Five Ways White-Collar Enforcement Is Changing

Since the transition to a new presidential administration in January, policies on trade and immigration have dominated the news. The administration’s approach to white-collar law enforcement isn’t generating the same buzz, but tangible and consequential shifts are nonetheless taking place. Here are five major changes we’ve identified.

1)  The Securities and Exchange Commission has concentrated the power to open investigations with commissioners, taking it out of the hands of career staff.

SEC staff members need formal orders on enforcement actions to open investigations, which allow them to do things like subpoena witnesses and acquire documents from the targets of their probes. When the Trump administration took office during his first term in 2017, the SEC nixed the sub delegation of the director of its Division of Enforcement to senior officials to open such investigations.

With the change in leadership at the SEC, the administration is going a step farther this time around. A final rule issued by the agency last month nullified the authority of the Division of Enforcement’s director to issue formal orders of investigation. Instead, greater discretion over enforcement decisions will be in the hands of politically appointed SEC commissioners.

2)  Trump’s former SEC chair is now U.S. attorney of the Southern District of New York.

In a move similar to his first term in office, Trump nominated Jay Clayton as interim U.S. attorney of the famed Southern District of New York. The position is considered a high-profile appointment due to the number of headline-grabbing cases that are adjudicated in the district, which includes the borough of Manhattan.

Despite his previous role as chair of the SEC, Clayton wasn’t a conventional pick to head up the office of the SDNY. Namely, he lacked experience as a prosecutor. Senate Minority Leader Chuck Schumer blocked Clayton’s appointment using an obscure procedural mechanism known as a “blue slip,” citing concerns over Clayton’s lack of prosecutorial experience.

3)  Cryptocurrencies will probably get a light enforcement touch.

In April, Caroline D. Pham, the acting head of the Commodity Futures Trading Commission, indicated the CFTC should adhere to a newly issued memorandum from the Department of Justice regarding digital assets. The memo declared DOJ “will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets.” Likewise, the CFTC should “not seek to ‘charge regulatory violations in cases involving digital assets,’ in particular ‘violations of registration requirements under the Commodity Exchange Act,’ unless ‘there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully,’” according to Pham.

The upshot: Expect Brian Quintenz, the current administration’s pick to chair the CFTC, to ease up on crypto, indicating a likely less aggressive approach to crypto enforcement.

4)  The Foreign Corrupt Practices Act is on hold from enforcement.

The administration published an executive order in February calling on the Department of Justice to pause any new FCPA investigations or enforcement actions for the equivalent of six months. Why the FCPA? According to the EO released on February 10, “overexpansive and unpredictable” enforcement of the FCPA “not only wastes limited prosecutorial resources that could be dedicated to preserving American freedoms, but actively harms American economic competitiveness,” according to the directive.

5)  Defense lawyers are readying to reassess white-collar cases.

Given the new administration’s policy changes on matters like crypto enforcement and the FCPA, the federal government might take a different view now of some of the white-collar cases that popped in the previous four years. Some defense attorneys are reportedly asking for reassessments of their cases.

We’ll continue to monitor developments in white-collar enforcement under the current administration and provide updates as necessary.