Change in SEC Rules May Cause Delays in Investigations
Akerman lawyers Douglas Paul and Ashley Akapo explored the recent significant modification in regulations at the Securities and Exchange Commission in a freshly published Bloomberg Law piece. The revised rule, issued on March 10, 2025, mandates that SEC commissioners must sign off on official investigation orders, overturning a policy that had been in place for 15 years. This alteration has the potential to decelerate the speed of investigations and reshape their extents. Paul and Akapo shed light on potential repercussions, such as prolonged informal investigation phases, a slower overall investigation tempo, and a potential boost in non-compliance with voluntary requests. “With the new regulation introducing an additional obstacle to issuing formal orders, investigations might linger in the informal phase longer than before,” the duo explained. “The revamped rule could also impact the pace and breadth of the SEC’s investigations.”
By requiring SEC commissioners to greenlight formal orders, investigations could likely experience delayed timelines due to additional approval steps. The rule change introduces a new layer of decision-making that previously did not exist, potentially stalling the progress of probes. The shift from spontaneous decision-making by enforcement staff to a higher level of bureaucratic scrutiny might lead to a sense of caution and deliberation, ultimately affecting the momentum of investigations. This could weigh heavily on the efficiency and efficacy of the entire inquiry process, potentially bogging down the overall timeline.
The adjustment in rules could result in a more deliberate and cautious approach by SEC enforcement staff. With formal orders requiring commissioner approval, investigations may undergo increased scrutiny and evaluation, necessitating a more thorough and thoughtful approach to initiating probes. The prospect of executive oversight and intervention may inject further caution into the investigation process. This additional layer of decision-making could lead to a more measured and strategic investigative process, further delaying the issuance of formal orders and potentially impacting the overall trajectory of investigations.
In conclusion, the SEС’s recent rule change requiring commissioner approval for formal investigation orders marks a significant shift in the regulatory landscape. This adjustment could potentially lead to slower investigation timelines, prolonged informal inquiry phases, and heightened scrutiny over the initiation of probes. The impact of this rule change remains to be seen, but it signals a broader trend towards increased oversight and accountability in regulatory investigations. As enforcement processes evolve in response to changing regulatory environments, stakeholders must adapt to these new operational dynamics and navigate the shifting terrain of compliance and investigation processes.
