Former President Donald Trump has publicly pledged to remove current SEC Chair Gary Gensler if he wins the 2024 presidential election, promising to appoint a more crypto-friendly regulator.
This decision could shift regulatory oversight of the crypto and financial markets. However, questions about the president’s authority to remove SEC commissioners without cause have raised legal concerns.
If Trump wins, one of these things will happen:
1. @GaryGensler resigns promptly, as is the tradition when there is a change in administration.
2. Trump asks for Gensler’s resignation on Day 1 and he complies.
3. Trump replaces Gensler as SEC Chairman, but allows him to…— MetaLawMan (@MetaLawMan) October 29, 2024
Legal Hurdles in Replacing the SEC Chair
If Trump secures the presidency, Gensler faces a few possible outcomes. Typically, SEC chairs step down with a change in administration, as seen when former Chair Jay Clayton resigned after President Biden’s election in 2020.
If Gensler does not resign voluntarily, Trump could request his resignation on his first day in office or demote him to commissioner. Trump might also try to dismiss Gensler entirely, which could spark a legal battle if Gensler resists.
Read also: Donald Trump Promises To Fire Gary Gensler as SEC Chair On Day One
A court case may arise if Gensler claims the right to complete his term, set to expire in 2026. Legal analysts say this could define the extent of presidential power over independent agency commissioners, possibly challenging traditional interpretations.
Uncertainties Around Presidential Power over SEC Roles
The president’s authority to remove the SEC Chair is largely based on the 1950 Reorganization Plan No. 10, which grants the president power to appoint the chair from among the commissioners. However, the law does not clarify removal procedures.
Legal precedents, such as the Humphrey’s Executor standard, suggest that some officials may only be removed for cause, although the Supreme Court has not extended this protection explicitly to SEC commissioners.
In the 2010 Free Enterprise Fund v. Public Company Accounting Oversight Board case, Chief Justice Roberts assumed commissioners might have “for cause” protection, while Justice Breyer argued that SEC commissioners lack specific removal protections.
Trump’s stance on Gensler aligns with certain financial sector concerns. Tony Edward, for instance, pointed out that while Gensler and Senator Elizabeth Warren scrutinize the crypto industry for alleged fraud, Treasury Secretary Janet Yellen has flagged widespread fraud in the traditional banking system.
Wait a minute! @GaryGensler and @ewarren said the crypto industry is the one with all the fraud. Liz, better get on the phone with your buddy Jamie Dimon to see what’s going on here. https://t.co/mKeY6T1WAF
— Tony Edward (Thinking Crypto Podcast) (@ThinkingCrypto1) October 30, 2024
Yellen noted the increasing scale of banking fraud and the Treasury’s growing reliance on AI to detect fraudulent activity.
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