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Is the SEC enforcement division about to lose subpoena power?

To great fanfare, SEC Chairman Mary Schapiro last year gave the authority to issue subpoenas directly to the agency's enforcement division.

Until then, investigators had to come before the agency's commissioners to request permission to file subpoenas, a process that was widely viewed as a hindrance to conducting swift probes into financial wrongdoing.

But little noticed at the time was that this grant of power came with an expiration date:

Aug. 11, 2010 - or today.

So says the federal rule: "These orders designate the enforcement staff authorized to issue subpoenas in connection with investigations under the federal securities laws. This action is intended to expedite the investigative process by removing the need for enforcement staff to seek Commission approval prior to performing routine functions. The Commission is adopting this delegation for a one-year period, and at the end of the period will evaluate whether to extend the delegation (though any formal orders issued during this period will remain in effect)."

UPDATED, 2:15 p.m.: As of 2:50, an SEC spokesman didn't get back to me. But the SEC posted a new rule indicating that the enforcement division will hold to this power.

There's little question that grant of subpoena power has at least temporarily boosted the number of cases in which subpoenas are being issued. (Technically, the enforcement division director (or anyone he deputizes) was given the power to issue formal orders of investigation, which allow for the filing of subpoenas. Until then, all investigations are informal and parties don't have to respond to SEC inquiries.)

For instance, as of late March, the commission has issued more than twice as many formal orders (496 to 223) in fiscal year 2009 as in fiscal year 2008.

But there are lingering questions. Has the enforcement staff run investigations better as a result of the subpoena power? Have commissioners stayed informed and closely monitored investigations in which subpoenas are issued? Are investigators issuing subpoenas prematurely just because of the ease of doing so?

King & Spalding lawyer Russell G. Ryan described some of his concerns with the new subpoena power in a post last year.

By Zachary Goldfarb  |  August 11, 2010; 2:14 PM ET
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Next: SEC enforcement division gets to keep its subpoena power

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