SEC expands number of staffers authorized to launch investigations

Allison Herren Lee reversed a decision made under the Trump administration to limit the authority to issue such orders to two senior officials. With the move, approximately 36 senior officials in the Enforcement Division will have that power, according to a story in the Wall Street Journal. Issuing a formal order of investigation allows the agency to subpoena companies and individuals for records or testimony.

“This delegation of authority will enable investigative staff to act more swiftly to detect and stop ongoing frauds, preserve assets, and protect vulnerable investors,” Lee said in a statement Tuesday. “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.”

Total stand-alone enforcement actions under former SEC Chair Jay Clayton, who stepped down from his post in December, hit 405 for fiscal year 2020, the lowest since at least 2015, according to the Enforcement Division’s 2020 annual report. There were 548 stand-alone enforcement actions in fiscal year 2016 under former President Barack Obama; total stand-alone enforcement actions were 446, 490, and 526 in the fiscal years under President Donald Trump.

The slowdown in stand-alone enforcement actions in fiscal year 2020 may, in part, have been caused by the pandemic, which forced all SEC investigators to work remotely starting in March. But the bottleneck in launching investigations may have been a contributing factor as well.

Experts have speculated the SEC will ramp up investigations against Wall Street when Biden’s nominee for the SEC chair, Gary Gensler, eventually takes over. Gensler must first be confirmed by the Senate. His nomination hearing has yet to be scheduled.