However, most likely when a new president wins, a new administration will come in and the old one will step down, so I think it is the new president’s prerogative to decide who stays and who goes, so if Trump wins, Uncle Gary will go.
This is true if we are talking about political positions, but since SEC is an independent agency of the United States federal government, and to change SEC, a new law is needed to be approved from Congress, or in other words, the matter must be a priority for Trump, + the Republicans + the Democrats,
yeah trump can't fire him on day one:
https://www.law.com/newyorklawjournal/2024/09/04/can-the-president-fire-the-sec-chair-or-other-commissioners/?slreturn=20241026111045
"On July 27, 2024, former President Donald Trump gave a keynote address at the Bitcoin 2024 conference in Nashville, Tennessee. During this address, Trump announced his intention, if elected in November, to remove Securities and Exchange Commission ("SEC" or "the Commission") Chair Gary Gensler "on day one" and appoint a new Chair.1 Trump is not the first politician to call for the SEC Chair's removal. In September 2008, then-presidential candidate John McCain vowed to remove SEC Chair Christopher Cox.2 Trump is also not the first politician to call for Gensler's removal. House Representatives Warren Davidson and Tom Emmer introduced the SEC Stabilization Act in June 2023 to "restructure the Securities and Exchange Commission and remove Gary Gensler as Chair of the SEC."3
Now, with the presidential election only two months away—and thus the possibility of an administration change prior to the expiration of Gensler's term—what might otherwise be a hypothetical question becomes a realistic one: can the President remove the SEC Chair, or any SEC Commissioner, at will? The answer to this question is not clear. After beginning with an overview of the statutory authority governing the SEC and a brief discussion of case law defining the President's removal power, this article will examine the legal support for and against presidential removal of SEC Commissioners at will.
Creation of the SEC and Appointment of Chair
The Securities Exchange Act of 1934 ("the Exchange Act") officially established the SEC and specified the limits on the composition of its Commissioners. The Exchange Act requires that the Commission be comprised of five Commissioners appointed by the President, with the advice and consent of the Senate. No more than three of the Commissioners can be affiliated with the same political party, and each Commissioner serves a term of five years. The terms of the Commissioners are staggered so that they do not all expire at the same time. 15 U.S.C. § 78d(a). Importantly, the Exchange Act does not address whether, or if so, how Commissioners can be removed from office.
A decade and a half later, President Harry S. Truman submitted to Congress the Reorganization Plan No. 10 of 1950, which transferred certain executive and administrative functions from the full Commission to the Chair, including the appointment and supervision of SEC personnel and management of SEC funds. Section 3 of the Reorganization Plan also transferred the power of selecting the SEC Chair from the full Commission to the President. Reorganization Plan No. 10 of 1950, 15 Fed. Reg. 3175 (May 24, 1950).
At the very least, one could make the argument that, under Reorganization Plan No. 10, the President could appoint a new SEC Chair among the existing five Commissioners without having to remove any Commissioner from office, but that is not the focus of this article. Furthermore, even if the President could entirely remove and/or reappoint the Chair or other Commissioners, the President would still have to meet the statutory requirements regarding political party affiliations and staggered terms.
Article II Removal Power
The only express reference to removal in the Constitution is found in Article II, Section 4: "The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors." U.S. Const. art. II, § 4. The Constitution is silent on the power to remove an officer who was appointed by the President, with the advice and consent of the Senate.
The Supreme Court contemplated the President's removal power in Myers v. United States, 272 U.S. 52 (1926). In that case, the Postmaster General, acting at the direction of the President, removed from office a first-class postmaster in Portland, Oregon. The postmaster was appointed to office under an 1876 statute that specified: "Postmasters of the first, second, and third classes shall be appointed and may be removed by the President by and with the advice and consent of the Senate, and shall hold their offices for four years unless sooner removed or suspended according to law." Id. at 107 (emphasis added). The Senate had not consented to the postmaster's removal. The Court found the statute unconstitutional, holding that Article II provides the President with the exclusive power of removal of executive officers, unrestrained by Senate consent. It explained that "Article II grants to the President the executive power of the Government, i.e., the general administrative control of those executing the laws, including the power of appointment and removal of executive officers – a conclusion confirmed by his obligation to take care that the laws be faithfully executed . . . ." Id. at 163-64.
Although the question presented to the Myers Court concerned the President's exclusive authority to remove executive officers, the Court suggested that the President also has removal power over officers who perform "quasi-judicial" duties, because "- therwise [the President] does not discharge his own constitutional duty of seeing that the laws be faithfully executed." Id. at 135.
