27

FINANCIALREGULATORYAGENCIES
SECURITIES AND EXCHANGE COMMISSION
AND RELATED AGENCIESDavid R. BurtonT

he primary purposes of the laws and regulations governing capital markets andof capital market regulators are to deter and punish fraud and other material
misstatements to investors; foster reasonable, scaled disclosure of informationthat is material to investors’ financial outcomes and proxy voting decisions; andmaintain fair, orderly, and efficient secondary capital markets.
The Securities Act of 19331 and the Securities Exchange Act of 19342 reflect
nearly nine decades of rushed and haphazard amendments. The securities laws
are now extremely complex and do not constitute a coherent, rational regulatory
regime. For example, the current SEC has proposed a climate change reporting
rule that would quadruple the costs of being a public company.3 This would havea substantial adverse impact on existing companies. Over time, it would also substantially reduce the number of public companies and therefore the number ofinvesting options available to ordinary Americans. The Securities and Exchange
Commission (SEC) should be reducing impediments to capital formation, not radically increasing them.
The SEC and Congress should fundamentally reform the securities laws governing issuers, broker–dealers, exchanges, and other market participants. Amongother things, they should establish a simplified and rationalized securities disclosure system with:— 829 —

Mandate for Leadership: The Conservative PromiselThree basic categories of firm: private firms, an intermediate category ofsmaller firms,4 and public firms;lReasonable, scaled disclosure requirements; andlSpecified secondary markets for the securities of these firms.5

The SEC needs to be reformed to achieve its important core functions more
effectively, to improve transparency and due process, and to reduce unnecessary
regulatory impediments to capital formation.6 Under current law, the SEC Chairman has the authority to make almost all of the necessary changes.7 Unfortunately,
financial regulators, particularly the SEC and the Financial Industry Regulatory
Authority (FINRA), are poorly managed and organized.
With regulatory authority delegated by the government, both the PublicCompany Accounting Oversight Board (PCAOB) and FINRA have proved to beineffective, costly, opaque, and largely impervious to reform. To reduce costs andimprove transparency, due process, congressional oversight, and responsiveness,
PCAOB and FINRA should be abolished, and their regulatory functions shouldbe merged into the SEC. Furthermore, Congress should establish an independent board or commission and charge it with producing a detailed report within
18 months that examines the degree to which the regulatory functions of the various other so-called self-regulatory organizations (SROs), which are no longer
self-regulatory in any meaningful sense, should be moved to the SEC.8
Discrimination based on immutable characteristics has no place in financial
regulation. Offices at financial regulators that promote racist policies (usually inthe name of “diversity, equity, and inclusion”) should be abolished, and regulations
that require appointments on the basis of race, ethnicity, sex, or sexual orientation
should be eliminated. Equal protection of the law, equal opportunity, and individual merit should govern regulatory decisions.9
Congress has given the SEC broad “general exemptive authority,”10 but the SEC
has used this authority only rarely. It should use this authority significantly more
often to reduce the regulatory burden on issuers, particularly smaller entrepreneurs.
ENTREPRENEURIAL CAPITAL FORMATION

Financial regulators should remove regulatory impediments to entrepreneurial capital formation.11 In the absence of the fundamental reform outlined above,
the SEC should:lSimplify and streamline Regulation A (the small issues exemption)12 andRegulation CF (crowdfunding)13 and preempt blue sky registration and qualification requirements for all primary and secondary Regulation A offerings.14— 830 —

2025 Presidential Transition Project

l

l

l

l

l

l

l

Either democratize access to private offerings by broadening the definitionof accredited investor for purposes of Regulation D or eliminate theaccredited investor restriction altogether.15
Allow traditional self-certification of accredited investor status for all
Regulation D Rule 506 offerings.
Exempt small micro-offerings from registration requirements.16
Exempt small and intermittent finders from broker–dealer registration
requirements and provide a simplified registration process for private
placement brokers.17
Exempt peer-to-peer lending from federal and state securities laws andreduce the regulatory burden on Regulation CF debt securities.
Make the Title I Emerging Growth Company (EGC) exemptions permanent
for all EGCs.
Reduce the regulatory burden on small broker–dealers and exempt privately
held, non-custodial broker–dealers from the requirements to use a PCAOBregistered firm for their audits.
Congress should:lAmend the Internal Revenue Code to disregard crowdfunding andRegulation A shareholders for purposes of the 100-shareholder limit for
Subchapter S corporations.18

BETTER CAPITAL MARKETSTo improve capital markets, the SEC should:

l

l

l

Preempt blue sky registration, qualification, and continuing reporting
requirements for securities traded on established securities markets(including a national securities exchange or an alternative trading system).19
Terminate the Consolidated Audit Trail (CAT) program.20
Abolish Rule 144 and other regulations that restrict securities resales and instead
require a company that has sold securities to provide sufficient current information to the market to permit reasonable investment decisions and secondary sales.

