For the moment, the Securities and Exchange Commission has a full complement of five members, but it may not last for long.
Last week, the
Senate confirmed Elad Roisman to a Republican seat that had been vacated by Michael Piwowar in July. It was an odd occurrence because SEC vacancies are usually filled in tandem, with the Senate approving a Republican and a Democrat.
Democratic SEC member Kara Stein, whose term ended last year, has to depart by the end of the current Congress in December.
Mr. Roisman traveled alone because Senate Democrats had trouble settling on their own nominee. Finally, Allison Lee, a former SEC enforcement official, was forwarded to the White House,
according to published reports.
The Trump administration has not acted, while the legislative calendar winds down quickly in advance of November's midterm elections. The confirmation process usually takes months.
"I'm one of many people who simply does not know why the nomination hasn't been announced," said Neil Simon, vice president for government relations at the Investment Adviser Association.
The SEC could head into the New Year with four members and a Republican majority as it makes crucial decisions on its investment-advice rules package.
Whether the SEC makeup affects the outcome depends on SEC Chairman Jay Clayton's desire to achieve consensus in a policy area that historically has been riven with divisions among commissioners.
"Clayton has to get three votes, and it's going to be difficult to fashion a set of rules that is acceptable to Republicans and Democrats on the commission," said David Tittsworth, counsel at Ropes & Gray.
There is some speculation that Mr. Clayton will forge ahead as soon as he gets those three votes — himself, Republican commissioner Hester Peirce and Mr. Roisman.
A Democratic takeover of the House could add to Mr. Clayton's urgency.
If Rep. Maxine Waters, D-Calif.,
chairs the House Financial Services Committee, it's almost certain to bring more pressure on the SEC to strengthen investor protections in the so-called Regulation Best Interest designed to raise the advice standard for brokers.
Mr. Clayton may decide that three votes is as good as it's going to get for an advice reform package that he has put at the top of his agenda and that will in large part determine his legacy.
But the path to three votes will have obstacles, too.
The
commission voted 4-1 to put out the advice proposal for public comment. Ms. Stein opposed even doing that, while Democratic Commissioner Robert Jackson Jr. and Ms. Peirce expressed reservations. It is not known if Mr. Roisman supports the advice rule in its current form.
Mr. Clayton is "going to have to work hard just to get them on board," said Scott Kimpel, a partner at Hunton Andrews Kurth who was counsel to former SEC member Troy Paredes. "His challenge is going to be to find any majority he can get."
Cobbling those votes together could require more than tweaking the proposal — and pushing the timeline for a final rule package well into 2019.
"I think there's a substantial chance that the proposal will go through significant revision, especially with respect to Form CRS [client relationship summary] and possibly other provisions," Mr. Simon said.
The SEC machinations will add to the intrigue in Washington over the next couple of months.