Nine years later, the Supreme Court further clarified the President's removal power in Humphrey's Executor v. United States, 295 U.S. 602 (1935). In that case, the Court drew a distinction between "purely executive officers" and members of independent agencies that serve non-executive functions. In Humphrey's Executor, President Roosevelt removed William Humphrey, a member of the Federal Trade Commission ("FTC"), after Humphrey refused Roosevelt's request to resign due to a disagreement on policies. Id. at 618-19. The Federal Trade Commission Act—similar to the Securities Exchange Act—created the FTC and specified the requirements for its composition. Unlike the Exchange Act, however, the Federal Trade Commission Act noted that "[a]ny commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office." Id. at 620. The Supreme Court examined whether (1) the statute limited the President's removal power only to instances of a commissioner's "inefficiency, neglect of duty, or malfeasance in office;" and whether (2) the statute restricting removal to those express instances was constitutional. Id. at 619.
The Court answered both questions in the affirmative. Id. at 632. The Court explained that the Myers decision was not controlling in Humphrey's Executor because, unlike the postmaster, which is "an executive officer restricted to the performance of executive functions," the FTC is a quasi-legislative and quasi-judicial body that operates outside of the executive branch. Id. at 627-28. The Court reasoned, "The authority of Congress, in creating quasi legislative or quasi judicial agencies, to require them to act in discharge of their duties independently of executive control cannot well be doubted; and that authority includes, as an appropriate incident, power to fix the period during which they shall continue, and to forbid their removal except for cause in the meantime." Id. at 629. The Court thus distinguished the Myers decision, ruling that the President's exclusive power to remove is "confined to purely executive officers" and not members of independent agencies. Id. at 631-32. Accordingly, the Court concluded the for-cause restriction on the FTC commissioners' removal was constitutional. Id. at 632.
For purposes of this article, we consider the SEC an independent agency that, broadly speaking, operates outside of the exclusive control of the executive branch. However, we do not assume that the SEC's independence necessarily leads to a forcause restriction on the removal of its Commissioners.4
Principles Against Removal At Will
Trump's promise to remove Gensler as SEC Chair naturally implicates the Supreme Court's opinion in Free Enterprise Fund v. Public Company Accounting Oversight Board, 130 S. Ct. 3138 (2010), which addressed a "for cause" limitation on removal power.
The Public Company Accounting Oversight Board ("PCAOB" or "the Board"), created as part of the Sarbanes-Oxley Act of 2002, is composed of five members appointed by the SEC. The statute establishing the Board also gave the SEC the power to remove PCAOB members from office "for good cause shown." 15 U.S.C.A. § 7211(e)(4)-(6). Free Enterprise—an accounting firm under investigation by the PCAOB—claimed that Sarbanes-Oxley violated the separation of powers by conferring executive power on Board members without subjecting them to Presidential control. Id. at 3142. Specifically, Free Enterprise argued that PCAOB members were improperly protected from presidential control on two levels: (1) PCAOB members could only be removed by SEC Commissioners for good cause; and (2) the SEC Commissioners could only be removed by the President for good cause. Id.
It is important to note that the Supreme Court in Free Enterprise accepted a stipulation among the parties that SEC Commissioners could only be removed for cause. The Court ultimately held that the dual for-cause limitations on the Board's removal were unconstitutional. Id. at 3143, 3148. The Court reasoned that the dual structure not only protected Board members from removal without good cause, but it also denied the President a decision on whether good cause exists because that decision belonged to officers who were not subject to the President's direct control: the SEC Commissioners. Id. The Court explained that this structure contradicted Article II's vesting of executive power in the President because "[w]ithout the ability to oversee the Board, or to attribute the Board's failings to those whom he can oversee, the President is no longer the judge of the Board's conduct. He can neither ensure that the laws are faithfully executed, nor be held responsible for a Board member's breach of faith." Id.
The Court's decision in Free Enterprise would appear, at first glance, to answer the very question this article contemplates: if Trump were elected President, he could not remove Gensler on day one unless he showed good cause. But the answer may not be that straightforward. Critical to the majority's opinion in Free Enterprise is the assumption that SEC Commissioners can only be removed for good cause. That assumption, as the Court admitted, is not based on any legal analysis, but rather solely on a stipulation between the parties. Chief Justice Roberts, writing for the majority in Free Enterprise, noted early in the opinion that "[t]he parties agree that the Commissioners cannot themselves be removed by the President except under the Humphrey's Executor standard of 'inefficiency, neglect of duty, or malfeasance in office' . . . and we decide the case with that understanding." Id. at 3148-49. Justice Breyer's dissent in Free Enterprise—mentioned later in the section of this article discussing principles supporting removal at will—questions the validity of this assumption.
