March 12, 2025
What happened?
In a 3 to 2 decision, a final amended rule was passed by the Securities and Exchange Commission (“SEC”), removing the authority of the Director of the Division of Enforcement to issue formal orders of investigation. These formal orders of investigation designate the Enforcement staff authorized to issue subpoenas in connection with investigations under federal securities laws. The original delegation of authority from the SEC to the Director of the Division of Enforcement occurred in 2009 and authorized the Director to issue formal orders of investigation. The original grant of 1 year had been extended continuously over time until this rulemaking. No notice or public comment period was required for the rulemaking because it was solely related to agency organization, procedure, or practice under the Administrative Procedure Act.
The summary of the final amended rule states, “[t]he amendment is intended to increase effectiveness by more closely aligning the Commission’s use of its investigative resources with Commission priorities.”
What does this mean for me?
Eliminating this 15-year-old delegation of power puts the power to issue formal orders of investigation in the hands of the Republican majority of commissioners leading the SEC. More 3 to 2 decisions are sure to follow. Investigations will continue, they will just be guided from the priorities of the Commission and not those of the Director of the Division of Enforcement or the Division itself.
Similar to the regulatory freeze at the start of the new administration, this rule placing authority back with the Commission aligns with the goals of the administration. It also follows the news of new investigations needing Commission approval and open investigations being reined in or withdrawn. This does not indicate that investigations will cease, expect new investigations to align with priorities of the new administration and the Republic commissioners.
