The DOJ caused a stir late Friday with its announcement that the President intends to nominate SEC Chairman Jay Clayton to replace Geoffrey Berman as the United States Attorney for the Southern District of New York, which is arguably the most prominent prosecutorial position outside of DC. What will this mean for the SEC?
According to a NYT article, Jay notified Staffers on Saturday that he intends to stay at the Commission until he’s confirmed into the new position. It’s not yet clear whether Jay’s nomination will make it through the Senate, or how long it will take, especially since it’s been reported that even those on Capitol Hill were blindsided by the news – and Democrat New York Senator Chuck Schumer, who traditionally would have procedural blocking power over the nomination since it’s in his home state, released a statement calling for Jay to withdraw his name from consideration. Bloomberg also reported that it’s unlikely Jay expected his nomination to spark controversy and require removal of the current occupant from office.
If and when Jay does leave the SEC, many speculate that Hester Peirce, as the most senior remaining Republican Commissioner, would be appointed to the role of Chair for the time being. She wouldn’t need Senate approval since they’ve already approved her appointment as a Commissioner. The digital token crowd is pretty excited about that prospect, but it remains speculation at this point.
The effect on rulemaking could be murkier. First, the timing of the Congressional Review Act deadline was already up in the air due to the coronavirus. That’s the Act that marks the cut-off point after which agency rules are vulnerable to repeal by the next Congress, and it’s always especially relevant during a presidential election year. Often, this deadline falls sometime in May, but an article from the Brookings Institute notes that it could be as late as July or even August if Congress continues to meet regularly in the coming months. So, while many think the SEC is unlikely to adopt any more major rules at this point, the door may still be open.
Second, the SEC currently has four commissioners because former Commissioner Rob Jackson stepped down earlier this year; his post had ended last June. John blogged on Friday that the President nominated SEC Senior Counsel Caroline Crenshaw to fill the vacancy, but no timetable has been set for her confirmation. If Jay moves on before Caroline is confirmed, the SEC will be left with just three commissioners. That’s enough for a quorum under the Commission’s procedural rules (17 CFR §200.41), but as Broc blogged back when Mary Jo White was Chair, it effectively gives each commissioner “veto power” by not showing up.
If Jay departs after Caroline is confirmed, that would return the number of commissioners to four — and they might split 2-2 in their decision-making, with Commissioners Roisman and Peirce taking one view and Commissioners Lee and Crenshaw taking another. So, if we’re going to see any further rulemaking, it would most likely have the best chance of getting through with Jay still in the seat as Chair.
-Lynn Jokela, TheCorporateCounsel.net June 22, 2020