On February 12, 2025, a group of former Securities and Exchange Commission (SEC) attorneys sent a letter to the current members of the SEC and the Senate Whistleblower Protection Caucus expressing concern about reports that the SEC has changed the process to initiate a formal investigation.
The attorneys, who now represent whistleblowers in private practice, include former SEC Commissioner Allison Herren Lee. The letter was sent in response to recent reports that the Division of Enforcement would require Commission approval before initiating formal investigations. Their letter discusses the history of the delegation to the Division of Enforcement and points out some potential negative impacts of the change on whistleblowers and the SEC Whistleblower Program.
The attorneys explain that the authority to initiate a formal investigation – that is, to give the staff authority to use the Commission’s statutory powers to issue subpoenas and take sworn testimony – has been delegated to the Division of Enforcement since just after the twin crises of 2008-09 – the Bernie Madoff scandal and the subprime meltdown. Since then, formal order authority has been delegated to the Division of Enforcement to make the staff more efficient and responsive to fast-moving events, to prevent harm to investors and markets, and to prevent the hiding or transfer of assets.
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