What the Election Could Mean for SEC, DOL

As the presidential election nears, all eyes are on the regulators overseeing the investment advisory industry and how they could be reshaped, depending on who wins the White House.

As it stands now, the Securities and Exchange Commission has a full complement of commissioners: two Republicans and three Democrats.

"Though the president is responsible for their nominations, the commissioners won't be replaced all at once," Morningstar analysts wrote in a recent blog post. "SEC commissioner terms are staggered such that no one term exactly coincides with the president's term, which is facilitated by the fact that commissioner terms are five years."

SEC Chairman Gary Gensler's term expires in 2026. However, if Donald Trump prevails, Gensler will likely resign.

Trump has already vowed to replace Gensler with a crypto-friendly regulator if he returns to the White House.

The terms of Commissioners Jaime Lizárraga, a Democrat, and Mark Uyeda, a Republican, expire in 2027 and 2028, respectively, "leaving them insulated from the election politics this year and next," the Morningstar analysts note.

Meanwhile, Democratic Commissioner Caroline Crenshaw's term has already expired.

President Joe Biden renominated Crenshaw, "but the vote has been delayed in the Senate Banking Committee, so it is unlikely that she will be voted on before the end of this legislative session," the Morningstar analysts write. "Consequently, she will have to be renominated by the next president."

Meanwhile, if Kamala Harris wins, "we'll see the SEC look the same for a little while," according to Gail Bernstein, general counsel and head of public policy at the Investment Adviser Association in Washington. "It's unlikely we'd see the chair step down or tender a resignation immediately."

DOL Fiduciary Rule Outlook

The fate of the Labor Department's fiduciary rule may also depend on who wins the White House.

On Sept. 20, Labor filed in the Fifth Circuit Court of Appeals to reverse two rulings from federal courts in Texas that temporarily stopped the new fiduciary rule from taking effect.

Before the stays were granted, the rule was set to take effect Sept. 23.

"It seems likely that a Harris administration would defend the 2024 rule, but we don't know to what extent a Trump administration will defend it or seek to replace it," ERISA attorney Brad Campbell, partner at Faegre Drinker in Washington, said in an email. Trump "might again object to the Biden-era rule in its details, but promote related policies."

If there is a second Trump administration, "the fate of the fiduciary rule and any successor regulations or guidance should be a material discussion point in the nomination and confirmation process" for the secretary of Labor and the assistant secretary for the Employee Benefits Security Administration, Campbell added.

Until a new president has appointed a Labor secretary, "it will be difficult to evaluate the potential for guidance and the nature of the guidance, at least if Trump is elected," added Fred Reish, partner at Faegre Drinker in Los Angeles.

"If Harris is elected, it is a fairly safe position to assume that she will continue the DOL's current positions and approaches. As I see it, the current DOL is taking positions consistent with traditional Democratic thinking. The Democrats see a more active role for the government, and particularly for the DOL, which suggest that the DOL would pursue protections for workers and retirees," Reish said.

The Republicans "are more trusting of businesses and would likely be more 'hands-off,' Reish added. "That would probably be the case for the fiduciary regulation."

SEC Rules in Play

As the Morningstar analysts note, "much of the SEC's agenda will depend on the outcome of this election. Will the SEC continue to defend its climate rule in court? Will it continue to pursue crypto enforcement via cases with large fines?"

In its Spring 2024 Regulatory Flexibility agenda, the SEC indicated that it would adopt three Advisers Act rules in the fourth quarter — on cybersecurity, ESG and outsourcing. The fall reg flex agenda is imminent, according to Carlo di Florio, president of the ACA Group.

"If the SEC is planning to adopt any more Advisers Act rules this year, we think the cyber rule is the most likely candidate," di Florio relayed.

The cyber and outsourcing rules were addressed in the SEC's 2025 exam priorities, notes Amy Lynch, president and founder of FrontLine Compliance.

"Cyber was mentioned directly as a focus area for the SEC across all types of registrants," Lynch said. "Outsourcing was addressed indirectly by several references to 'service providers' throughout the report."

The outsourcing and ESG rules "are both in the 'final rule stage' of the list of proposed rules, but they have been sitting there since the spring," Lynch said. "ESG is not mentioned at all in the 2025 SEC Exam priorities report so this could mean a rule is coming soon or it has been completely scrapped."

The cybersecurity, outsourcing and ESG rules are still on the SEC's agenda, Bernstein added.

"We think the staff is still working on them," she said.

A proposed rule that will likely come out this year is the Customer Identification Programs rule that the SEC is working on with the Treasury Department's Financial Crimes Enforcement Network, or FinCEN, "which goes with the anti-money laundering rule," Bernstein said.

In late August, FinCEN issued a final anti-money laundering rule for investment advisors. For the first time, the rule will require advisors to set up anti-money laundering programs and to start sending out suspicious activity reports.

Compliance with the anti-money laundering rule for advisors has to begin in January 2026, and "these two rules really need to work together," Bernstein said. "I think the industry wants a final [customer identification program] rule to come out in time for them to be able to integrate it into all the implementation for AML."

The customer identification rule requires advisors "to collect a lot of information about customers, has new recordkeeping requirements" and a lot more, Bernstein said.