Shakeup at the SEC: Recent Changes in Formal Investigative Authority, Regional Directors, and Reductions in Force

With all the headlines about changes in federal government structure in recent weeks, it is easy to miss some of the key changes taking place at the Securities and Exchange Commission. In this note, we have summarized three of the most important structural/process changes at the SEC, and how they may impact markets, industry, and investigations moving forward.

Formal Investigative Authority

In early March, the Commission voted to amend existing SEC regulations and rescind the standing delegation of the SEC’s investigation authority to the director of the Enforcement Division. Going forward, only the Commission can issue a formal order of investigation, a necessary prerequisite before the staff can serve subpoenas for documents or testimony on third parties.

Before 2009, the authority to issue formal orders rested solely with the Commission. In 2009, during the Obama administration, the Commission delegated its formal order authority to the director of the Enforcement Division. Consequently, from 2009 to March of this year, SEC staff could obtain a formal order of investigation from the director of the Enforcement Division, without having to petition the commissioners.[1]

The newly adopted rule, which withdraws the delegation of formal order authority to the director of enforcement, returns the SEC to its pre-2009 process. All formal investigative orders—and the subpoena power that derives from them—must once again be voted on by the Commission. It is a move the SEC says will “increase effectiveness by more closely aligning the Commission’s use of its investigative resources with Commission priorities.”

But increased effectiveness for the Commission’s priorities could come with decreased efficiency, delay of potential investigations, or even stopping them before they start. Given the need to get full Commission approval, we expect the staff will make greater use of “voluntary” requests for information as they begin their initial inquiries, hoping to get cooperation from third parties. This may allow individuals and companies to negotiate more successfully the scope and timing of their responses, since their responses will be voluntary and not be compelled by a subpoena. The opening of formal investigations (and the service of subpoenas), therefore, could be delayed until the staff can marshal at least some evidence that the initial allegations of misconduct have merit.

SEC Regional Directors

The SEC currently has 10 regional offices[2] across the country. Previously, a regional director oversaw the work of each office, which was responsible for its own geographic region. But news broke in late February that these regional directors would be eliminated as a part of the administration’s ongoing efforts to streamline the federal government through the Department of Government Efficiency (DOGE). Now, instead of a regional director in each office across the country, there are three deputy directors of enforcement, one for the Northeast, one for the Southwest, and one for the West. This change may impact the speed at which the SEC, particularly through its regional offices, can carry out investigations, conduct litigation, and reach settlements. While these delays could create uncertainty for companies awaiting SEC determinations, it could also encourage investigators and litigation teams at the SEC to dispose of matters more quickly.

SEC Staffing Reductions

Finally, DOGE’s reorganization of the federal government has led to roughly 600 SEC employees (or about 12% of the Commission’s workforce) opting to voluntarily depart from their positions in late March 2025. News reports suggest that the Enforcement Division and the Office of General Counsel at the SEC both saw significant impacts from the voluntary departures, even before DOGE formally began recommending changes in the workforce at the Commission. If the trend of federal government reductions continues, the SEC could see even more departures. These departures can be expected to impede the SEC’s enforcement and litigation efforts, especially when the agency is not able to backfill positions. As with other recent developments, limitations in the SEC’s enforcement and litigation processes and tools are in line with the new administration’s focus on capital formation as opposed to enforcement.