The U.S. Securities and Exchange Commission (SEC) has experienced a significant slowdown in rulemaking since President Biden took office, primarily due to an increasingly complex legal environment. Recent court rulings have curtailed the SEC’s ability to regulate the $27 trillion private funds industry and raised doubts about its justifications for new regulations, including those related to share buybacks. Supreme Court decisions have also limited federal agencies’ powers to interpret ambiguous laws, forcing SEC officials to rethink their regulatory strategies to mitigate legal risks.
SEC Chair Gary Gensler has recognized the need for the agency to adapt in light of adverse court rulings that have derailed many of his proposed initiatives, particularly concerning private funds, climate change, and diversity. With the upcoming election year looming, the SEC faces pressure to finalize important regulations that could define Gensler’s legacy, especially with political opponents threatening his position and advocating for reduced regulatory oversight.
Despite the legal setbacks, Gensler’s tenure has seen notable achievements, such as reforms for blank check companies and trade settlements. However, his ambitious regulatory agenda, which included 30 new rules proposed in 2022, has drawn legal challenges from conservative and industry groups. Additionally, recent Supreme Court rulings have constrained the SEC’s enforcement capabilities, leading to the dismissal of some malpractice cases. While uncertainties remain regarding the long-term impact of these legal hurdles, former SEC Commissioner Luis Aguilar remains optimistic about the agency’s ability to adapt its regulatory approach.
