Academic journal article Harvard Law Review

The SEC Is Not an Independent Agency

Academic journal article Harvard Law Review

The SEC Is Not an Independent Agency

Article excerpt

During his 2008 presidential campaign, Senator John McCain boldly claimed: "The chairman of the [Securities and Exchange Commission] serves at the appointment of the president. ... If I were president today, I would fire him." (1) The statement soon became an embarrassment after commentators pointed out that the President cannot "fire" a commissioner the Securities and Exchange Commission (SEC or Commission) at will, (2) based on the understanding long held by legislators, courts, academics, and other authorities that the SEC an independent agency. (3) In the face of this criticism, the McCain campaign quickly backed away from the statement. (4)

But two years later, the Supreme Court faced the same question and four Justices were so easily persuaded. Dissenting in Free Enterprise Fund v. Public Company Accounting Oversight Board, (5) Justice Breyer wrote: "It is certainly not obvious that the SEC Commissioners enjoy [removal] protection." (6) He explained that "the statute that established the Commission ... is silent on the question," (7) and that, in light of the statute's history, Congress not have intended to make the SEC independent. (8) Despite Justice Breyer's concerns, majority opinion sidestepped this question, allowing the parties to stipulate that SEC commissioners had removal protection and "decid[ing] the case with that understanding." (9) Thus, the Court did not squarely decide whether SEC commissioners are removable by the President at will, or only for cause. (10)

This Note argues that if the President were to remove an SEC commissioner without cause, a reviewing court would uphold the removal. Part I describes the unique historical period in which the SEC was created: during the nine years between the landmark decisions in Myers v. United States (11) and Humphrey's Executor v. United States, (12) when it was assumed that all executive appointees were terminable at will. Part II considers the text of the statute that created the SEC. To interpret the statute's silence, it turns to a long-standing rule of construction providing that the President has the power to remove officers he or she appoints unless Congress explicitly provides otherwise. Part II also considers the legislative and executive understandings of the statute when it was enacted. Finally, Part III canvasses alternative approaches to interpreting the statute. In particular, it considers rules based on the agency's structural features, on the totality of the circumstances, on the postenactment history of the statute, and on the history and tradition surrounding the agency. Because these approaches produce ambiguous results, rest on questionable legal grounds, and risk undermining important balances struck by the enacting legislature, Part III concludes that they are not suitable techniques for determining the SEC's independence. (13) Therefore, this Note concludes that the SEC is not an independent agency, and closes with a brief look at this argument's potentially significant implications for the SEC and for other agencies similarly lacking explicit statutory for-cause removal protection.


Before examining the SEC's enabling statute, it is important to understand the context in which the SEC was created. First, this Part sketches the Supreme Court's landmark decisions in Myers, which appeared to hold that Congress could not limit the President's removal power, (14) and Humphrey's Executor, which held that Congress could limit the President's power to remove all but "purely executive" officers. (15) This Part then turns to the creation of the SEC, which occurred between these two decisions, and therefore during a time when most observers believed that Congress could not constitutionally prevent the President from removing an appointee.

A. From Myers to Humphrey's Executor

Although lawmakers have debated the constitutionality of limiting the President's removal power since the First Congress, (16) the Supreme Court did not squarely rule on the issue until Myers, in 1926. …

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