SEC's Republican-Led Commission Tightens Oversight of Probes

WASHINGTON, D.C. - In a significant shift in policy, the Securities and Exchange Commission (SEC) under its new Republican-led commission has implemented stricter oversight of probes, requiring Commission approval for formal orders of investigation. This change, which took effect under President Donald Trump's administration, has raised concerns about potential delays in investigations and the agency's ability to detect and address securities law violations.

The new approach, which was not previously reported, mandates that enforcement staff seek permission from the politically appointed leadership before formally launching probes. This requirement applies to all five commissioners, including the chair, who oversee the independent agency. Currently, the Commission has three members - two Republicans and one Democrat.

Previously, such authority was delegated to lower-level staff, with the Commission retaining the right of refusal. However, it is unclear whether the Commission has voted to formally revoke the delegation of that authority or who ordered the change. An SEC spokesperson declined to comment, and the White House did not respond to a request for comment.

Proponents of the change argue that it will reduce harm to individuals subject to investigations, while others contend that it takes away staff autonomy. The move is among the first changes in enforcement at the SEC under the new leadership, which is expected to be friendlier to industry.

Steven Peikin, who served as SEC co-director of enforcement under Republican Jay Clayton, speculated that such a change could happen under the new administration. "I think it's a huge waste of commission resources to be focused on formal order authority," Peikin said.

The requirement for Commission approval does not necessarily mean fewer investigations will be launched. However, it does indicate that the Commissioners will be more involved in the enforcement process earlier on. This could lead to a more consistent and predictable approach to enforcement, as Commissioners with diverse viewpoints will have a say in the initiation of formal investigations.

The shift in policy comes as the SEC faces criticism for its aggressive enforcement agenda under the previous administration. Some argue that the agency overstepped its authority and engaged in politically motivated investigations. The new approach may help to address these concerns by ensuring that investigations are subject to greater scrutiny and oversight.

However, the requirement for Commission approval may also lead to delays in the initiation of formal investigations. This could potentially allow more time for evidence to be destroyed or hidden, making it more difficult for the SEC to gather sufficient information to build a case against suspected violators.



In conclusion, the SEC's new approach to oversight of probes is likely to influence the agency's ability to detect and address potential securities law violations by potentially delaying investigations, leading to a more cautious approach to enforcement, and resulting in a more consistent and predictable approach to enforcement. However, it is important to monitor the SEC's actions under the new administration to assess the actual impact of these changes on the agency's effectiveness in addressing market abuses and protecting investors.