— 831 —

Mandate for Leadership: The Conservative Promise

Congress should:
l

l

l

l

Prohibit the SEC from requiring issuer disclosure of social, ideological,
political, or “human capital” information that is not material to investors’
financial, economic, or pecuniary risks or returns. The proposed SEC
climate change rule, which would quadruple the costs of being a publiccompany, is particularly problematic.21
Repeal the Dodd–Frank mandated disclosures relating to conflict minerals,
mine safety, resource extraction, and CEO pay ratios.22
Oppose efforts to redefine the purpose of business in the name of social
justice; corporate social responsibility (CSR); stakeholder theory;environmental, social, and governance (ESG) criteria; socially responsible
investing (SRI); sustainability; diversity; business ethics; or commongood capitalism.
Prohibit securities regulators, including SROs, from promulgating rules
or taking other actions that discriminate, either favorably or unfavorably,on the basis of the race, color, religion, sex, or national origin of suchindividual or group.

SEC ADMINISTRATIONTo enable it to achieve its core mission more effectively, the SEC should:23

l

l

l

Publish better data on securities offerings, securities markets, andsecurities law enforcement and publish an annual data book of timeseries data on these matters. Specifically, the SEC Division of Economic
and Risk Analysis (DERA) needs to do a much better job of collecting andreporting fundamental data regarding offerings, regulatory costs, violations,enforcement, investors, state regulator taxes, fees and activities, andother matters.
Ensure that SEC resources flow toward its core functions and away fromancillary and support functions or from missions that do not fall within the
SEC’s statutory charge.
Ensure that any three SEC Commissioners are empowered to place an itemon the agenda and to receive adequate staff support to do so even without
the Chairman’s support.

— 832 —

2025 Presidential Transition ProjectllEliminate all administrative proceedings (APs) within the SEC except
for stop orders related to defective registration statements. The SEC
enforcement system does not need to have both district court cases andAPs. Alternatively, respondents should be allowed to elect whether an
adjudication occurs in the SEC’s administrative law court or an ordinary
Article III federal court.24
End the practice of delegating the decision to initiate an enforcement case.
The SEC Chairman—and possibly the U.S. Government Accountability
Office (GAO)—should study whether other Commission delegation of
authority to staff should be narrowed and whether sunsetting of suchdelegation of authority should be required.
Congress should:llRequire an Inspector General’s (or possibly a GAO) report regarding SEC
information technology spending and contracting. Spending appears to bemuch too high, and IT contracting is poorly managed.
Statutorily limit the time for an investigation to two years with noextensions. Long investigations harm private parties and the quality ofjustice. With adequate management processes, the SEC should not needmore than two years even for complicated matters.
The SEC Chairman should:lDramatically reduce the number of direct reports to the SEC Chairman.

lMerge SEC offices that are performing similar functions.

lReduce the number of managers per employee.

CFTC ADMINISTRATION AND IMPROVEDCOMMODITIES AND DERIVATIVES MARKETSCongress should:llModernize the definition of commodity (which is now largely a laundry listof agricultural commodities)25 and clarify the treatment of digital assets.
Clarify through an express amendment to the Commodity Exchange Act(CEA)26 the circumstances that require a foreign swap trading platform to— 833 —

Mandate for Leadership: The Conservative Promise

register with the Commodity Futures Trading Commission (CFTC) as a swap
execution facility (SEF) under Sections 2(i)27 and 5h28 of the CEA. Currently, it
is not clear whether having one or a small number of U.S. participants would
require SEF registration under prior staff guidance, which has led foreignswap trading platforms to exclude all U.S. persons from their platforms or togo through the process of seeking an exemption from registration.
llAmend Section 2 of the CEA to authorize the CFTC Chairman to remove theagency’s Executive Director without a Commission vote.
To augment Commissioners’ independence, establish funding amounts for
the Commissioners’ offices by statute with adjustments for inflation, withno requirement for a Commissioner to obtain budget or expense approvals
from the Chairman or the agency’s administrative staff.
The CFTC should:

l

l

l

l

l

Allocate more resources to core agency functions rather than ancillary andsupport operations.
Replace the existing position limits rule, which reduces liquidity and makes
markets more volatile, with further delegation of authority to the exchanges
to set position limits and position accountability levels where appropriate
for the relevant market.
Reduce overly prescriptive rules implementing the CFTC’s core principles.
Apply the definitions of “U.S. Person” and “Guarantee” in the CFTC’s 2020
rule on cross-border application of swaps regulations (2020 Cross-Border
Rule)29 to the regulatory requirements that remain covered by the CFTC’s
2013 guidance on the subject (2013 Guidance).30 Currently, the definitionof each of these foundational terms differs depending on whether therequirement in question is covered by the 2020 Cross-Border Rule or the2013 Guidance.
Remove the regulatory categories of “affiliate conduit” and “foreign
consolidated subsidiary” from the 2013 Guidance and the CFTC’s crossborder rule on margin for uncleared swaps,31 respectively. These categories
were replaced by the concept of a “Significant Risk Subsidiary” for purposesof the 2020 Cross-Border Rule because of widespread market confusion andcompliance difficulties arising from their broad and vague scope.

