A telling statistic about the Trump administration was delivered by Sen. Dean Heller, R-Nev., at the recent Hispanic Chamber of Commerce‘s Legislative Summit in Washington: 1,200 nominees must be confirmed for each new administration, of which 25 have been confirmed so far.
For the investment advisory industry, it goes without saying that two appointees — a new Securities and Exchange Commission chair as well as a new Labor secretary — will be central to dictating the policies they’ll be dealing with under President Donald Trump.
The former head of the SEC’s enforcement division, Robert Khuzami, said on an early March call with reporters that Sullivan & Cromwell partner Jay Clayton will likely be confirmed as chair of the SEC; Clayton’s nomination hearing was scheduled to take place on March 23.
Discussing the priorities of a Clayton-led commission, Khuzami, now a partner in Kirkland’s Government & Internal Investigations Practice Group, warned that “one scandal or high-profile matter” could derail such an agenda.
Khuzami, who was SEC enforcement chief in the wake of the financial crisis (from 2009-2013), worries about the administration’s announced federal agency hiring freeze, which would have “a real impact” on agencies like the SEC.
The problem is that positions that open up as officials rotate out of government won’t be filled, which will “slow down the work of these agencies.”
Since the administration has signaled its intent to cut back on the number of federal workers, Khuzami added that “there have been some suggestions that freezes might not be sufficient but actual cuts may occur.”
Moreover, streamlining and even potential consolidation of agencies may also come into play, as Trump issued an executive order in mid-March to reorganize the executive branch of government, which includes such federal agencies as the SEC and the Cabinet — including the departments of Labor and Justice — as well as the Social Security Administration.
Trump’s “Comprehensive Plan for Reorganizing the Executive Branch” directs the Office of Management and Budget director to propose a plan to “reorganize governmental functions and eliminate unnecessary agencies.”
The plan requires that heads of federal agencies must submit, within 180 days of the order, to OMB a proposed plan to “reorganize the agency, if appropriate, in order to improve the efficiency, effectiveness and accountability of that agency.”
A Changed Focus at SEC
One thing is certain, said Khuzami: With a new administration comes “different priorities.”
With the backlog of financial-crisis-related cases largely “cleared up,” he continued, “it’s a safe bet that there’s going to be less of a priority on record-setting penalties and maybe less of an emphasis on first-ever cases,” which was a central focus of former SEC Chairwoman Mary Jo White.
Much of the focus over the past four years under White was “new cases in new areas that hadn’t been brought before,” Khuzami said. “I think that’s an approach that might get closer scrutiny.”