Term Set to End January 3 for Lone Democrat SEC Commissioner Caroline Crenshaw

The S.E.C. loses its lone Democratic voice

The S.E.C. will soon be without its one remaining Democratic commissioner, Caroline Crenshaw, as her term is set to come to a close on Jan. 3. And Crenshaw is worried about the partisan future of the nation’s leading securities watchdog, Niko Gallogly writes.

Crenshaw was left as the lone Democrat in the role after the S.E.C.’s former chair, Gary Gensler, and Jaime Lizárraga, another Democrat, resigned in January. Paul Atkins, a Trump nominee, was sworn in as chair in April. He is joined by two other Republican commissioners, Mark Uyeda and Hester Peirce.

A historical rarity. The S.E.C., which was established as a five-member bipartisan commission, will operate with a 3-0 partisan makeup when Crenshaw departs. The agency has done so only a handful of times in its history. It’s unclear if or when President Trump plans to choose a Democrat to replace Crenshaw or to fill the S.E.C.’s fifth seat.

SEC’s Earnings Fraud, Auditor Liability Cases Plunge Under Trump

The SEC under the second Trump administration is on track for its least active docket of earnings fraud and auditor liability cases since Ronald Reagan occupied the White House.

Fresh priorities under new leadership at the Securities and Exchange Commission—along with a staff exodus and a 43-day government shutdown—have stunted the regulator’s efforts to hold companies and their outside auditors accountable.

The SEC has issued just 20 enforcement actions so far this year involving violations that range from accounting errors to fraud, as well as audit failures.

That case count falls far short of the 79 financial reporting-related actions the Wall Street watchdog has issued on average annually since the start of President Donald Trump’s first term in 2017, according to case data compiled by professors at the University of Southern California.

“It’s truly a historic lack of enforcement this year,” said William Floyd, an accounting analyst and adviser to Floyd Advisory.

Revitalizing America’s Markets at 250

Shortly after I left the SEC as a staff member in the mid-1990s, there were more than 7,000 companies listed on the U.S. exchanges, from small-cap innovators to giants of industry. Yet by the time that I returned as Chairman earlier this year, that number had fallen by roughly 40 percent.

What happened during those decades tells a cautionary tale of regulatory creep. A tale that tells us that the path to public ownership has become narrower, costlier, and overly burdened with rules that often create more friction than benefit.

These trends have eroded American competitiveness; locked average investors out of some of the most dynamic companies; and pushed entrepreneurs to seek capital elsewhere, either in the private markets or on foreign shores.

This decline was not inevitable—nor, is it now irreversible. While there are many SEC rules and practices that have amassed over the decades and are ripe for reform, perhaps none epitomize regulatory creep more so than the voluminous disclosure requirements contained in the Commission’s rulebook today.

Over the years, and particularly over the past two decades, special interest groups, politicians, and—at times—the SEC itself have weaponized the disclosure regime that Congress created for our marketplace, in an effort to advance social and political agendas that stray far from the SEC’s mission of facilitating capital formation; protecting investors; and ensuring fair, orderly, and efficient markets.