Trump signs executive order to expand control over agencies, including SEC

President Donald Trump issued an executive order to expand the White House’s control over federal agencies, including the Securities and Exchange Commission — a move likely to bring challenges in court.

The order, issued Feb. 18, contends that the president should have "supervision and control of the entire executive branch."

That means that “all executive departments and agencies, including so-called independent agencies, shall submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs," the order states. The Office of Information and Regulatory Affairs, commonly known as OIRA, is housed within the White House’s Office of Management and Budget.

“So-called independent agencies” include the SEC, Federal Trade Commission and Federal Communications Commission, according to a fact sheet on the order, also issued Feb. 18.

The order does not apply to the Federal Reserve’s monetary policy but does apply to “its supervision and regulation of financial institutions,” according to the order text.

In addition to submitting regulations to the White House, the order requires all federal agencies to “consult with the White House on their priorities and strategic plans, and the White House will set their performance standards,” according to the fact sheet.

The fact sheet also states that OMB “will adjust so-called independent agencies’ apportionments to ensure tax dollars are spent wisely.” The SEC requested a $2.6 billion budget for fiscal year 2025, though Congress is still in the process of funding negotiations for fiscal year 2025, as the most recent stopgap funding bill expires in March.

The order is likely to spark lawsuits, as “the SEC was created as an independent agency for a reason in the law, and so … I'm not sure if it's lawful for the White House to then circumvent that structure and exert direct influence,” according to Igor Rozenblit, managing partner at Iron Road Partners, a regulatory and compliance consulting firm, and former SEC staffer from 2010 to 2021.

The SEC’s five commissioners are appointed by the president and confirmed by the Senate, however, “to ensure that the commission remains nonpartisan, no more than three commissioners may belong to the same political party,” the SEC website states.

Another potential legal issue is the order states that the Office of Management and Budget may adjust the SEC’s funding, though Congress is “supposed to be appropriating (federal agencies), not the executive branch,” Rozenblit said.

Ultimately, “the staff that works at the SEC consider themselves to be impartial and really focused on the technical enforcement of the rules, and this (order) colors that whole opinion of themselves and makes them seem more like a political apparatus,” Rozenblit contended.

He added that if the White House “sees fit to get itself involved in individual enforcement matters, that could really hurt the credibility of the commission.”

“It's important to remember that the investment industry itself lobbied for the SEC to be created with flexibility and independence,” Rozenblit wrote in a Feb. 19 LinkedIn post, referencing a statement from former President Franklin D. Roosevelt after signing the Investment Company Act and Investment Advisers’ Act into law in 1940.

“In the case of this legislation, it deserves notice that the investment trust industry insisted that the Congress grant to the Securities and Exchange Commission broader discretionary powers than those contemplated in the original regulatory proposals,” Roosevelt said in his statement.

Both the SEC and Federal Trade Commission “are charged with defending consumer and investor rights and protecting market integrity. Their independence is designed to enable them to perform these duties without undue political pressure from giant corporations, the super rich and the super-connected,” Public Citizen, a progressive consumer advocacy organization, wrote in a Feb. 18 news release.

“Trump’s EO would dissolve that independence and put the agencies under Trump’s thumb, ensuring they turn a blind eye to wrongdoing by favored corporations and leave consumers and investors out to dry,” the organization added.

“One reason the financial markets in the U.S. are so robust is because people trust them, and if the regulator is controlled politically, you have to wonder at what point will people become skeptical,” Rozenblit said.