Michael Piwowar, the Republican serving as the agency’s acting chairman, has quietly initiated a review of delegated authority, which gives senior SEC attorneys the power to start probes and inspect firms without seeking approval from the politically appointed SEC commissioners.
The Securities and Exchange Commission’s interim chief has quietly initiated a review that could make it harder for government lawyers to open investigations into corporate wrongdoing, said three people with knowledge of the matter.
Michael Piwowar, the Republican serving as the agency’s acting chairman, has requested an examination of what’s known internally as delegated authority, the people said. It gives senior attorneys across the SEC powers to start probes, inspect firms and signoff on some financial products without seeking approval from Piwowar and the other politically appointed commissioners who oversee the regulator.
Piwowar, through a representative, declined to comment.
Any rollback of authorities could be felt particularly hard in the SEC’s enforcement division. It’s now common practice for officials to issue subpoenas and negotiate settlements without SEC commissioners weighing in, except in the biggest and most-sensitive cases. Staff attorneys argue the process allows them to move quickly and avoid getting bogged down in wrangling among commissioners.
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When commissioners get involved, investigations become “a more drawn out process,” said Alec Koch, a former SEC enforcement attorney now in private practice at King & Spalding. “It goes from hours or days to weeks potentially.”
The examination Piwowar has asked for is wide-ranging and not limited to the enforcement unit, said two of the people, who requested anonymity to discuss an initiative that isn’t public. Other SEC divisions regulate corporate disclosures, stock markets and mutual funds. While staff has some ability to act unilaterally, Piwowar and other commissioners must vote to approve rules, enforcement settlements and lawsuits against alleged wrongdoers.
The move by Piwowar, less than a month after taking over as interim chief, comes after he repeatedly asked former SEC Chair Mary Jo White to take similar action, said one of the people.
Piwowar recently held a meeting to announce the review to the various heads of SEC divisions and offices, the person said. He asked them to identify their delegated authorities and suggest powers that should be added or taken away. Piwowar, 48, stressed the effort, which will be overseen by the SEC’s general counsel, could go both ways.
Still, Piwowar hasn’t been shy about questioning whether the enforcement division has too much autonomy. In a 2013 speech, for instance, he argued that commissioners should have more sway over what are known as formal investigations, in which senior lawyers have powers to authorize the collection of evidence, the subpoenaing of witnesses and sworn testimony.
In an interview earlier this month in his office overlooking the U.S. Capitol, Piwowar said enforcement work should go on as normal under his watch and that he told the division’s acting director to “follow the evidence, follow the law” when they met recently.
Some of the enforcement division’s delegated authorities came after the financial crisis, when the SEC faced widespread criticism for failing to spot abuses. In 2009, then-SEC Chairman Mary Schapiro tried to streamline investigations by granting subpoena authority to her enforcement chief, who in turn gave the power to about a dozen or so senior officials.
Since taking over in late January, Piwowar has been active. He’s sought fresh scrutiny of controversial SEC rules, including one that requires public companies to disclose how top executives’ pay compares with compensation for rank-and-file employees and another that forces firms to reveal whether their products use metals linked to violent conflicts in Africa.
While President Donald Trump has nominated Wall Street lawyer Jay Clayton to lead the SEC, the Senate hasn’t scheduled a confirmation hearing.
The SEC is currently down to two commissioners: Piwowar and Kara Stein.
Stein, a Democrat, has criticized powers that SEC attorneys have to waive penalties that are triggered automatically when companies settle enforcement cases. She has argued that because staff lawyers routinely waive the added punishments, they fail to deter future wrongdoing.