Can the U.S. President Fire the SEC Chairman?

Trump pledges to fire SEC Chair Gary Gensler: Does the President have the power to do so?

Curiously, the question of whether the President has the power to remove SEC Commissioners without cause is an open one. Before we get to that question, however, let’s start with the issue of Gensler’s status as SEC chair.

Reorganization Plan No. 10 of 1950 section 3 provides that the President has the power to designate a member of the Commission to serve as its chairman. Dicta in some decisions and some law review commentary argues that the President therefore can remove a Commissioner from the position of chairman…. This seems to be the general understanding. Certainly, it is what I’ve always understood.

So if reelected Trump likely could remove Gensler from his post as chairman and designate a different member of the Commission to serve as chairman. But can he remove Gensler as a Commissioner?

SEC Intends to Amend Complaint Against Third Party Tokens (Like SOL, MATIC) in Binance Case

The U.S. Securities and Exchange Commission (SEC) may be dropping it’s charges against so-called third-party tokens, such as Solana’s SOL and Polygon’s MATIC, which have been part of its case against Binance, according to a court filing early Tuesday morning.

According to the filing, the SEC has already informed the defendants, Binance and affiliated entities (namely Binance.US and founder Changpeng Zhao), that it “intends to seek leave to amend its complaint, including with respect to the ‘Third Party Crypto Asset Securities’… “obviating the need for the Court to issue a ruling as to the sufficiency of the allegations as to those tokens at this time.”

More Left

Because I think the point here is that it’s securities fraud if he deceived people about some material fact. If people went around thinking “I need to be in the same trades Andrew Left,” and he said “I shorted Company X and am still short right this minute and will stay short for months,” and they believed him about his position, so they shorted Company X, and actually he had already bought back his short, then that would be fraud about a material fact.

But I don’t think that happened? I think that happened is that people went around thinking “Andrew Left has a good track record of finding stocks to short,” and he said “Company X is a fraud and I am short,” and they believed him about Company X, so they shorted Company X. And then if he was honest and diligent and mostly correct about Company X being a fraud, then, you know, kind of no harm no foul? Even if he covered his shorts immediately?

I am not saying this is the law — I don’t think it is — it’s just a statement of my sympathies. And I have not closely studied his track record, and I don’t know how honest and diligent his calls actually were; again, the SEC has messages that suggest he might not have been all that honest and diligent….

Trump Becomes a Crypto Convert

If crypto currencies really are a libertarian vehicle to invest free from political vagaries, then they should trade on their own without government help. Regulators can protect investors from scammers and lay out transparent rules. But Mr. Trump’s sketchy plan reflects the contradictions of much of his MAGA platform, which advocates deregulation but at the same time more government industrial policy.

If Mr. Trump wants to strike a contrast with Kamala Harris, he might instead call for government getting out of the business of picking winners and losers—crypto and bitcoin included. It never ends well.

From crackdown to comeback: Crypto’s fortunes turn in Washington

Crypto’s long winter in Washington is coming to an end.

Last year, the digital asset industry faced a regulatory crackdown after the collapse of leading crypto companies and the indictments of their executives. Fast forward to this past week, when presidential contenders from both sides of the aisle took an interest in the sector and calls to replace its chief nemesis, Securities and Exchange Commission Chair Gary Gensler, grew louder.

***

Some prominent Democratic senators derided crypto as “bullsh*t” in the wake of the 2022 FTX collapse. Yet there are signs some of them are now tempering their past scorching criticisms of the industry.

“I think we’re in a process of finding out — dot some ‘I’s and ‘T’s and crossing them, all that stuff,” Tester told Semafor in June. “But look, it’s 21st century stuff. I thought fax machines were BS too.”

Why is Your Audit Fee So High? Perhaps Management is Telling Investors it’s Honest

A research paper published in the Journal of Business Ethics finds that companies that use “trust words,” such as “character,” “ethics,” and “honest,” in the MD&A section of their SEC Form 10-K “have lower information content” in their earnings announcements than firms that do not use trust words. In Can We Trust the Trust Words in 10?Ks?, Myojung Cho (Lubin School of Business, Pace University), Gopal V. Krishnan (Department of Accountancy, Bentley University), and Hyunkwon Cho (SKK Business School, Sungkyunkwan University) also find that “firms using trust words are more likely to receive a comment letter from the SEC, pay higher audit fees, and have lower corporate social responsibility scores.” In short, the use of trust words in the 10-K is “associated with negative outcomes, and trust words are an inverse measure of trust.”