Now that the Presidential election has been called for Joe Biden, it is time to start asking what a Biden Presidency may mean, including in particular what SEC enforcement and regulatory activity might look like under a Biden Administration. As discussed below, the likelihood is that we will see a more active SEC enforcement division and a shift back toward a more active regulatory approach.


The changes at the Commission will start at the top. Current SEC Chair Jay Clayton’s term runs until June 2021, but, as noted in a November 8, 2020 Law360 article about the election outcome on the SEC, Biden could remove Clayton before his term expires if he does not resign in connection with the transition of administrations in January, as Clayton’s predecessors Mary Jo White and Chris Cox did in the two most recent administration transitions.


A new Democratically appointed Chair likely would join with current Democratic Commissioners Allison Herren Lee and Caroline Crenshaw (who took office in 2019 and 2020, respectively) to alter the course that the Commission followed under Clayton.


A November 7, 2020 Bloomberg article (here) suggests that the new Democratic majority would likely “launch an active rulemaking agenda, roll back Trump-era regulations, and step up its enforcement and inspections program.”


The Bloomberg article notes that under Clayton the agency’s Enforcement Divisions “brought fewer cases than under the leadership of his predecessor Mary Jo White, with a lower number of cases brought against public companies or large Wall Street firms.” The Law360 article quotes one commentator as saying, “You are likely to see a more aggressive enforcement approach under Biden, one that would likely be more willing to litigate aggressively against larger financial institutions.”


To the extent it may provide some useful perspective on what to expect from a Biden administration, it may be worth noting that the Obama administration ramped up SEC enforcement as it took over in 2009, and, following a reorganization of the Enforcement Division in 2010, the SEC brought a record number of enforcement actions in 2011 and 2012 – even though, as the Law360 article noted, the administration was knocked for not pursuing top Wall Street executives in the wake of the global financial crisis.


There may also be a change of enforcement focus under the Biden administration. As the Law360 article notes, under Clayton “the SEC’s enforcement division has primarily focused on the actions of investment advisers and scheme that target retail investors.” The Law360 article quote a commentator as suggesting that under Biden, the Enforcement Division is likelier to have more of a focus on Wall Street, with an increase in investigations “especially of large publicly traded companies and a higher focus on insider trading.” The Bloomberg article adds that the COVID-19 pandemic “will almost certainly prompt extensive SEC investigative and enforcement actions, particularly with respect to health care and pharmaceutical issuers and profiteers pedaling “bogus investments.”


From a regulatory standpoint, it seems likely that the Biden administration would roll back the deregulatory approach pursued during the Trump administration. Among other things, the Bloomberg article suggests, the Commission’s recent changes to proxy advisor rules and changes to shareholder proposal rules could be candidates for reversal.


The Bloomberg article also suggests that ESG-related issues could take a top priority. The article suggests that we should “expect a heightened focus on ESG and a top place on the Commission’s rulemaking to-do list at the outset of a Biden administration.” The article also suggests that the agency could also “amend Regulation S-K to require specific disclosures relevant to investors seeking out accurate, comparable, and actionable information for use in their analyses.” As noted in yesterday’s post, climate change-related disclosure may well be one of the Commission’s priorities.