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Securities and Exchange Commission Under Fire For Partisanship

Early last week, the Senate confirmed President Biden’s nominations for two new Commissioners at the Securities and Exchange Commission (SEC). One of the appointments confirmed was that of Jaime Lizárraga, a longtime aide to Democratic  Speaker Nancy Pelosi. In addition, Biden also confirmed a Republican spot that had been left open since the resignation of Republican Commissioner Elad Roisman.

The appointments highlight a concern growing over the last decade that the SEC has become a distinctly partisan institution. The issue of partisanship at the SEC comes down to the fact that the SEC is governed by five Commissioners: 2 Democrats, 2 Republicans, and a Chairperson who is appointed by the President. This means that the party holding the White House usually has a majority of the Commissioner votes, and effective control of the SEC. 

In 2015, a number of D.C. politicians expressed their view that partisanship had ‘seeped’ into the Commission’s decision making. They worried that this was discrediting the agency and making it difficult to get the Commission’s work done. While complaints are often thrown at the Commission, the situation has escalated in recent years with similar criticism now coming from the Commissioners themselves. 

This issue came to the fore in 2021 when rules passed while the Commission was under Republican leadership were revisited by the Democratic led Commission. This caused the two Republican Commissioners, Hester Peirce and Elad Roisman, to issue a lengthy statement that blamed the Commission’s lack of progress on key regulatory issues on the “regrettable decision” to spend the Commission’s scarce resources to undo a number of rules the Commission adopted under Republican leadership:

A change in administration naturally brings changes in policy, and the Agenda reflects that shift in the form of new rulemakings, but reopening large swathes of work that was just completed without new evidence to warrant reopening is not normal practice. Past Commissions have generally refrained from engaging in a game of seesaw with our rulebook.” 

Just a few months after this, Commissioner Roisman resigned. While Roisman didn’t give any reason for his resignation, the implication appears to be that his vote was essentially useless. This suggests that the party lines had been drawn, and with three Democratic Commissioners, the only question was whether there would be two dissents or one. In contrast, the remaining Republican Commissioner, Hester Peirce, was not under any illusions regarding the power of a dissenting voice. Earlier this year Peirce delivered a 24 minute dissent during an SEC meeting with her monitor turned off for carbon footprint reasons, in what appeared to be a tongue-in-cheek jab at the climate disclosure rule she was dissenting on. The stunt caused some to question whether this was the ‘peak politicization‘ of the Commission.  

With the appointment of Lizárraga also came the appointment of Mark Uyeda, who fills the open Republican seat on the Commission. While this will bring the balance of Commissioners to 3-2 in favor of the Democrats, the question is whether Uyeda will adopt an approach in line with Roisman’s shunning of the Commission in light of the partisanship or whether Uyeda will adopt an approach closer to Peirce’s criticism. 

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