SEC Revokes Delegated Authority for Formal Orders and Subpoenas

On March 11, 2025, the U.S. Securities and Exchange Commission (SEC or Commission), under Acting Chair Mark Uyeda, amended its regulations to eliminate its long-standing delegation of formal order authority to the Director of the Division of Enforcement. The Commission had delegated this authority, which allowed the Enforcement Division to issue subpoenas in investigations without seeking Commission approval, for over 15 years, following the 2008 financial crisis. The rule release explained that the change “is intended to increase effectiveness by more closely aligning the Commission’s use of its investigative resources with Commission priorities.” The consolidation of power in the Commission is consistent with moves to consolidate authority in presidentially appointed officers and the White House’s February 18, 2025 Executive Order titled, “Ensuring Accountability for All Agencies,” which laid out directives for independent agencies to consult and coordinate with the White House and/or the Director of the Office of Management and Budget on all significant regulatory actions, policies and priorities, and strategic plans.

Revoking the Enforcement Director’s authority to issue formal orders (and its attendant subpoena power) will impact the SEC’s processes, both within the Enforcement Division and at the Commission level. For one, the Commission now controls when the staff is authorized to issue subpoenas in investigations. If the Commissioners do not view a proposed investigation as a priority or warranting the expenditure of resources, they can refuse to issue a formal order.

Another significant impact: the approval process for a formal order may end up being much slower. While the Enforcement Director or an Enforcement Division senior officer may have been able to approve an order request within days, going forward, the staff may be required to prepare a lengthy and detailed memorandum regarding the investigation to the Commissioners. Then, the Commissioners (and their staff) will review and weigh in on the rationale, before ultimately voting on whether to approve a formal order. This process could result in delays for Enforcement Division staff, as they will not be able to issue investigatory subpoenas during the formal order consideration process.

This change may not necessarily mean that enforcement will come to a standstill. Enforcement Division staff remain able to issue voluntary requests for information to both issuers and SEC registrants (broker-dealers and investment advisers), as well as to individuals and entities that are not registered with the Commission. Enforcement Division staff has used such voluntary requests for years as an investigative tool, and complying with such requests is often viewed as the first step in obtaining cooperation credit. While registered entities generally are required to produce documents and information pursuant to such voluntary requests, Enforcement Division staff may find themselves more limited in their abilities to obtain information from some third parties, such as accounting firms or banking institutions, that may face confidentiality, professional, privacy, or other constraints in disclosing client information without a subpoena.

While we have yet to see how this amendment may play out in practice, the change to the process for obtaining a formal order provides yet another indication that the Commission is asserting more oversight over staff activities.

Enforcement Edge continues to monitor developments in the new Trump administration, including at the SEC and other regulatory agencies. For questions on this or any other subject, please reach out to the authors or any of their colleagues in Arnold & Porter’s Securities Enforcement & Litigation and White Collar Defense & Investigations practice groups.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.