— 834 —

2025 Presidential Transition Project

DIGITAL ASSETS

Both the SEC and the CFTC have been irresponsible actors in the digital asset
area. They have had more than a decade to promulgate rules governing digitalassets, yet the SEC has utterly failed to do so, and the CFTC has provided only
minimal guidance. Instead, both agencies have chosen regulation by enforcement—and have done it poorly. They neither adequately protect investors nor
provide responsible market participants with the regulatory environment thatthey need to thrive.
The SEC and CFTC should clarify the treatment of digital assets (coins or
tokens). Specifically, they should:llPromulgate a joint regulation providing that a holder of digital assets may
not be deemed a party to an investment contract or an investor in a common
enterprise unless, while the enterprise is a going concern, the holder isentitled to a share of the earnings or profits of the common enterprise ora defined flow of payments from the common enterprise in considerationof the investment or unless, upon liquidation, the holder has rights against
the assets of the common enterprise. Otherwise, the digital asset shall bedeemed a commodity to be regulated by the CFTC, not the SEC.
Amend the definition of commodity to include digital assets that are nota security as so defined and amend the definition of security to make it
clear that a certificate (digital, electronic, or otherwise) that represents
ownership of commodities and is convertible into a physical commodity on
demand is not a security but a commodity.

In the absence of regulatory action, Congress should enact legislation that
achieves these goals.
IMPROVED REGULATION OF THE INDUSTRY AND SROS

Congress and the SEC need to conduct more robust oversight of self-regulatoryorganizations, and SROs need to be reformed; otherwise, as discussed above, SRO
regulatory functions should be merged into the SEC. The SEC, FINRA itself, orCongress should:l

In the absence of merging FINRA into the SEC as recommended,
require that:
1.

FINRA’s Board of Governors meetings be open to the public unless theboard votes to meet in executive session.

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Mandate for Leadership: The Conservative Promise

2. FINRA’s Board of Governors’ agenda be made available to the
public in advance.
3. Board minutes describing actions taken be published without delay.
4. FINRA make available to the public in advance rulemakings that the
FINRA board is expected to consider.
5. FINRA arbitration and disciplinary hearings should be open to the
public and reported.
l

l

l

l

l

Require FINRA arbitrators to make findings of fact based on the evidentiary
record and demonstrate how those facts led to the award given (except withrespect to very small claims). These written FINRA arbitration decisions
should be subject to SEC review and limited judicial review.
Require that all SRO fines, including those imposed by FINRA, should
go either to a newly established investor reimbursement fund or to theTreasury. SROs should not have a financial interest in imposing fines.
Require all SROs to conduct meaningful cost-benefit analysis as part of therulemaking process with respect to major rules.
Require all SROs to publish rules in proposed format and seek publiccomment before they are submitted to the SEC or the CFTC.
Require each SRO to submit an annual report to Congress with detailed,specified information about its budget and fees; its enforcement activities(including sanctions and fines imposed by type of violation and type of firm
or individual); its dispute resolution activities; and its rulemaking activities.
Congress should:llConduct annual oversight hearings on SROs.
Either make FINRA, the Municipal Securities Rulemaking Board (MSRB),
and the National Futures Association (NFA) “Designated Federal Entities”
and establish an inspector general with respect to financial SROs, including
FINRA, the MSRB, and the NFA or place FINRA, the MSRB, and the NFA
within the ambit of an existing inspector general.

— 836 —

2025 Presidential Transition ProjectlRequire the SEC and the CFTC to publish a detailed annual report on SRO
supervision.

AUTHOR’S NOTE: The preparation of this chapter was a collective enterprise of individuals involved in the2025 Presidential Transition Project. All contributors to this chapter are listed at the front of this volume, but PaulAtkins, C. Wallace DeWitt, Christopher Iacovella, Brian Knight, Chelsea Pizzola, and Andrew Vollmer deserve special
mention. The author alone assumes responsibility for the content of this chapter, and no views expressed hereinshould be attributed to any other individual.

CONSUMER FINANCIAL PROTECTION BUREAU
Robert Bowes

T

he Consumer Financial Protection Bureau (CFPB) was authorized in 2010by the Dodd–Frank Act.32 Since the Bureau’s inception, its status as an “independent” agency with no congressional oversight has been questioned in multiple
court cases, and the agency has been assailed by critics33 as a shakedown mechanism to provide unaccountable funding to leftist nonprofits politically aligned withthose who spearheaded its creation.
In 2015, for example, Investor’s Business Daily accused the CFPB of “diverting
potentially millions of dollars in settlement payments for alleged victims of lending
bias to a slush fund for poverty groups tied to the Democratic Party” and planning “to create a so-called Civil Penalty Fund from its own shakedown operations
targeting financial institutions” that would use “ramped-up (and trumped-up)
anti-discrimination lawsuits and investigations” to “bankroll some 60 liberal nonprofits, many of whom are radical Acorn-style pressure groups.”34
The CFPB has a fiscal year (FY) 2023 budget of $653.2 million35 and 1,635 fulltime equivalent (FTE) employees.36 From FY 2012 through FY 2020, it imposed
approximately $1.25 billion in civil money penalties;37 in FY 2022, it imposed
approximately $172.5 million in civil money penalties.38 These penalties are
imposed by the CFPB Civil Penalty Fund, described as “a victims relief fund, into
which the CFPB deposits civil penalties it collects in judicial and administrative
actions under Federal consumer financial laws.”39
The CFPB is headed by a single Director who is appointed by the President toa five-year term.40 Its organizational structure includes five divisions: Operations;
Consumer Education and External Affairs; Legal; Supervision, Enforcement andFair Lending; and Research, Monitoring and Regulations.41 Each of these divisions
reports to the Office of the Director, except for the Operations Division, which
reports to the Deputy Director.
Passage of Title X of Dodd–Frank was a bid to placate concern over a seriesof regulatory failures identified in the wake of the 2008 financial crisis. The law
imported a new superstructure of federal regulation over consumer finance and— 837 —

