Update 3/2: Today Microsoft has released an update to resolve this problem (KB3041687). The update brings the client version to 4.7.209. You can find more about the update here: http://support2.microsoft.com/kb/3041687
This last Tuesday (February 12, 2015) Microsoft released a platform update to Endpoint Protection (4.7.205). This update appears to have a major issue with Windows 8.1/Windows Server 2012 R2. I have not seen these issues in Windows 7. In my environment, I saw two problems with the update.
First, the update actually failed to install when installing other updates. This also caused all other updates that were being ran to also fail and would not complete until rebooting the system. Secondly, once I got the update actually installed (by installing it standalone), downloads began to fail in Internet Explorer, stating that the file has been deleted . It has also reported that this affects Chrome as well, but not Firefox.
The only solution is to uninstall and reinstall without the update. Even disabling scanning of downloads does not help. Currently waiting to hear something