Recently, the Fifth Circuit in Jarkesy v. Securities Exchange Commission, 34 F.4th 446 (5th Cir. 2022), reaffirmed the for-cause limitations on SEC Commissioners' removal. In that case, the SEC brought an administrative enforcement action against Jarkesy and his firm, in which an SEC administrative law judge ("ALJ") ruled that Jarkesy had committed securities fraud. Id. at 449. Jarkesy appealed the judgment and argued, among other things, that the administrative proceeding was defective because the statutory removal restrictions on SEC ALJs were unconstitutional. Id. The statute stated that ALJs could only be removed "for good cause established and determined by the Merit Systems Protection Board ["MSPB"] on the record after opportunity for hearing before the Board." 5 U.S.C.A. § 7521.
The Fifth Circuit agreed with Jarkesy on similar grounds to the Supreme Court's reasoning in Free Enterprise, finding fault with the dual for-cause protections for the MSPB and SEC. The Fifth Circuit reasoned that "for an SEC ALJ to be removed, the MSPB must find good cause and the Commission must choose to act on that finding. And members of both the MSPB and the Commission have for-cause protection from removal by the President . . . Thus, SEC ALJs are sufficiently insulated from removal that the President cannot take care that the laws are faithfully executed." Id. at 465 (emphasis added). The Fifth Circuit held that the statutory removal restrictions were unconstitutional. Id.
The SEC appealed the Fifth Circuit's decision to the Supreme Court. In late June of this year, the Court reversed on Seventh Amendment grounds without reaching the issue of removal. Sec. & Exch. Comm'n v. Jarkesy, 144 S. Ct. 2117, 2128 (2024).
Principles Supporting Removal At Will
Although the majority in Free Enterprise and the Fifth Circuit in Jarkesy seemed quick to accept the notion that SEC Commissioners can only be removed for cause, Justice Breyer's dissent in Free Enterprise provides a roadmap for those arguing that for-cause protection for SEC Commissioners is not necessarily guaranteed.
Breyer pointed out that the Exchange Act is silent on the question of removal, contrasting it with statutes establishing dozens of federal agencies that do mention removal. Thus, according to Breyer, as far as the Exchange Act's text is concerned, "the President's authority to remove the Commissioners is no different from his authority to remove the Secretary of State or the Attorney General." Free Enterprise, 130 S. Ct. at 3182-83. To support this assertion, Breyer cited to the Supreme Court's 1903 opinion in Shurtleff v. United States: "To take away th[e] power of removal . . . would require very clear and explicit language. It should not be held to be taken away by mere inference or implication." Id. at 3183 (original citation omitted).
Breyer also used the timing of the SEC's creation to suggest that Congress did not intend for Commissioners to enjoy for-cause protection. Congress created the SEC after the Supreme Court's decision in Myers but before its decision in Humphrey's Executor. Id. According to Breyer, that sequence is significant because the SEC was created at a time when, under the Court's precedent, it would have been unconstitutional to make SEC Commissioners removable only for cause. Id. Furthermore, Breyer reasoned, Congress created at least three major federal agencies during this post-Myers, pre-Humphrey's Executor period—the SEC, Federal Communications Commission, and Federal Power Commission (later renamed Federal Energy Regulatory Commission)—without expressly making any of the officers removable for cause, whereas Congress created the National Labor Relations Board with an explicit removal limitation just one month after the Supreme Court's decision in Humphrey's Executor. Id
Breyer's dissent places a lot of weight on the text (or lack thereof) of the Exchange Act, especially when compared to other statutes that do expressly mention removal. Notably, the same statute that simultaneously established the SEC, ordered the appointment of the Commissioners, restricted political affiliation, carved out term limits, and specified several other details, was silent on the topic of removal. So, one might argue, this textual silence, combined with Supreme Court precedent affirming the President's authority to remove appointed officials, would appear to support the claim that the President can, in fact, remove the SEC Chair at will. See also Collins v. Yellen, 594 U.S. 220, 223 (2021) ("When a statute does not limit the President's power to remove an agency head, the Court generally presumes that the officer serves at the President's pleasure.").