Mandate for Leadership: The Conservative Promisemortgage lending and servicing industries traditionally regulated by state banking regulators. Consumer protection responsibilities previously handled by the
Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal
Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and Federal Trade Commission were transferred to and consolidated in
the CFPB, which issues rules, orders, and guidance to implement federal consumer
financial law.
The CFPB collects fines from the private sector that are put into the Civil Penalty Fund.42 The fund serves two ostensible purposes: to compensate the victims
whom the CFPB perceives to be harmed and to underwrite “consumer education”
and “financial literacy” programs.43 How the Civil Penalty Fund is spent is at thediscretion of the CFPB Director. The CFPB has been unclear as to how it decides
what “consumer education” or “financial literacy programs” to fund.44 As noted,
critics have charged that money from the Civil Penalty Fund has ended up in the
pockets of leftist activist organizations.
In Seila Law LLC v. Consumer Financial Protection Bureau,45 the Supreme Courtof the United States held that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violated constitutional separationof powers requirements because “[t]he Constitution requires that such officials
remain dependent on the President, who in turn is accountable to the people.”46
The CFPB Director is thus subject to removal by the President.
The CFPB is not subject to congressional oversight, and its funding is notdetermined by elected lawmakers in Congress as part of the typical congressional
appropriations process. It receives its funding from the Federal Reserve, which
is itself funded outside the appropriations process through bank assessments.
CFPB funding represents 12 percent of the total operating expenses of the Federal Reserve and is disbursed by the unelected Board of Governors of the Federal
Reserve System.47 This is not the case with respect to any other federal agency.
On October 19, 2022, in Community Financial Services Association of America
v. Consumer Financial Protection Bureau, the U.S. Court of Appeals for the Fifth
Circuit held that the CFPB’s “perpetual insulation from Congress’s appropriations
power, including the express exemption from congressional review of its funding,renders the Bureau ‘no longer dependent and, as a result, no longer accountable’to Congress and, ultimately, to the people”48 and that “[b]y abandoning its ‘mostcomplete and effectual’ check on ‘the overgrown prerogatives of the other branchesof the government’—indeed, by enabling them in the Bureau’s case—Congress ran
afoul of the separation of powers embodied in the Appropriations Clause.”49 The
Court further remarked that the CFPB’s “capacious portfolio of authority acts ‘asa mini legislature, prosecutor, and court, responsible for creating substantive rules
for a wide swath of industries, prosecuting violations, and levying knee-buckling
penalties against private citizens.’”50— 838 —

2025 Presidential Transition Project

On February 27, 2023, the Supreme Court granted the petition for a writ ofcertiorari.51 The Court should issue its final decision by 2024.
The CFPB is a highly politicized, damaging, and utterly unaccountable federal
agency.52 It is unconstitutional. Congress should abolish the CFPB and reverse
Dodd–Frank Section 1061, thus returning the consumer protection function of
the CFPB to banking regulators53 and the Federal Trade Commission. Provided
the Supreme Court affirms the Fifth Circuit holding in Community Financial Services Association of America, the next conservative President should order theimmediate dissolution of the agency—pull down its prior rules, regulations andguidance, return its staff to their prior agencies and its building to the General
Services Administration.
Until this can be accomplished, however, Congress should:
l

l

l

l

l

Ensure that any civil penalty funds not used to recompense wronged
consumers go to the Department of the Treasury. The funds should not
be retained by the Bureau to be dispensed at the pleasure of the Director—
potentially to political actors. Moreover, the CFPB should not have afinancial incentive to impose penalties.
Repeal Dodd–Frank Section 1071. This section, which relates to smallbusiness data collection, imposes requirements on financial institutions’lending to small firms, raises costs, and limits small businesses’ accessto capital.54
Require that no CFPB funds are spent on enforcement actions thatare not based on a rulemaking that complies with the Administrative
Procedure Act.55
Require that respondents in administrative actions be allowed toelect whether an adjudication occurs in an administrative law court
or an ordinary Article III federal court.56
Specify the nature of “deceptive, unfair, and abusive” practices todefine the scope of the CFPB mission more precisely.

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Mandate for Leadership: The Conservative Promise
ENDNOTES

1.
2.
3.

4.
5.

6.

7.

8.

9.

