Yesterday (November 21), the Securities and Exchange Commission (SEC) announced current SEC Chair Gary Gensler will leave the agency on January 20, 2025 when President-elect Donald Trump takes office.  Gensler’s departure is no surprise as Trump has made it clear he would be appointing someone else to take over as the SEC’s top cop.  No doubt, Gensler’s replacement will bring to the agency a very different enforcement approach.  How different, and which areas of enforcement may be tempered or fortified, remains to be seen.

By all accounts, Gensler’s three-and-a-half-year reign (since April 2021) was marked by an aggressive approach to securities enforcement that many will miss and most agree will not be replicated under the new Administration.  In announcing Gensler’s impending departure, the SEC identified numerous accomplishments the agency achieved during Gensler’s tenure:

Treasury Markets. The SEC adopted rules to promote central clearing and narrow circumstances in which broker-dealers are exempt from national securities association registration to lower risk and enhance efficiency in the U.S. capital markets.

Equity Markets. The SEC made updates to the National Market System so that stocks can be traded more efficiently with narrower spreads and lower fees.

Corporate Governance. The SEC adopted several corporate governance changes, including when corporate insiders can sell their shares, when executives must return compensation based on misreported financials, and on the nature of executive disclosures on pay versus performance.

Disclosures. The SEC adopted several rules to ensure adequate investor disclosures from public companies (and companies seeking to go public), broker-dealers, and investment advisors. These included requiring enhanced disclosures on cyber and climate risks, from companies seeking to go public through SPACs (special purpose acquisition companies), and on broker-dealer and investment adviser notifications of data breaches.

But where Gensler perhaps made his biggest impact was in the agency’s aggressive and wide-ranging securities fraud enforcement activity.  As the SEC described it, the Divisions of Enforcement and Examinations, which comprise roughly half the agency, “have been steadfast cops on the beat during Chair Gensler’s tenure.”  Here are some of the specifics: (i) the agency received more than 145,000 tips, complaints, and referrals; (ii) made roughly $1.5 billion in whistleblower awards under the SEC Whistleblower Program; (iii) filed roughly 2,700 enforcement actions; (iv) secured roughly $21 billion in penalties and disgorgement; and (v) returned more than $2.7 billion to harmed investors.

One of the more high-profile areas the SEC targeted under Gensler was crypto-related fraud, with roughly 18% of the SEC’s tips, complaints, and referrals in the past year relating to this industry despite crypto markets comprising less than 1 percent of the U.S. capital markets.  Some have criticized the SEC’s aggressive approach with crypto but the SEC has held firm, highlighting how “court after court agreed with the Commission’s actions to protect investors and rejected all arguments that the SEC cannot enforce the law when securities are being offered—whatever their form.”

Nevertheless, many believe Trump and whomever he chooses to replace Gensler will sharply curtail the SEC’s enforcement of the crypto markets.  No doubt there likely will be some serious softening in some of the SEC’s other priority target areas, like off-channel communications and ESG-related disclosures, just to name two of the more probable subject areas.

Whoever Trump selects, hopefully it will be someone with the experience and credentials Gensler brought to the agency.  Before leading the SEC, Gensler was the Chair of the Commodity Futures Trading Commission, senior advisor to Senator Paul Sarbanes in writing the Sarbanes-Oxley Act, Undersecretary of the Treasury for Domestic Finance, Assistant Secretary of the Treasury, Professor of Global Economics and Management at the MIT Sloan School of Management, Chair of the Maryland Financial Consumer Protection Commission, and a leading partner at Goldman Sachs, responsible for the firm’s worldwide Controllers and Treasury efforts.

In announcing his departure, Gensler called his service for the SEC “an honor of a lifetime.”  We look forward to Gensler’s next move, whether inside or outside of government.  We also look forward to meeting his SEC replacement and hope they bring the same level of dedication and energy that soon-to-be-former Gensler brought to this critical market regulator.  We likewise hope they bring the same level of support for whistleblowers and an equally strong recognition of how critical they are to the SEC enforcement regime.

Read SEC Chair Gary Gensler to Step Down at constantinecannon.com