The SEC Just Opened the Floodgates to Fraud

The Trump administration has transformed the agency into an instrument of financial sector chicanery.

If you doubt that President Donald Trump is successfully trashing the administrative state, consider a rule change that the Securities and Exchange Commission announced with little fanfare that took effect on October 2. Under the new rule, the SEC, which effectively until now has required a quorum of three to conduct business, will now require a quorum of only one.

At the moment, the SEC has two commissioners, both Republican. These are the Trump sycophant Paul Atkins, who serves as the SEC chairman, and the reliably pro-business Mark Uyeda, whom Trump appointed acting chairman before Atkins took office in April 2025. During Trump’s first term, Jim Chanos, a billionaire investment manager who predicted a year in advance the collapse of Enron, pronounced that America had entered “the golden age of fraud.” That was premature. In his second term, Trump is much more energetically pardoning financial fraudsters, and his SEC is more aggressively reducing transparency and slashing enforcement.

Even in the best of times, Republican administrations are much less keen than Democratic ones to enforce the nation’s securities laws. But Trump is taking moral laxity to stratospheric new levels. Perhaps Trump became more hospitable to white-collar felons after becoming one himself. Perhaps Trump is neutering the SEC so he doesn’t have to look over his shoulder whenever he trades stocks on insider information or uses his office to reward investors in his crypto business. Whatever the motive, going forward, our unitary executive will be able to indulge financial criminality more freely with a unitary SEC.

To help you understand how appalling this SEC rule change is, bear with me while I explain how the regulatory process works. You have Cabinet agencies like the Commerce Department or the Interior Department and you have independent agencies like the SEC, the Federal Trade Commission, and the National Labor Relations Board. Cabinet agencies are always headed by a single political appointee who answers to the president. Independent agencies are usually headed by a commission, or board, typically consisting of five Senate-confirmed commissioners (or board members). These commissioners serve staggered fixed terms, typically five years. When a sitting commissioner’s term ends, the president nominates a new one, but in doing so he must limit to a bare majority (typically three) the slots filled from his own party. For the remaining slots, he must nominate a person from the opposing party.

In practice, a president seldom must wait very long before an independent agency is controlled by a majority from his own party. An unfriendly Congress may resist confirming some commissioner or other on partisan grounds, but such standoffs are typically resolved when an additional commission slot opens for the opposite party. You want your guy? Then vote for my guy.

Trump, of course, famously lacks impulse control, and he doesn’t like waiting even a little bit to win a majority at any given independent agency. Consequently, he’s experimented with not nominating anybody to an independent agency if the next in line’s a Democrat, or, alternatively, firing sitting Democrats. Sometimes he’s done both. Firing a sitting commissioner without cause was, until this past June, illegal under the Supreme Court’s 1935 Humphrey’s Executor decision, which said President Franklin Roosevelt lacked the power to fire,........

© New Republic