H.R. 5480, Securities Act of 1933, Public Law No. 73-22, 73rd Congress, May 27, 1933, https://govtrackus.
s3.amazonaws.com/legislink/pdf/stat/48/STATUTE-48-Pg74.pdf (accessed February 20, 2023).
H.R. 9323, Securities Exchange Act of 1934, Public Law No. 73-291, 73rd Congress, June 6, 1934, https://
govtrackus.s3.amazonaws.com/legislink/pdf/stat/48/STATUTE-48-Pg881a.pdf (accessed February 20, 2023).
Mark T. Uyeda, Commissioner, U.S. Securities and Exchange Commission, “Remarks at the 2022 Cato
Summit on Financial Regulation,” November 17, 2022, https://www.sec.gov/news/speech/uyeda-remarkscato-summit-financial-regulation-111722 (accessed February 20, 2023); Hester M. Peirce, Commissioner, U.S.
Securities and Exchange Commission, “It’s Not Just Scope 3: Remarks at the American Enterprise Institute,”
December 7, 2022, https://www.sec.gov/news/speech/peirce-remarks-american-enterprise-institute-120722(accessed February 20, 2023); comment letter from David R. Burton to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, “Re: The Enhancement and Standardization of Climate-Related
Disclosures for Investors [File No. S7-10-2; Release No. 33-11042; RIN 3235-AM87],” June 17, 2022, https://www.
sec.gov/comments/s7-10-22/s71022-20131980-302443.pdf (accessed February 20, 2023).
Size would probably be measured best by public float or the number of beneficial owners.
See David R. Burton, “Securities Disclosure Reform,” Heritage Foundation Backgrounder No. 3178, February
13, 2017, https://www.heritage.org/sites/default/files/2017-02/BG3178.pdf; David R. Burton, “Offering andDisclosure Reform,” Chapter 11 in Reframing Financial Regulation: Enhancing Stability and Protecting
Consumers, ed. Hester Peirce and Benjamin Klutsey (Arlington, VA: Mercatus Center at George Mason
University, 2016), pp. 277–315, https://www.mercatus.org/research/books/reframing-financial-regulation(accessed February 20, 2023); Andrew N. Vollmer, “Investor-Friendly Securities Reform to Increase Economic
Growth,” Securities Regulation & Law Report, Bloomberg BNA, Vol. 49, June 5, 2017.
See, for example, David R. Burton, “Reforming the Securities and Exchange Commission,” Heritage
Foundation Backgrounder No. 3378, January 30, 2019, https://www.heritage.org/sites/default/files/2019-01/
BG3378.pdf; Andrew N. Vollmer, “Testimony on Workforce Management Disclosures and Other SEC Issues,”
submitted to the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, Committee
on Financial Services, U.S. House of Representatives, December 6, 2022, https://www.congress.gov/117/
meeting/house/115227/witnesses/HHRG-117-BA16-Wstate-VollmerA-20221208.pdf (accessed February 20,2023); David R. Burton, “Reforming FINRA,” Heritage Foundation Backgrounder No. 3181, February 1, 2017,https://www.heritage.org/sites/default/files/2017-02/BG3181.pdf; Hester Peirce, “The Financial Industry
Regulatory Authority: Not Self-Regulation After All,” Mercatus Center at George Mason University Working
Paper, January 2015, https://www.mercatus.org/research/working-papers/financial-industry-regulatoryauthority-not-self-regulation-after-all (accessed February 20, 2023); Thaya Brook Knight, “Transparency andAccountability at the SEC and at FINRA,” Chapter 11 in Prosperity Unleashed: Smarter Financial Regulation,
ed. Norbert J. Michel, (Washington: The Heritage Foundation, 2017) https://www.heritage.org/sites/default/
files/2017-02/11_ProsperityUnleashed_Chapter11.pdf.
Reorganization Plan No. 10 of 1950, U.S. Code Title 5—Appendix, Reorganization Plans, http://uscode.house.
gov/view.xhtml?req=granuleid:USC-prelim-title5a-node84-leaf114&num=0&edition=prelim (accessed
February 20, 2023).
The board or commission should evaluate the regulatory functions of the National Securities Exchanges,
Registered Securities Future Product Exchanges, Registered Clearing Agencies (such as the Depository Trust
Company (DTC), the National Securities Clearing Corporation (NSCC) and the Options Clearing Corporation(OCC)), the Municipal Securities Rulemaking Board (MSRB) and the National Futures Association (NFA). Thisboard or commission should have a broad composition and permit minority reports.
Boyden Gray & Associates, Comments Submitted on Behalf of Alliance for Fair Board Recruitment Concerning
the Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change to Adopt Listing Rules Related
to Board Diversity, Amendment No. 1, File No. SR-NASDAQ-2020-081, April 6, 2021 https://www.sec.gov/
comments/sr-nasdaq-2020-081/srnasdaq2020081-8639478-230941.pdf (accessed February 20, 2023);
David R. Burton, “Nasdaq’s Proposed Board-Diversity Rule Is Immoral and Has No Basis in Economics,”
Heritage Foundation Backgrounder No. 3591, March 9, 2021, https://www.heritage.org/sites/default/
files/2021-03/BG3591_0.pdf. The SEC is contemplating at least two rules that can be expected to requiredifferential treatment based on race, sex, ethnicity, and so on. See Executive Office of the President, Office— 840 —

