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As Keir also noted in his LinkedIn summary, Chair Gensler’s comments acknowledged that many of the actions the SEC pursued in the last four years may be challenged or modified in the next administration. This Gibson Dunn alert discusses the process of transitioning administrations as well as several tools — plus their efficacy and limits — in facilitating the new administration’s agenda. On rulemaking, here’s what the alert says is likely to happen on day one:

[O]n January 20, 2025, President-elect Trump likely will direct executive branch agencies to freeze pending rulemakings and recommend that independent regulatory agencies do the same. He also may request that departments and agencies withdraw proposed rules that have been sent to the [OFR] but have not yet been published and postpone the effective dates of rules that have been published but have not yet taken effect, although these options may face immediate challenges under the [APA].

[A]t the start of the Biden Administration, Assistant to the President and Chief of Staff Ronald A. Klain sent a memorandum to the heads and acting heads of all executive departments and agencies asking them to take [certain] steps “to ensure that the President’s appointees or designees ha[d] the opportunity to review any new or pending regulations.” … This memorandum was generally understood not to apply to independent agencies, but a new administration might take a more aggressive approach and seek to exert more direct control over traditionally independent agencies such as the [SEC] and [FTC].

At the start of the first Trump Administration in 2017, Assistant to the President and Chief of Staff Reince Preibus issued a similar memorandum, although there were some differences from the Klain iteration. …

Although it is difficult to evaluate the effect of these memoranda on federal agencies, it appears that agencies generally comply with their instructions.  For example, in February 2002, the Government Accountability Office determined that “federal agencies delayed the effective dates for 90 of the 371 final rules that were subject to” a similar memorandum published at the beginning of the Bush Administration … and that a majority of the rules that were not delayed were non-controversial rules that the White House had previously agreed should be issued as scheduled.

Independent regulatory agencies in some cases also abide by the regulatory moratoria, although they have not delayed the effective dates of previously published rules. An agency is an “independent regulatory agency” if it is “run by principal officers appointed by the President, whom the President may not remove at will but only for cause.” In contrast to non-independent agencies (sometimes referred to as executive agencies), the President’s control over independent agencies is limited by his inability to fire the commissioners, board members, and directors that make these agencies’ final decisions, unless he has “cause” to remove them from office.

For-cause removal protections are typically understood to preclude the President from removing an agency official simply because the President disagrees with the official’s policy decisions. At the SEC, for example, five commissioners decide whether to propose and adopt new regulations, and under current law the President is widely believed to lack the ability to prevent them from doing so if he disagrees (though an aggressive administration might argue that the President’s lack of control over independent agencies is unconstitutional).  Likewise, if the President orders the commissioners to repeal regulations adopted during the Biden Administration, nothing clearly requires them to obey that order.

– Meredith Ervine