Per Bloomberg:
Donald Trump said he would fire the Securities and Exchange Commission chair and pick crypto-friendly regulators if he returns to the White House in a bid to court virtual currency enthusiasts and harness the industry’s growing influence in the political arena.
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. See, e.g., S.E.C. v. Blinder, Robinson & Co., Inc., 855 F.2d 677, 682 (10th Cir. 1988) (stating that "the chairman serves at the President's pleasure"); Adam C. Gillette, Form over Function: How Collins v. Yellen Signals A Threat to the Independence of Multimember Financial Regulatory Agencies, 26 N.C. Banking Inst. 109, 129 (2022) ("The President is free to name a new chair from the members at any time."). 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?
15 U.S.C. sec. 78d provides for appointment of commissioners, but contains no statutory guidance as to their removal from office. In Free Enter. Fund v. Pub. Co. Acctg. Oversight Bd., 561 U.S. 477 (2010), Chief Justice Roberts' majority opinion noted 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 487 (citations omitted). In a dissent joined by Justices Stevens, Ginsburg, and Sotomayor, Justice Breyer complained that:
One last question: How can the Court simply assume without deciding that the SEC Commissioners themselves are removable only “for cause”? ... Unless the Commissioners themselves are in fact protected by a “for cause” requirement, the Accounting Board statute, on the Court's own reasoning, is not constitutionally defective. I am not aware of any other instance in which the Court has similarly (on its own or through stipulation) created a constitutional defect in a statute and then relied on that defect to strike a statute down as unconstitutional.
Id. at 545-46 (emphasis in original).
He went on to state that:
It is certainly not obvious that the SEC Commissioners enjoy “for cause” protection. Unlike the statutes establishing the 48 federal agencies listed in Appendix A, infra, the statute that established the Commission says nothing about removal. It is silent on the question. As far as its 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.
Id. at 546.
A 2013 Harvard Law Review note argued "that if the President were to remove an SEC commissioner without cause, a reviewing court would uphold the removal." Note, The SEC is not an Independent Agency, 126 Harv. L. Rev. 781, 782 (2013).
A 2022 blog post on the Yale Journal of Regulation's Notice & Comment site stated that "[i]t is widely assumed that SEC commissioners are insulated from removal by the President without good cause, but this view lacks any clear statutory basis" and concluded that "much of the current impetus around implied removal protection suggests that, were the Supreme Court to address the issue squarely, presidential removal power would win the day."
SEC chairs traditionally have resigned after a Presidential election in which control of the White House changes hands. If Gensler declined to fall on his sword, it is unclear whether he can be fired.
