Democrats seek probe over weakening SEC's subpoena powers

Yellen: U.S. banks are lending and globally competitive
Yellen: U.S. banks are lending and globally competitive

President Trump's temporary SEC chief has already taken steps to curb the agency's ability to go after financial crime.

Now, four top Democratic senators are raising the alarm. In a letter Wednesday, senators Elizabeth Warren, Sherrod Brown, Robert Menendez, and Brian Schatz called on the agency's inspector general to examine whether Acting Chairman Michael Piwowar overstepped his authority by scaling back the agency's investigative powers and moving to potentially roll back two agency rules.

Lawmakers questioned whether Piwowar's actions "exceed his authority" as the interim head of the agency. They are concerned that his moves violated agency procedures because they were taken without a minimum number of commissioners to approve new regulations. Only three out of the five SEC's commissioners seats are currently filled.

"We ask that you conduct an investigation into each of these decisions to determine whether they are legally permissible," the senators wrote.

Related: Exxon to Trump: Don't ditch Paris climate deal

The SEC is responsible for protecting investors by rooting out financial crime and ensuring capital markets are fair for all. The fear is that these actions would weaken the agency.

Shortly after being named acting chairman, Piwowar ordered a review that removed the ability of more than a dozen of the agency's enforcement officials nationwide to launch investigations and issue subpoenas, two people familiar with the matter told CNNMoney.

Those powers are now limited to only the SEC's enforcement division director, the sources said. They said the change was aimed at ensuring that enforcement powers are being used consistently across the country.

But the move has the effect of weakening the investigative powers of the enforcement's staff and rolling back authority that had been granted in 2009 under former chairman Mary Schapiro in the wake of the financial crisis.

Before 2009, only the SEC's commissioners had the ability to issue subpoenas and open investigations.

Related: Trump's Wall Street cop promises 'no favoritism'

The changes mean that Jay Clayton, a Wall Street lawyer that Trump nominated to run the SEC, would inherit a weakened agency if he gets confirmed by the U.S. Senate.

Asked about the removal of subpoena power during last week's confirmation hearing, Clayton said he was not consulted about the shift and is unsure if he agrees with it.

"I will have to discuss this with both commissioners," Clayton said, referring to Piwowar and SEC Commissioner Kara Stein.

Senator Menendez asked Clayton if in his experience as a lawyer defending banks and other companies he found that the SEC's enforcement staff "abused" its subpoena authority.

"In my experience, I have not seen an abuse of subpoena authority," Clayton said.

Piwowar has taken other actions during his short term. In late January, he asked his staff to reconsider a regulation that requires companies to report the use of minerals from war-torn regions in their supply chains.

And in February, he asked his staff to seek fresh input on a regulation that requires public companies to disclose how much their senior executives make compared to an average employee of the firm.

Personal Finance

CNNMoney Sponsors