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SEC restores enforcement staff’s power to launch investigations

Neudata News
10 Feb 2021

The Securities and Exchange Commission is granting its enforcement staff more power to launch investigations, restoring a tool that allows about 36 senior officials in the regulatory agency to subpoena companies and individuals for records or testimony.

The move is an early signal that the regulator will become more assertive under the Biden administration, according to industry experts.

Under the Trump administration, the SEC limited the authority to approve new probes to only two officials. At the time, they said it would cause the regulator to make more consistent decisions about the tips and complaints that justified investigations.

The rules, which have now been restored, were first introduced during the Obama administration with the goal of making it easier for the SEC to launch investigations in the wake of the financial crisis.

“Returning this authority to the division’s experienced senior officers, who have a proven track record of executing it prudently, helps to ensure that investigative staff can work effectively to protect investors in an era when the pace of fraud – like the pace of markets themselves – is ever more rapid,” said Allison Herren Lee, the SEC’s acting chair, said in a statement on Tuesday.

Last year, SEC enforcement activity hit a six-year low, with 405 enforcement actions completed, according to the agency’s 2020 Annual Report. The regulator brought 548 stand-alone actions in 2016 under President Obama and 446, 490 and 526 in 2017, 2018 and 2019, respectively, under President Trump.

According to the Wall Street Journal, SEC staffers have the power to look into suspected wrongdoing without launching a formal investigation, but are supposed to either close the case or convert it to an investigation within 60 days.

Industry players have speculated that the SEC will become more active in its investigations into Wall Street activities, particularly around the use of alternative data, once President Biden’s chair pick Gary Gensler takes the helm. Gensler must first be confirmed in the US Senate before assuming his post, with Herren Lee acting as chair until his confirmation. His nomination hearing has not been scheduled yet.


Photo by JOSHUA COLEMAN on Unsplash

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Sondra Campanelli News Editor (London)