TheCorporateCounsel.net

With news of Commissioner Lizárraga’s planned departure on January 17th and Chair Gensler’s planned departure at noon on January 20th, the SEC is set to look very different in less than two months, scaling back to just three Commissioners, assuming no further departures.

The SEC usually has five Commissioners who are appointed by the President with the advice and consent of the Senate. The terms for Commissioners last five years and are staggered so that one Commissioner’s term ends on June 5th of each year. The Chair and Commissioners may continue to serve up to approximately 18 months after their terms expire if they are not replaced before then. For example, Commissioner Crenshaw’s term expired in June 2024, but she continues to serve – while President Biden renominated Crenshaw for another five-year term, the vote has been delayed in the Senate Banking Committee. Commissioner Peirce’s term expires in June 2025, and in the past she has indicated that she does not intend to serve another term as an SEC Commissioner. Commissioner Uyeda’s terms expires in 2028.

Chair Gensler’s decision to exit the Commission effective at noon on Inauguration Day means that we are not likely to see the game of musical chairs that we saw at the Commission during the last change in Presidential Administration. Back then, former SEC Chair Jay Clayton departed the agency in late December, and on December 28, 2020, Elad Roisman was designated as Acting Chair. A few weeks later, on January 21, 2021, President Biden designated Allsion Herren Lee as Acting Chair, and she served until Gary Gensler was sworn in as Chair on April 17, 2021, after being nominated for the position on February 3, 2021.

In this go-round, we are likely to see President-elect Trump designate either Commissioner Peirce or Commissioner Uyeda as Acting Chair until the Senate can confirm a new SEC Chair, probably by sometime in the Spring. Over the course of the next eight weeks, we will see announcements from various members of the SEC’s Senior Staff (e.g., Directors and Office Heads) indicating their planned departures, and acting leaders will be put in place (in most cases drawing from the existing Staff) until the new Chair is sworn in.

For the most part, all of this churn means that policy initiatives will be on hold until the new Chair can set the regulatory direction for the agency. In the trenches, nothing really changes, as the Staff will continue reviewing registration statements and periodic reports and conducting Enforcement investigations, regardless of who is in charge.

Speaking from my own experience, this sort of inevitable leadership change roughly every three-and-half years is always a stressful time when serving at the SEC. Projects that you may have been working on for years go “pencils down” all of the sudden, and you may face a regulatory future that does not necessarily align with your own views and values, but you know that you have to follow the agenda set by the agency’s new leadership. I imagine that all of this uncertainty is compounded by the prospect of the DOGE, which will be led by a person that has no love lost for the SEC. As an SEC alum and longtime student of the SEC’s history, I am hoping that the agency can pull through!

– Dave Lynn