"SEC Enforcement: New Policy Requires Commissioner Approval for Formal Investigations"

The U.S. Securities and Exchange Commission (SEC) has implemented a new policy requiring its enforcement staff to obtain approval from politically appointed commissioners before launching formal investigations. This change comes after a leadership transition at the SEC, with Mark Uyeda appointed as Acting Chair.

According to two anonymous sources familiar with the matter, the new requirement mandates that enforcement staff must secure permission from commissioners to issue subpoenas, demand documents, and compel testimony. Previously, staff members had the authority to initiate formal investigations independently, with SEC commissioners maintaining oversight of the process.

Tyler Warner, a former banking consultant turned NFT market analyst, believes that the new system will prevent "rogue attacks" and make commissioners more discerning in approving investigations. However, he also acknowledges the risk that legitimate cases of fraud may be missed or delayed.

Under the previous administration, the SEC required approval from its two enforcement directors to formally launch probes. The sources did not specify whether the Commission formally voted to revoke the previous delegation of authority. Enforcement staff can continue conducting informal investigations without commissioner approval, including sending information requests.

During Gary Gensler's leadership, the SEC increased regulatory actions against major crypto exchanges, focusing on allegations of fraud and securities law violations. This approach drew criticism from both the crypto sector and some lawmakers, who argued that Gensler's interpretations of securities laws were overly broad and vague.

Marc Fagel, a retired attorney specializing in SEC enforcement and securities litigation, criticized the change, stating that it was a step backward and would make investigations slower, ultimately benefiting those committing fraud.