February 25, 2020

February 24, 2020

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SEC Shake-Up: President-Elect Trump Expected to Make Key Appointments

In the wake of the election of Donald Trump as the 45th President of the United States, Mary Jo White has announced her intent to step down from her role as Chair of the Securities and Exchange Commission.  Chair White, the 31st and one of the longest-serving Chairs of the SEC, will be leaving her post at the end of the Obama administration in January.

SEC, SealThe outcome of the election and Chair White’s announcement are sure to kick off an avalanche of prognostication about her successor, the direction of the SEC, and the fate of some of the laws that govern the securities industry, most principally the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. There is already speculation that President-elect Trump will designate a Chair who is a proponent of smaller government and deregulation to steer the agency charged with overseeing the securities industry.

Beyond designating a Chair, however, President-elect Trump will be in a position to overhaul the makeup of the SEC during his administration.  Upon assuming office, President-elect Trump will be authorized to appoint three of the five SEC Commissioners, in addition to designating the next Chair – with a fourth Commissioner appointment as early as June of 2017.  This is particularly important in an agency that relies on Commissioner votes for each decision, order, rule or similar action.  However, despite his broad appointment powers, President-elect Trump will not be permitted to remove any of the remaining Commissioners, nor will he be permitted to “stack the deck” by appointing only Republicans to fill all of the open Commissioner seats.   

The SEC was created by the Securities Exchange Act of 1934, and consists of five Commissioners.  Each Commissioner is appointed by the President, with the advice and consent of the Senate, for staggered five-year terms.  A Commissioner may serve an additional eighteen months, but typically a Commissioner will step down prior to the expiration of his or her term.

While the President appoints the Commissioners, and also designates the Chair, the President does not have the power to remove Commissioners.  Therefore, while Chair White could have continued to serve as a Commissioner until the expiration of her term in June of 2019 regardless of the outcome of the election, President-elect Trump would have been permitted to exercise his authority to designate a new Chair.

The SEC is also a non-partisan agency.  By law, no more than three of the five Commissioners may belong to the same political party. For example, there are currently three Commissioners – Chair White (I), Commissioner Kara Stein (D), and Commissioner Michael Piwowar (R).  Two of the Commissioner seats are currently vacant, and with Chair White’s impending departure, President-elect Trump will have the power to appoint three of the five Commissioners, and designate the Chair. Additionally, Commissioner Stein’s (D) term is set to expire in June of 2017, which would result in an additional appointment for President-elect Trump in the near future.  Assuming that Commissioner Piwowar remains – only two of the open seats may be Republicans.

Lastly, given the anticipated changes at the Commission’s highest levels, it would not be uncommon to see the departures of one or more of the senior SEC officials most responsible for setting and discharging agency policy, principally the heads of the five SEC Divisions – Corporation Finance, Enforcement, Economic and Risk Analysis, Investment Management, and Trading and Markets – or the directors of the SEC’s eleven regional offices.

Despite the turnover and uncertainty, the SEC will continue its operation as a deliberative body even after Chair White’s departure. Indeed, federal regulations provide that a quorum of the SEC shall consist of three members, and that if the number of Commissioners in office is less than three, a quorum shall consist of the number of members in office.  However, while there remain many unknowns about President-elect Trump’s administration, it is fair to assume that the SEC, for one, is sure to look – and perhaps act – much differently.

© 2020 Proskauer Rose LLP.


About this Author

Michael R. Hackett, Litigation Attorney, Proskauer Law Firm

Michael R. Hackett is an associate in the Litigation Department and a member of the Asset Management Litigation practice. His practice focuses on disputes and regulation involving private funds, including private equity, venture capital, hedge, real estate and private credit funds, as well as other limited partnerships, where he regularly advises funds, fund sponsors, investment advisers and institutional and individual investors.

Mike’s experience representing private fund clients runs the gamut, from control contests within advisers, to...

Timothy W. Mungovan, Litigation Attorney, Proskauer Law Firm

Timothy Mungovan is a Partner in the Litigation Department, co-head of the Private Investment Funds Disputes practice and a member of the Private Investment Funds Group. Tim has an international practice in complex commercial litigation, advising public and private companies in a variety of areas, including securities, corporate governance, fiduciary obligations, investment management and financial services, fraud and trade secrets.

In addition to his regular commercial litigation practice, Tim focuses on disputes involving private investment funds including hedge, private equity and venture capital funds and other limited partnerships. He has advised funds, fund sponsors, investment advisers, managers, principals, feeder funds, institutional and individual investors in various disputes, including control contests, partnership disputes, restructurings, removal of a general partner and claims of fraud. He is widely recognized for litigating hedge fund fraud and representing investors in redemption disputes.

617-526-9412, 212-969-3201
Joshua Newville, Proskauer Rose, regulatory enforcement attorney, industry compliance legal counsel, securities exchange commission lawyer

Joshua M. Newville is a partner in the Litigation Department in New York. His practice focuses on commercial litigation and regulatory investigations. Mr. Newville advises companies and individuals in securities litigation and compliance matters. He also focuses on internal investigations and enforcement matters. Prior to joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset...

Anthony M. Drenzek, Special regulatory Counsel, Proskauer Rose, Attorney, Finance Policy Lawyer
Special Regulatory Counsel

Tony is special regulatory counsel in the Corporate Department and a member of the Private Funds Group and the Private Equity & Hedge Fund Litigation team. His practice focuses on advising U.S. and offshore private fund managers on all aspects of federal, state and SRO organizational and operational compliance, with a specific emphasis on the Investment Advisers Act of 1940.

Tony assists U.S. and offshore private fund clients in registering with the SEC as investment advisers, or reporting as exempt reporting advisers, and complying with...