2025 Presidential Transition Projectof Management and Budget, Office of Information and Regulatory Affairs, “Fall 2022 Unified Agenda ofRegulatory and Deregulatory Actions: Active Regulatory Actions Listed by Agency,” https://www.reginfo.gov/
public/do/eAgendaMain (accessed February 20, 2023); “Human Capital Management Disclosure,” RIN: 3235AM88, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202204&RIN=3235-AM88 (accessed
February 20, 2023); “Corporate Board Diversity,” RIN: 3235-AL91, https://www.reginfo.gov/public/do/
eAgendaViewRule?pubId=202204&RIN=3235-AL91 (accessed February 20, 2023).
10. 15 U.S. Code § 77z–3, https://www.law.cornell.edu/uscode/text/15/77z-3 (accessed February 20, 2023); 15 U.S.
Code § 78mm, https://www.law.cornell.edu/uscode/text/15/78mm (accessed February 20, 2023).
11. S. ___, Jumpstart Our Business Startups Act of 2022, discussion draft, 117th Congress, 2nd Session, https://www.banking.senate.gov/imo/media/doc/the_jobs_act_4.0discussiondraft.pdf (accessed February 20,2023); David R. Burton, “Entrepreneurial Capital Formation,” Testimony before the Committee on Banking,Housing, and Urban Affairs, U.S. Senate, April 5, 2022, https://www.heritage.org/testimony/entrepreneurialcapital-formation; “Removing Barriers to Small Business Capital Formation and Expanding Investor
Opportunities,” Section 6 in Nicholas Anthony, Norbert J. Michel, Jennifer J. Schulp, George Selgin, and Jack
Solowey, “Sound Financial Policy: Principled Recommendations for the 118th Congress,” ed. Norbert J. Michel
and Ann Rulon, Cato Institute, 2022, pp. 22–27, https://www.cato.org/sites/cato.org/files/2022-10/soundfinancial-policy-118th-congress.pdf (accessed February 20, 2023); David R. Burton and Norbert J. Michel,
Proposals to Foster Economic Growth and Capital Formation, Submission to Committee on Banking, Housing,and Urban Affairs, U.S. Senate, March 18, 2021, https://www.banking.senate.gov/imo/media/doc/David%20
Burton%20and%20Norbert%20Michel%20-%202021-3-18.pdf (accessed February 20, 2023); David R. Burton,“Improving Entrepreneurs’ Access to Capital: Vital for Economic Growth,” Heritage Foundation BackgrounderNo. 3182, February 14, 2017, https://www.heritage.org/sites/default/files/2017-02/BG3182.pdf.
12. The small issues exemptive authority has been in the Securities Act since its initial enactment.
13. The crowdfunding exemption was created by Title III of the 2012 JOBS Act. See H.R. 3606, Jumpstart Our
Business Startups Act, Public Law No. 112-106, 112th Congress, April 5, 2021, Title III, § 302, https://www.
govinfo.gov/content/pkg/PLAW-112publ106/pdf/PLAW-112publ106.pdf (accessed February 20, 2023).
14. Burton, “Improving Entrepreneurs’ Access to Capital: Vital for Economic Growth”; Rutheford B. Campbell
Jr., “The Case for Federal Pre-Emption of State Blue Sky Laws,” Chapter 6 in Prosperity Unleashed: Smarter
Financial Regulation, https://www.heritage.org/sites/default/files/2017-02/06_ProsperityUnleashed_
Chapter06.pdf.
15. Andrew N. Vollmer, “Abandon the Concept of Accredited Investors in Private Securities Offerings,” Securities
Regulation Law Journal, Vol. 49, No. 5 (Spring 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_
id=3719280 (accessed February 20, 2023); Thaya Brook Knight, “Your Money’s No Good Here: How Restrictions
on Private Securities Offerings Harm Investors,” Cato Institute Policy Analysis No. 833, February 9, 2018, https://www.cato.org/sites/cato.org/files/pubs/pdf/pa833.pdf (accessed February 20, 2023); David R. Burton, “Congress
Should Increase Access to Private Securities Offerings,” Heritage Foundation Issue Brief No. 4899, August 29,
2018, https://www.heritage.org/sites/default/files/2018-08/IB4899.pdf; Andrew N. Vollmer, “Evidence on the
Use of Disclosure Documents in Private Securities Offerings to Accredited Investors,” Mercatus Center at George
Mason University Working Paper, October 22, 2020, https://www.mercatus.org/publications/financial-regulation/evidence-use-disclosure-documents-private-securities-offerings-0 (accessed February 20, 2023).
16. For a detailed discussion, see “Micro-Offerings,” Section IId in Burton and Michel, Proposals to Foster
Economic Growth and Capital Formation, pp. 15–17.
17. David R. Burton, “Let Entrepreneurs Raise Capital Using Finders and Private Placement Brokers,” Heritage
Foundation Backgrounder No. 3328, July 10, 2018, https://www.heritage.org/sites/default/files/2018-07/
BG3328.pdf; Andrew N. Vollmer, “Make It Easy for Startups to Sell Stock,” Mercatus Center at George Mason
University Discourse, September 21, 2020, https://www.mercatus.org/bridge/commentary/make-it-easystartups-sell-stock (accessed February 20, 2023).
18. See H.R. 531, S-Corp Access to Crowdfunding Act, 115th Congress, introduced January 13, 2017, https://www.
govinfo.gov/content/pkg/BILLS-115hr531ih/pdf/BILLS-115hr531ih.pdf (accessed February 20, 2023); David
Burton, “The Tax Law Makes It Almost Impossible for ‘S Corporations’ to Use Equity Crowdfunding,” The Daily
Signal, April 19, 2016, https://www.dailysignal.com/2016/04/19/the-tax-law-makes-it-almost-impossible-fors-corporations-to-use-equity-crowdfunding/.

