Bad username or password is being returned on a new installation even though the user's name and password have been validated as correct.

If the permissions of the etc/swrpcudp are checked and show the correct values (setuid flag is on for owner and group) :

-r-sr-s---   1 root     staffwar  484904 Feb 26  2007 swrpcudp

then you should also check the mount options of the file system using the mount -p command (below shows the mount output for a /tibco file system):

dev/vgtibco/lvtibco              /tibco      vxfs    nosuid,ioerror=mwdisable,delaylog,nodatainlog,dev=40010001   0 0

The file system in this case has disabled the ability of the iProcess Engines to use setuid which is a requirement for password verification on UNIX.  The file system should be remounted without the nosuid limitation to enable iProcess logins with password verification.