ACUS recommends best practices for fair and efficient administrative investigations.
Federal agencies are responsible for detecting, investigating, and prosecuting potential violations of the statutes and regulations they administer. The Administrative Conference of the United States (ACUS) has examined various agency practices related to investigative procedures, including the public availability of enforcement manuals and settlement agreements and the use of algorithmic tools, such as artificial intelligence, in agency enforcement. At its 83rd Plenary Session, ACUS adopted Recommendation 2025-1, which provides best practices to improve transparency, fairness, and efficiency in agency investigations to help agencies carry out their regulatory missions. The recommendation was informed, in part, by an ACUS report examining the administrative investigative procedures of eight federal agencies.
Distinct statutory authorizations allow federal agencies to conduct investigations and direct the activities of enforcement personnel. Agencies also operate under internally developed procedures and institutional practices. Many federal agencies document these processes in their enforcement manuals, but only some agencies make those manuals publicly available on their websites.
Agencies wield significant investigative power with marginal oversight and transparency for three reasons. First, agency authorizing statutes are often broad and confer undefined authority to achieve their statutory mandate, leaving many procedural aspects of investigations to the agency’s discretion.
Second, there is a siloing effect: Agencies, along with the lawyers that regularly appear before them and other stakeholders, have developed idiosyncratic practices related to agency investigation. These unique practices create a high barrier to entry, favoring actors who are already familiar with—or, in some cases, played a role in creating—these idiosyncrasies. Furthermore, variations in procedural requirements limit the ability of other agencies and the regulated public to innovate by learning from best practices and success stories from the investigative systems and practices used by other agencies.
Finally, courts have paid scant attention to—and thus required little accountability for—agency investigative power. In Axon Enterprise, Inc. v. Federal Trade Commission, the U.S. Supreme Court authorized suits to challenge the constitutionality of certain agency adjudicatory structures before an agency has made a final decision reviewable under the Administrative Procedure Act. But most targets of agency investigations will not be able to seek redress by challenging investigations on constitutional grounds.
Recommendation 2025-1 provides best practices to address the three challenges described above and to generally ensure transparency, efficiency, and fairness in administrative investigations. Because agencies operate under distinct authorities and employ different institutional practices and procedures, how one agency best operates may not be appropriate for another. ACUS intentionally prepares its recommendations, including Recommendation 2025-1, to be broadly applicable, recognizing that agency processes and goals will differ.
Nonetheless, some best practices apply broadly. The report, for example, recommends that all agencies conducting investigations adopt the “Wells Rule” notice process used by the Securities and Exchange Commission. This process includes informing the subject of an investigation that enforcement staff have made a preliminary determination to recommend enforcement action, identifying the securities law violations underlying the recommendation, and inviting a response to the recommendation. Notably, reflective of their Wells notice process, the Securities and Exchange Commission has a reputation for effectively refusing to negotiate with investigative subjects when the Commission finds violations prior to formal initiation of an enforcement action. ACUS recommends, more broadly, that agencies provide notice to investigative subjects before initiating an enforcement action unless there are compelling reasons not to do so.
Another best practice identified in the underlying report is the issuance of no-action letters. No-action letters allow the regulated public to request and receive regulatory clarity in otherwise gray areas of enforcement or compliance when a novel situation arises. Typically, a no-action letter or equivalent—such as an Internal Revenue Service private letter ruling—is sought by a regulated entity from an agency when a change in circumstances or facts makes it uncertain whether an action of the regulated party would be lawful. The appropriateness of no-action letters depends heavily on the nature of the agency’s investigations, and there may be compelling reasons for an agency not to issue a no-action letter. Recognizing this variation, ACUS recommended only that agencies notify the subjects of investigations when the investigation is terminated, although it also recognized that some agencies may choose to go further.
Of particular note, Recommendation 2025-1 identifies and lays out basic investigative methods not yet implemented by some agencies. Specifically, it urges agencies, when formally or informally seeking information from the subjects of an initiated investigation, to communicate to those subjects: the scope and general nature of the investigation; the potential violations of statutes or regulations being investigated; the date by which the subject must submit the information or otherwise respond to the request, including procedures for requesting an extension of time; whether any challenge or appeal process exists for the request; whether the information is being sought through a compulsory or voluntary process; and whether refusal to provide the information sought may result in a compulsory process.
Although these practices and recommendations may seem basic, that they are needed both highlights the patchwork of investigative practices across agencies and reveals how the issue of agency investigations is under-researched and continues to escape significant public policy discussion. Overall, this recommendation represents a giant step toward more transparent, fair, and efficient practices regarding agency investigations and investigative procedures.
The views expressed in this essay are those of the authors and do not necessarily represent the views of the Administrative Conference, its members, or the federal government.
This essay is part of a series, titled “Strengthening Agency Processes Through Transparency and Engagement.”