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Mandate for Leadership: The Conservative Promise
19. Burton, “Improving Entrepreneurs’ Access to Capital: Vital for Economic Growth”; Campbell, “The Case forFederal Pre-Emption of State Blue Sky Laws.”
20. David R. Burton, “Why the SEC’s Consolidated Audit Trail Is a Bad Idea,” Heritage Foundation Commentary,
December 5, 2019, https://www.heritage.org/monetary-policy/commentary/why-the-secs-consolidatedaudit-trail-bad-idea; Hester M. Peirce, Commissioner, U.S. Securities and Exchange Commission, “Statementon the Order Granting Temporary Conditional Exemptive Relief from Certain Requirements of the National
Market System Plan Governing the Consolidated Audit Trail,” July 8, 2022, https://www.sec.gov/news/
statement/peirce-statement-consolidated-audit-trail-070822 (accessed February 20, 2023).
21. Peirce, “It’s Not Just Scope 3: Remarks at the American Enterprise Institute”; Uyeda, “Remarks at the 2022
Cato Summit on Financial Regulation.”
22. David R. Burton, “How Dodd–Frank Mandated Disclosures Harm, Rather than Protect, Investors,” Heritage
Foundation Issue Brief No. 4526, March 10, 2016, http://thf-reports.s3.amazonaws.com/2016/IB4526.pdf.
23. For a detailed discussion of SEC administration, see Burton, “Reforming the Securities and Exchange
Commission.”
24. See, for example, Andrew N. Vollmer, “Accusers as Adjudicators in Agency Enforcement Proceedings,”
University of Michigan Journal of Law Reform, Vol. 52, No. 1 (Fall 2018), pp. 103–155, https://repository.law.
umich.edu/cgi/viewcontent.cgi?article=1602&context=mjlr (accessed February 20, 2023).
25. 7 U.S.C. § 1a(9), https://www.law.cornell.edu/uscode/text/7/1a (accessed February 20, 2023).
26. Or the CFTC can undertake a rulemaking.
27. 7 U.S.C. § 2(i), https://www.law.cornell.edu/uscode/text/7/2 (accessed February 20, 2023).
28. 7 U.S.C. § 7b–3, https://www.law.cornell.edu/uscode/text/7/7b-3 (accessed February 20, 2923).
29. Commodity Futures Trading Commission, “Cross-Border Application of the Registration Thresholds andCertain Requirements Applicable to Swap Dealers and Major Swap Participants,” Final Rule, Federal Register,Vol. 85, No. 178 (September 14, 2020), pp. 56924–57016, https://www.govinfo.gov/content/pkg/FR-2020-0914/pdf/2020-16489.pdf (accessed February 21, 2023).
30. Commodity Futures Trading Commission, “Interpretive Guidance and Policy Statement Regarding Compliancewith Certain Swap Regulations,” Federal Register, Vol. 78, No. 144 (July 26, 2013), pp. 45292–45374, https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2013-17958a.pdf(accessed February 21, 2023).
31. Commodity Futures Trading Commission, “Margin Requirements for Uncleared Swaps for Swap Dealers andMajor Swap Participants—Cross-Border Application of the Margin Requirements,” Final Rule, Federal Register,Vol. 81, No. 104 (May 31, 2016), pp. 34818–34854, https://www.govinfo.gov/content/pkg/FR-2016-05-31/
pdf/2016-12612.pdf (accessed February 21, 2023).
32. H.R. 4173, Dodd–Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 111th Congress,
July 21, 2010, Title X, https://www.congress.gov/111/plaws/publ203/PLAW-111publ203.pdf (accessed March 23,2023). See also Consumer Financial Protection Bureau, “About Us,” https://www.consumerfinance.gov/aboutus/ (accessed March 23, 2023).
33. See, for example, Paul Sperry, “Trump Is Finally Fixing This Economy-Killing Agency,” New York Post,
December 2, 2017, https://nypost.com/2017/12/02/trump-is-finally-fixing-this-economy-killing-agency/(accessed March 23, 2023). See also Jeb Hensarling “How We’ll Stop a Rogue Federal Agency,” The
Wall Street Journal, February 8, 2017, https://www.wsj.com/articles/how-well-stop-a-rogue-federalagency-1486597413 (accessed March 23, 2023), and H.R. 3389, CFPB Slush Fund Elimination Act of 2013, 113th
Congress, introduced October 30, 2013, https://www.congress.gov/113/bills/hr3389/BILLS-113hr3389ih.pdf(accessed March 23, 2023).
34. Editorial, “CFPB Joins Justice in Shaking Down Banks for Democrat Activist Groups,” Investor’s Business Daily,
June 17, 2015, https://www.investors.com/politics/editorials/cfpb-diverts-civil-penalty-funds-to-democratactivist-groups/ (accessed March 23, 2023).
35. Table, “Budget by Program,” in Consumer Financial Protection Bureau, Annual Performance Plan andReport, and Budget Overview, February 2023, p. 15, https://files.consumerfinance.gov/f/documents/cfpb_
performance-plan-and-report_fy23.pdf (accessed March 23, 2023).
36. Table, “FTE by Program,” in ibid., p. 16.

