The Securities and Exchange Commission announced the withdrawal of a policy that granted the Director of Enforcement the authority to initiate new investigations and approve the issuance of subpoenas. The former policy was created in 2009, which essentially allowed the Director to legally permit the SEC staff to open an official investigation.
The SEC announced in its final rule that it has decided to eliminate the delegation of authority to issue formal orders of investigation.” Such formal orders designate the enforcement staff authorized to issue subpoenas in connection with investigations under the Federal securities laws,” according to the rule. As a result of the amendment, the Director of Enforcement can no longer authorize his staff to open investigations pertaining to the Federal securities laws.
In supporting of its decision to rescind the Director’s authoritative power, the SEC said that this amendment comes as a “result of the commission’s experience with its nonpublic investigations.” The Commission additionally said that it me the amendment “to more closely align the commission’s use of its investigative resources with commission priorities.” The SEC did not further elaborate on its reasoning and left it up to public opinion as to its meaning.
Now, only the SEC itself can issue formal orders of investigation that authorize specifically-designated enforcement staff to exercise the Commission’s power to subpoena witnesses and take other authorized actions. This power no longer belongs to the Director unless specifically authorized by the SEC.
Although the Director initially had this power since 2010, such power was not delegated before then. “The Division of Enforcement operated for 40 years without delegated authority,” according to an SEC spokesperson. “We are returning to how the division operated for most of its existence, ensuring the commission has the utmost insight into the cases we bring throughout the process.”
In order to request for an investigation to be opened, the enforcement staff must now go through the SEC rather than being assigned to the leadership of the Enforcement Division. 