Following up on my recent blog – “A New Presidential Administration? Top Five Impacts in Our Space” – here are a few more thoughts based on my years of observing the SEC:

1. We don’t know much. I continue to read a number of commentaries with predictions about what the SEC under a new chair will look like. Some of them seem like they could be spot on. Some, not so much. But the reality is that we don’t know much until it starts playing out.
2. We don’t know how much the White House will be dictating what the SEC does. Although the agenda that the SEC establishes is almost entirely set by the SEC chair, sometimes the administration will give the chair guidance about what it wants to happen.
   
   When Donald Trump was last in office, then-SEC chair Jay Clayton appeared to be mainly operating under his own agenda. Beyond unwinding the SEC’s climate disclosure rule and Chair Gary Gensler’s crypto positions, I’m not sure how closely the White House will influence the incoming chair’s agenda – probably more than typical, given the desires of some in Congress to make changes at the SEC.
3. We don’t know whether recent dissents from GOP SEC commissioners mean anything going forward. A number of commentaries I’ve read say that the dissents from GOP Commissioners Hester Peirce and Mark Uyeda are tea leaves that indicate the direction of the SEC under a new chair. That may well be true, particularly if Uyeda becomes chair. But it’s not a certainty in my opinion.
   
   You never know what a new chair will seek until they’re in office. Remember that the SEC is supposed to be independent and nonpartisan, and for many decades, it was. Former Chair Bill Donaldson was an appointee of former President George W. Bush, and he was quite pro-investor, which is now deemed to be more of a trait of the Democrats. When Jay Clayton was chair, his political label was that of an “independent” (although that has changed, and he was just tapped to be US attorney for the Southern District of New York).
4. We don’t know how dramatic changes to the SEC might wind up being. In talking to folks at the SEC, some are worried there could be wholesale changes to SEC staffing and processes. Whether this transpires depends perhaps on who becomes the SEC chair – and how involved the White House decides to be in the SEC’s affairs.
   
   Francine McKenna recently wrote an interesting piece on “The Dig” titled, “Can SEC staff hold the line? We’re not in Kansas anymore, folks.” She quotes someone well respected in our industry who believes that regardless of who the chair is and how much gutting they do, the institution that is the SEC will keep it the respectable agency that it has been for years. She then quotes a study that provides examples of how this might not always be the case.
   
   Being a longtime creature of DC myself, I can attest to anecdotal evidence in speaking with neighbors and friends who work in agencies targeted during the previous Trump administration. When an agency is embattled, a lot of institutional knowledge tends to depart and find jobs elsewhere. And when morale is low, the work product is not good.
   
   So we’ll have to wait and see. At least I haven’t heard discussion of making all the commissioners come from one political party like we heard last time around (scroll down on this blog I penned in 2016 about the “mixed partisan party” commissioner requirement in Section 4(a) of the ’34 Act) …

Authored by

Broc Romanek

Cooley