Lawsuits in recent years have been filed against SEC rules concerning proxy-advice guidelines, stock buyback disclosures, short-sale disclosures and private fund disclosures, among others, with varying degrees of success.
Previous SEC leaders, Piwowar said, ostensibly made more of an effort to gain consensus among commissioners before finalizing a particular rule, whereas Chair Gary Gensler is content with 3-2 votes with he and the commission's other two Democrats voting in favor. The dissenting statements by the two Republican commissioners provide excellent material for industry groups to file legal challenges, Piwowar said.
And those legal challenges can pose other problems. "Because the SEC is forced to defend itself in its rule-makings and forced to defend itself in some of its enforcement cases, it's really taxing the resources of the agency," Piwowar said.
Also, with an election looming in November, the SEC has to finalize its agenda soon, he added.
"The SEC has to make some tough choices," Piwowar said. "On one hand, there's the litigation risk — can they get to some point where it's going to be where they won't get sued –— but on the other hand, the CRA might come into play."
The CRA, or Congressional Review Act, lets Congress disapprove — by a simple majority vote — a final rule issued by a federal agency if it has not been in effect for more than 60 legislative days. The CRA comes into play, typically, when one political party controls the White House, Senate and House simultaneously at the start of a new administration.
"Chair Gensler and a majority of the commission are very aware of the clock," Piwowar said.
Because the congressional calendar is fluid, the CRA deadline is uncertain, but usually comes in the middle of the year before a presidential election.