That said, other Supreme Court precedent suggests that the Exchange Act's silence may not be sufficient to support removal at will. In Wiener v. United States, 357 U.S. 349 (1958), the Supreme Court examined whether the President could remove a member of the War Claims Commission at will. The War Claims Act of 1948 established the War Claims Commission and specified that the commissioners were to be appointed by the President, with the advice and consent of the Senate. Notably, like the Exchange Act, the War Claims Act was silent on removal. Id. at 350. After one of the commissioners—who was appointed by President Eisenhower's predecessor—refused to resign at Eisenhower's request, Eisenhower removed the commissioner and replaced him "with personnel of [Eisenhower's] own selection." Id.
The Supreme Court ultimately concluded that the President could not remove the commissioner at will. Id. at 356. Although the statute itself was silent on removal, the Court used the War Claims Act's legislative history to demonstrate Congress's intention that the War Claims Commission remain independent of executive control. The Court reasoned, "If . . . the War Claims Act precluded the President from influencing the Commission in passing on a particular claim, a fortiori must it be inferred that Congress did not wish to have hang over the Commission the Damocles' sword of removal by the President for no reason other than that he preferred to have on that Commission men of his own choosing." Id. Although the Supreme Court has yet to examine whether the Exchange Act's legislative history would similarly shed light on Congress's intention for removal, Wiener at least challenges the notion that statutory silence, on its own, is enough to justify removal at will.
Conclusion
The question of whether the President can remove the SEC Chair at will remains an open one. As this article demonstrates, proponents of both sides of the argument can find some support in the case law, but both sides also face limitations. For example, the Court in Free Enterprise held that SEC Commissioners can only be removed for cause, but that outcome was based on the parties' stipulation rather than the Court's legal analysis. The Fifth Circuit supported for-cause protection in Jarkesy, but the Supreme Court failed to reach the removal issue on appeal. Breyer's Free Enterprise dissent elevated the significance of the Exchange Act's silence on removal, but the Wiener decision casts doubt on whether textual silence alone is sufficient. In other words, there are viable arguments on both sides of the issue. It remains to be seen whether a President will seek in the future to remove the SEC Chair and whether any new precedent will be established on this issue.
WILLIAM F. JOHNSON is a partner in the Special Matters and Government Investigations Practice Group at King & Spalding LLP. Associate JESSICA RENNERT assisted in the preparation of this article.
ENDNOTES:
1. Teresa Xie, Stephanie Lai, and Alicia Diaz, Trump Pledges to Fire Gensler, Hire People Who 'Love' Crypto, BLOOMBERG (July 27, 2024, 6:05 PM).
2. Jeff Mason, McCain says would fire SEC chairman, REUTERS (Sep. 18, 2008, 1:30 PM) https://www.reuters.com/article/topNews/idUSWAT01007920080918/.
3. Press Release, Tom Emmer, Emmer, Davidson Introduce 'SEC Stabilization Act' to Remove Chair Gary Gensler (Jun. 12, 2023), https://emmer.house.gov/2023/6/emmer-davidson-introduce-sec-stabilization-act-to-remove-chair- gary-gensler; H.R. 4019, 118th Cong. (2023).
4. Notably, prior SEC Chair Mary Jo White remarked in 2013 that "As with other independent agencies, the President cannot remove a Commissioner without cause and the agency does not report or answer to the White House or any part of the administration." Chair White's speech also cited SEC v. Blinder, Robinson & Co., Inc., 855 F.2d 677, 681 (10th Cir. 1988), which merely accepted without deciding the appellants' assertion that "it is commonly understood that the President may remove a commissioner only for 'inefficiency, neglect of duty or malfeasance in office.'" Mary Jo White, Chair, Sec. Exch. Comm'n, 14th Annual A.A. Sommer, Jr. Corporate Securities and Financial Law Lecture, Fordham Law School: The Importance of Independence (Oct. 3, 2013)."
but knowing trump he will do it. then go to the stacked Supreme Court and get his way.
God help us all when he wins.
That is not to say I like Harris
I feel as an American I get to pick between a bucket of shit and a bucket of diarrhea.
But since Vance has said he would dilute my vote (all my kids are dead via miscarriages) I am likely going to vote for Harris.
I liked Vance until he made clear he wants to weaken childless peoples vote.
Since Trump is old and fat putting him in means Vance will very likely be the president due to Trump being too old by 2026 or so.
Topic: Gary Gensler’s time is ticking (Read 2062 times)
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