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2025 Presidential Transition Project
37. Table 7, “Civil Penalty Fund Significant Activity,” in Consumer Financial Protection Bureau, Financial Reportof the Consumer Financial Protection Bureau, Fiscal Year 2022, November 15, 2022, p. 21, https://files.
consumerfinance.gov/f/documents/cfpb_financial-report_fy2022.pdf (accessed March 23, 2023).
38. Ibid.
39. Consumer Financial Protection Bureau, Financial Report of the Consumer Financial Protection Bureau, Fiscal
Year 2022, p. 20.
40. 12 U.S. Code § 5491, https://www.law.cornell.edu/uscode/text/12/5491 (accessed March 23, 2023).
41. Consumer Financial Protection Bureau, “Bureau Structure,” last updated March 15, 2023, https://www.
consumerfinance.gov/about-us/the-bureau/bureau-structure/ (accessed March 23, 2023).
42. See Consumer Financial Protection Bureau, “Consumer Financial Civil Penalty Fund Rule,” https://www.
consumerfinance.gov/rules-policy/final-rules/consumer-financial-civil-penalty-fund-rule/ (accessed
March 23, 2023).
43. Consumer Financial Protection Bureau, “Civil Penalty Fund: Consumer Education and Financial Literacy,”
https://www.consumerfinance.gov/enforcement/payments-harmed-consumers/civil-penalty-fund/consumereducation-financial-literacy/ (accessed March 23, 2023).
44. U.S. Government Accountability Office, Consumer Financial Protection Bureau: Opportunity Exists to Improve
Transparency of Civil Penalty Fund Activities, GAO-14-551, June 2014, https://www.gao.gov/assets/gao-14-551.
pdf (accessed March 23, 2023).
45. Seila Law LLC v. Consumer Financial Protection Bureau, 591 U.S. ___ (2020), https://www.supremecourt.gov/
opinions/19pdf/19-7_n6io.pdf (accessed March 23, 2023).
46. Ibid., p. 37.
47. See 12 U.S. Code § 5497(a)(1), https://www.law.cornell.edu/uscode/text/12/5497 (accessed March 23, 2023).
Congress specified that the amount transferred to the CFPB “shall not exceed” 12 percent “of the total
operating expenses of the Federal Reserve System…in fiscal year 2013, and in each year thereafter.” Ibid., §5497(2)(A)(iii).
48. Community Financial Services Association of America v. Consumer Financial Protection Bureau (5th Cir. 2022),
pp. 31–32, https://www.ca5.uscourts.gov/opinions/pub/21/21-50826-CV0.pdf (accessed March 23, 2023).
49. Ibid., p. 32.
50. Ibid. (quoting Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2202 n. 8 (2020)).
51. U.S. Supreme Court, “Order List: 598 U.S.,” February 27, 2023, Docket No. 22–448, CFPB et al. v. Com. Fin.
Services Assn., et al., https://www.supremecourt.gov/orders/courtorders/022723zor_6537.pdf (accessed
March 23, 2023).
52. Devin Watkins, Competitive Enterprise Institute, “Consumer Financial Protection Bureau: Ripe for Reform,”
testimony before the Subcommittee on Financial Institutions and Monetary Policy, Committee on
Financial Services, U.S. House of Representatives, March 9, 2023, https://docs.house.gov/meetings/BA/
BA20/20230309/115384/HHRG-118-BA20-Wstate-WatkinsD-20230309.pdf (accessed March 23, 2023);
Norbert J. Michel, “7 Steps Next Director Can Take to Make the Consumer Financial Protection Bureau Less
Awful,” Heritage Foundation Commentary, July 28, 2018, https://www.heritage.org/markets-and-finance/
commentary/7-steps-next-director-can-take-make-the-consumer-financial.
53. The Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation, Federal Reserve,
and National Credit Union Administration. Those functions performed by the Office of Thrift Supervision (OTS)
prior to Dodd–Frank should be transferred to the OCC since OTS has merged with OCC.
54. See “Section 1071 of the Dodd–Frank Act” in David R. Burton, “Improving Small Business Access to Capital,”
Consumer Financial Protection Bureau Symposium on Section 1071 of the Dodd–Frank Act, Small Business
Lending Panel, November 6, 2019, https://files.consumerfinance.gov/f/documents/cfpb_burton-writtenstatement_symposium-section-1071.pdf (accessed March 23, 2023).
55. 5 U.S. Code Chapter 5, https://www.law.cornell.edu/uscode/text/5/part-I/chapter-5 (accessed March 23, 2023).
56. Consumer Financial Protection Bureau, “Administrative Adjudication Proceedings,” https://www.
consumerfinance.gov/administrative-adjudication-proceedings/ (accessed March 23, 2023), and 12 Code ofFederal Regulations Part 1081—Rules of Practice for Adjudication Proceedings, https://www.law.cornell.edu/
cfr/text/12/part-1081 (accessed March 23, 2023).

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