The New Old SEC

Eric C. Chaffee

The administrative state is under attack, and the U.S. Securities Exchange Commission (“SEC”) is no exception. Through executive orders, the Trump Administration has called into question the independence and staffing of the SEC, and the Supreme Court has issued opinions that have eroded the agency’s authority and power, including eliminating Chevron deference, which was viewed by many as a cornerstone of administrative law.

This Article explores the scope of the SEC’s authority and the mandates for it to act by examining two of the potentially broadest grants of power that appear ubiquitously within federal securities law, i.e., the terms “for the protection of investors” and “in the public interest.” Although the assertion has been made that these terms provide broad power to engage in social engineering—including regarding the initially proposed version of the SEC’s climate disclosure rule—a textual analysis of these terms demonstrates that their meaning is much narrower. Such an analysis shows that “for the protection of investors” means providing investors with the truthful material information necessary to make informed investment decisions, and the term “in the public interest” is focused on the protection of securities markets through the creation of efficient markets and the prevention of market failures.

This Article contributes to the existing scholarship in four main ways. First, this Article provides the first focused academic piece on the meaning of the terms “for the protection of investors” and “in the public interest” within the field of federal securities law. Second, this Article provides the first academic study of how those terms ought to be understood textually in a post-Chevron world and considering the Roberts Court’s aversion to administrative deference generally. Third, this Article offers the first exploration of the mandates that the SEC has under the federal securities law to act “for the protection of investors” and “in the public” that will be complicated by the Trump Administration’s dramatic reshaping and downsizing of the federal government. Fourth, this Article provides the first examination of how a textualist analysis of the terms “for the protection of investors” and “in the public interest” impacts expansive efforts by the SEC, such as the recent proposed climate disclosure rule. The SEC must understand its role. The discussion contained in this Article helps to clarify it.