Immediate Practical Consequences of SEC-Related EOs

A large number of the executive actions, including executive orders (EOs) and memoranda, that President Trump has been issuing can have important consequences for companies that make filings or have other business with the SEC and its staff. Such consequences can be expected to vary considerably depending on the details of each company’s business, and much of the impact may emerge only at a future time.

There are some consequences of such executive actions, however, that most companies that have dealings with the SEC should keep in mind right now.

SEC Operations Under the New Administration

Following former SEC Chair Gary Gensler’s resignation, President Trump designated sitting Republican Commissioner Mark Uyeda as acting chair. Uyeda and the other two currently sitting commissioners constitute a quorum under the SEC’s rules, and therefore the commission can function pretty much as normal, having two sitting Republicans and one sitting Democrat.

Moreover, the two Republican commissioners are in general agreement with the regulatory approach favored by Paul Atkins, whom President Trump has nominated to be the chairman of the SEC and whose appointment the Senate is expected to approve. And, more generally, these three are all quite sympathetic to the regulatory objectives that the new administration has for the agency.

Accordingly, the sitting Republican commissioners are already aligning regulatory priorities with the new administration’s policy direction. Most notably, on January 21, 2025, acting chair Uyeda announced the formation of a new task force, led by Republican Commissioner Hester Peirce, that will work to develop a “sensible regulatory path” for the offering and administration of crypto (digital) assets. As a first step, the SEC on January 30, 2025, rescinded certain accounting guidance that had made it quite impractical for financial institutions to have custody of their customers’ crypto assets. These actions are consonant with Trump administration policies reflected in a January 23, 2025, EO that seeks to promote a more receptive regulatory environment for digital assets.

Disruption of SEC Workstreams and Staffing

The shifting regulatory policies at the SEC are already placing additional burdens on the many SEC staff members who will be called upon to participate in, or otherwise respond to, new regulatory initiatives and approaches.

Additionally, a presidential memorandum and follow-up directives from the Office of Personnel Management requiring federal employees to return to their assigned offices full time may apply at least to some extent to SEC staff, and other communications from the Office of Personnel Management appear to offer some employees a form of deferred “buyout” as an incentive for voluntary resignation. Prior to these developments, many SEC staff were spending relatively few days in the office, although many senior staff had been coming into the office more frequently. The current situation for SEC employees is complicated by legal and other uncertainties about the effect and implementation of these executive actions, including uncertainties arising from conflicts with union agreements that cover most nonsupervisory (generally, below branch chief-level) SEC employees.

As a result, some SEC employees have resigned or are expected to resign, requiring their workload to be redistributed among remaining staff. Moreover, the other uncertainties and adjustments (both professional and personal) to which even such remaining employees may be subject could reduce their productivity, at least in the short term.

Therefore, registrants and other persons dealing with the SEC staff should be aware that staff members with whom they would normally expect to be dealing (including their branch chiefs and reviewers) may have been reassigned or become overburdened. This may make it important for companies to:

• Allow as much time as possible for any required SEC staff processing and responding to filings and other submissions;
• Communicate in advance with the company’s reviewer, branch chief, or other relevant SEC official in order to set expectations appropriately; and
• Make increased efforts to explain the company’s plans and reasoning to the staff in ways designed to facilitate efficient staff action on the matter.

SEC Staff Willingness to Reconsider Prior Positions

The SEC recently has signaled considerable willingness to reconsider some significant positions that the commission or staff have previously taken. So far, the SEC’s above-mentioned movement on treatment of digital assets is the most dramatic example of this willingness. Another example is the commission’s early February decision to reinstate a policy from the George W. Bush administration era, requiring full commission approval before the SEC’s enforcement staff can issue a formal order of investigation.

As a result, companies may now have a greater opportunity to advocate for changes to prior SEC positions or actions. Among others, the following may be especially ripe for change:

• Many positions and actions that the current Republican commissioners have formally dissented from or otherwise criticized in recent years. Examples include SEC actions commissioners Uyeda and Peirce have decried as constituting (a) unduly expansive interpretations of the anti-fraud rule under the Investment Advisers Act and (b) indirect regulation of issuer activity through disclosure, including the recent stock buyback and fund liquidity disclosure rules; and
• Other positions or actions that are contrary to policies that the new administration may espouse, whether by EO or otherwise.

Given these evolving dynamics, companies engaging with the SEC should remain proactive, flexible, and well-informed to navigate potential regulatory shifts effectively.  We will continue to monitor the impact of any SEC-related executive actions.