ACUS regulation committee advances draft guidance on agency investigations, drops controversial footnote

The Administrative Conference of the United States’ regulation committee on a virtual meeting advanced a draft package of recommendations that would standardize how federal agencies document and conduct investigations, emphasize notice to subjects, and call for transparency about compulsory processes.

The committee discussed 15 numbered recommendations to be added to agency enforcement manuals, including a directive that agencies describe investigative procedures and the use of electronic submissions and algorithmic tools. Committee members debated how broadly the document should define an "investigation," whether recommendations should cover routine supervisory exchanges, and how to handle notice and termination communications to subjects of investigations.

The draft requires agencies, when seeking information from the target of an investigation, to communicate the scope and general nature of the inquiry, the potential legal basis for enforcement, deadlines and extension procedures, whether the request is compulsory or voluntary, and whether refusal may lead to compulsory measures. The draft also calls for processes to facilitate exchange of evidence, administrative review opportunities before judicial enforcement, and clear factors for deciding whether to negotiate settlements.

Committee members flagged several drafting points during the line-by-line review. Erica Litson questioned a sentence that appeared to treat routine supervisory data collection as investigatory, saying it could conflict with the paper's definition of "investigation." "That sentence seems to be describing information collection that is routine rather than information collection that happens during that window," Litson said, urging removal or revision. Aram (committee member) characterized a related concern raised by Jay Schwartz as an "administrability" issue for agencies with unusually intensive supervisory contact, such as the Federal Reserve, and said the recommendations are intended to target nonroutine information gathering.

The group accepted compromise wording that would acknowledge some agencies review information in the course of supervision "before determining whether to initiate a formal investigation." The committee also agreed to narrow the scope language in the footnote that defined an "investigation." The chair announced the committee would delete an additional, more specific footnote (referred to in the meeting as footnote 13) that Jay Schwartz had proposed to call out supervision-specific constraints; the group voted to remove that footnote and allow Mr. Schwartz to raise it at the plenary.

Members debated due-process elements. A committee member asked whether the draft should reference the SEC "Wells" process; participants recommended adding a separate recommendation ensuring subjects are afforded an opportunity to submit additional evidence or argument before a final enforcement decision when appropriate. On the standard of proof, a committee member cited Stedman v. SEC and questioned whether the draft's language added anything substantive; Aram advised the committee that practices vary by agency and that the draft should direct agencies to identify the appropriate standard for their own proceedings.

The committee also addressed the concern that agencies can leave investigations open for years. Jennifer Dickey and others noted that prolonged open investigations can impose collateral harms, including disclosure and licensing impacts for regulated parties. The committee retained a recommendation that agencies notify subjects when investigations are terminated but added the caveat "unless there are compelling reasons not to do so," to preserve exceptions such as national security or ongoing criminal matters.

The meeting concluded with a voice/hand vote to forward the revised draft to the ACUS plenary for final consideration. Kayla (committee member) announced she would abstain; Helen (committee member) voiced support. No hands opposed were observed on the call. The committee chair said staff would "clean it up" and circulate the final draft in advance of the plenary scheduled for June 12.

The draft addresses cross-cutting issues that federal agencies encounter when developing enforcement manuals and procedures, and it references prior ACUS work on regulatory enforcement manuals, settlement transparency, agency use of third-party programs, algorithmic tools in enforcement, and proactive disclosure of legal materials.

Next steps: the committee's edited draft will be circulated to committee members for final review and presented to the full ACUS plenary at its next session. The draft, as amended in committee, asks agencies to document investigative procedures, notify subjects in ordinary circumstances, explain the legal basis for compulsory processes, and consider Wells-style opportunities in appropriate cases.