The US Federal Trade Commission is reported to be investigating Facebook after allegations that 50 million users' private information was misused by a political consultancy firm.
Cambridge Analytica (CA), hired by the Trump campaign in the 2016 US election, has been accused of taking the personal data unknown to users.
CA head Alexander Nix has now been suspended by the company board.
The move came amid allegations the firm may have broken US electoral law.
CA, which is based in London, denies any wrongdoing.
Meanwhile, Facebook's stock has continued to slide, following a steep decline on Monday.
The British and European parliaments have called on Facebook boss Mark Zuckerberg to give evidence to them and the social network is due to brief congressional aides on Wednesday.
Mr Zuckerberg did not attend a Facebook staff briefing on the crisis at its Californian headquarters on Tuesday, which was led by deputy general counsel Paul Grewal instead, the Daily Beast news site reports.
The FTC is an independent agency of the US government tasked with protecting American consumers.
It is investigating whether Facebook violated the terms of a 2011 decree regarding the social network's privacy protections, an unnamed source "familiar with the agency's thinking and not authorised to speak on the record" told the Washington Post newspaper.
Under the 2011 decree, Facebook must notify users and obtain their permission before data about them is shared beyond the privacy settings they have established, the Washington Post says. Facebook was also subjected to 20 years of privacy checkups to ensure compliance.
Facebook confirmed on Tuesday that it was expecting to receive a letter from the FTC with questions about the data acquired by CA. However, it also said it had had no indication of a formal investigation, Reuters news agency reports.