SEC Lawyers Told to Seek Permission from Politically Appointed Leadership Before Launching Probes
Lawyers at the U.S. Securities Exchange Commission (SEC) have been told they need to seek permission from the politically appointed leadership before formally launching probes, two sources briefed on the matter said, in a marked change in procedure that could slow down investigations.
New Leadership at the SEC
The change, which has not been previously reported, was made under new leadership at the SEC since President Donald Trump took office, the sources said, speaking on condition of anonymity as the move has not been made public.
Typically Five Commissioners Oversee the Independent Agency
Typically, five commissioners, including the chair, oversee the independent agency. Currently, the Commission has three members — two Republicans and one Democrat. Commissioners are appointed by the president.
Change in Procedure
In recent days, some enforcement staff have been told that they will need to seek the Commission’s approval for all formal orders of investigation, which are required to issue subpoenas for testimony or documents, the sources said.
Previously, such authority had been delegated to lower-level staff. The Commission had the right of refusal — something that it didn’t always exercise.
SEC Spokesperson Declines to Comment
Reuters could not determine whether the Commission had voted to formally revoke the delegation of that authority, or who ordered the change.
An SEC spokesperson declined to comment. The White House did not respond to a request for comment.
Implications of the Change
Proponents of such a change argue that it will reduce harm to individuals subject to investigations, while others say it takes away staff autonomy.
New Leadership Expected to be Friendlier to Industry
Since Trump became President, Republican Mark Uyeda is leading the agency, alongside Republican Hester Peirce and Democrat Caroline Crenshaw.
Prior chair Gary Gensler and fellow Democrat Jaime Lizárraga left the commission last month. Uyeda is holding the position of acting chair until former SEC Commissioner Paul Atkins, who was tapped by Trump to be SEC chairman, is confirmed. Atkins is expected to make a sharp turn away from how the Biden administration policed capital markets.
SEC Enforcement Staff Can Still Investigate Informally
SEC enforcement staff can still informally investigate without such approval, including by sending out requests for information.
Recent History of Delegation of Authority
In recent history, the SEC has delegated authority to formally launch investigations to enforcement directors or other senior staff. Under the last administration, supervising attorneys below the enforcement director were able to issue such orders while during Trump’s previous administration, the SEC required approval by its two enforcement directors to formally launch probes.
Conclusion
The move is among the first changes in enforcement at the SEC under the new leadership, which is expected to be friendlier to industry. While speaking on a panel at an industry conference on Tuesday, Steven Peikin, who was SEC co-director of enforcement under Republican Jay Clayton, speculated such a change could happen under the new administration.
FAQs
Q: What is the purpose of the change in procedure?
A: The change is intended to reduce harm to individuals subject to investigations, but some argue it takes away staff autonomy.
Q: Who made the change?
A: The change was made under new leadership at the SEC since President Donald Trump took office.
Q: Will the change slow down investigations?
A: Yes, the change may slow down investigations as lawyers will need to seek permission from the politically appointed leadership before formally launching probes.
Q: What is the current leadership at the SEC?
A: The current leadership at the SEC includes Republican Mark Uyeda, Republican Hester Peirce, and Democrat Caroline Crenshaw.
Q: What is the expected impact of the change on industry?
A: The change is expected to make the SEC more friendly to industry, as the new leadership is expected to take a more lenient approach to enforcement.