There is little doubt that the historic upset victory last night by Donald J. Trump in the U.S. presidential election will embolden him to keep his promise of taking a blowtorch to Washington, D.C.’s administrative state. And his attack on bureaucracy would likely mean shaking up the Securities and Exchange Commission and U.S. Department of Labor, possibly upending leadership at both agencies or killing most, if not all, of their pending proposals and rules.

On the campaign trail and on his website, the soon-to-be-restored president has promised to eliminate 10 regulations for every new one. That’s a bold increase from his first term, when he signed an executive order mandating that all federal government agencies eliminate two rules for every new one approved.

At the SEC, Chairman Gary Gensler, a Democrat insider who served as the CFO of Hillary Clinton’s failed 2016 campaign, will most assuredly be on the chopping block.

Gail Bernstein, the general counsel at the Investment Adviser Association and an industry veteran, told reporters that Gensler is likely to resign and is unlikely to serve out his 2026 term.

“New leadership at the SEC and DOL will of course reflect the new administration’s priorities,” she said.

Clifford Kirsch, a partner with Eversheds Sutherland who counsels financial services clients on regulation, added, “It is very typical for an SEC chair to resign or at least offer to resign when there is a change of administration.”

When asked if Gensler is likely to resign, Duane Thompson, president of Potomac Strategies compliance consulting, said succinctly: “Yes.”

However, another high-profile industry attorney, Fred Reish, a partner with Faegre Drinker, said he suspects Gensler will hang on for as long as possible.

“I suspect that there is unfinished work that he would like to complete,” Reish said.

An SEC spokesperson reached by Financial Advisor said the agency did not want to comment.

Lutnick Floated
Howard Lutnick, head of Wall Street giant Cantor Fitzgerald, who serves as co-chair of Trump’s presidential transition team, has been floated as a potential SEC chair, though he may opt for a higher-profile secretary position in Trump’s administration.

Many are wondering whether the new administration would order the SEC to kill many or all of Gensler’s rules.

“There are still several controversial open rule proposals before the SEC—for example, the predictive data analytics proposal—which are not likely to move forward under new leadership, at least as currently proposed,” Bernstein said.

She said it’s also unlikely that any current proposals will move forward in their current form in the lame-duck Biden administration, unless they are changed in a way that better insulates them from challenge.

“The IAA’s priority themes will continue to focus on the cumulative impact of regulation on advisors, the need to better tailor regulation to smaller advisors, and the benefits of principles-based regulation over prescriptive regulation,” she added.

Reish said rulemaking at the SEC will more likely depend on the agenda of the SEC commissioner that Trump chooses to run the agency, whether or not it’s Lutnick.

Julie Su, the current acting secretary of the Department of Labor—and a controversial former labor secretary in California—is also likely seen as a target for removal. Democratic presidential nominee Kamala Harris said she would have kept Su on at the DOL, but Su has been highly criticized over her handling of the Covid unemployment insurance program in California. Her critics say that the program lost $32 billion to scam artists who hacked into it because Su declined to require ID requirements, an amount equal to a third of all American unemployment insurance fraud losses during the pandemic. Such criticisms are the reason she has served more than 550 days in her role without Senate confirmation.

While Su is almost guaranteed to be replaced, the advisory industry is also likely wondering if the DOL’s new fiduciary rule governing the conduct of advisors—a rule already on life support after two federal courts stayed it—will be waylaid as well.

Though Trump could kill the rule, “the courts could do the work for him by overturning [it] before a new department secretary is in place,” Thompson said. Trump “will likely approve an executive order—maybe on day one of his administration—halting implementation of any pending Biden administration rules, including SEC proposals.”

“Ultimately, the outcomes for DOL regulations are unknowable, and may depend more on his selection for the secretary of labor than on any preference of the president-elect,” Reish said. “For the moment, the fight about the fiduciary regulation will be in the courts, and ultimately it will depend on whether the new administration continues to defend the rule on appeal.”

The DOL’s environmental, social and governance rules, however, will continue to be under the gun, he added.

“I think the ESG regulation could be in jeopardy in the sense that a Republican administration will likely be anti-ESG and therefore will probably seek to rewrite the regulation,” Reish said.