SEC Readies to Expand Enforcement Investigations

The SEC announced this week that it will restore the authority of senior officers to move quickly to bring new investigations, a clear signal that it intends to increase the pace of enforcement. Acting Chair of the SEC Allison Herren Lee announced on February 9, 2021 that she was restoring the power of senior officers in the SEC’s Enforcement Division to authorize investigations. This action will permit about 36 senior officials at the SEC to approve the issuance of a formal order of investigation, which allows the SEC’s enforcement staff to subpoena companies and individuals for records and testimony. According to Acting Chair Herren Lee, this “delegation of authority will enable investigative staff to act more swiftly to detect and stop ongoing frauds, preserve assets, and protect vulnerable investors.”

Formal orders of investigation are necessary before SEC staff can issue subpoenas for the production of documents or testimony. The policy of allowing senior staff of the Enforcement Division to approve formal orders of investigation was first put into use in 2009, during the financial crisis, in an effort to increase the pace of investigations. It remained in effect until 2017, when the then-Acting Chair required that requests to launch investigations be approved only by the Enforcement Division’s top leadership.

The policy change announcement will allow SEC staff to move more quickly to bring new investigations. It is also a signal that the SEC is likely to increase the pace of enforcement under the new administration.

If you have any questions, please do not hesitate to contact any member of Ice Miller’s White Collar Defense & Investigations Group for assistance.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.