November 11, 2024
In securities law, there’s a fine line between right and wrong — a “gray area” that requires regulators with the highest moral and ethical standards. The independent role of these regulators is crucial – a matter I have often written about.
Historically, senior regulators have been free to protect markets by keeping unethical individuals out of financial trading. Their decisions to keep these all-too-frequent bad actors away from transactions have long protected investors and the economy from great harm.
However, a new wave of deregulation comes with Trump’s return to the White House. Trump 2.0 promises to cut back on regulations and reduce the civil service, creating more space for unethical behavior to thrive in financial markets. Figures like Elon Musk, known for pushing boundaries with securities laws, are expected to play a key role in this deregulated landscape, aiding in reshaping securities trading. Unfortunately, Musk and Trump share a history of sidestepping regulations, and with them at the helm, it’s likely that questionable filings, once relegated to the bottom of the pile, may find easy paths forward through quid-pro-quo arrangements.
One major consequence is that investment-related fraud will almost certainly increase, especially if whistleblowers—critical industry watchdogs—are sidelined. The SEC’s administrative courts will also be dismantled, forcing cases back into state and federal courts. While this shift allows disputes to be settled in legal courts, it also introduces a new political dynamic that could impact decisions.
In this environment, the identity of the next SEC Commissioner will be crucial; that person’s values and approach will set the tone for how much fraud we may expect.
Upholding integrity in our financial markets has never been more critical. Alas, with my many years of experience in these matters, I am not as hopeful as most of you.