Two years ago, a group of five law professors – John Coates (Harvard Law), John C. Coffee, Jr. (Columbia Law), James Cox (Duke Law), Merritt Fox (Columbia Law), Joel Seligman (University of Washington Law) – came together to form what they called The Shadow SEC.

The Shadow SEC is based on the earlier established Federal Reserve Shadow Open Market Committee, and is “intended to provide, encourage, facilitate, and distribute policy discussions and debates relating to the federal securities laws and the Securities and Exchange Commission (SEC).”

Since its creation, the Shadow SEC has put out eight statements. 

The Value of an Independent SEC (2/24/25)

The Crisis Deepens as SEC Staff and Budget Cuts Are Directed (3/13/25)

FCPA Books and Records Requirements Must Be Vigorously Enforced (5/12/25) 

The PCAOB Should be Carefully Reviewed, Not Hastily Abolished (5/14/25)

The PCAOB Should be Preserved (7/3/25)

The Not-So-GENIUS Act (7/14/25)

Too Much, Too Fast (9/30/25)

Comment on SEC Proposal to Allow Semiannual Reports (6/1/26)

Washington University Law School Professor Joel Seligman is one of the founders of the Shadow SEC. 

He’s the author of more than twenty books, including The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance (Walters Kluwer 2003). 

He wrote an article recently about how Trump’s attack on the SEC is different from earlier attacks on the SEC.

“It’s different in a number of ways,” Seligman told Corporate Crime Reporter in an interview last week. “Number one, for the last several months, since January 2026, the SEC has been a one party commission. There are three commissioners led by Paul Atkins, who is the chair. They have been appointed by Republicans. There are no Democrats. This is strikingly inconsistent with the statutory model, which assumes there will be a five person commission, no more than three of which shall be associated with any one party.” 

“There is no plan for the President to appoint Democratic commissioners. And this gives Chairman Atkins and the three commissioners unusual latitude to pursue new ideas. And it gives them protection from the kind of robust internal debate which minority commissioners sometimes bring to the SEC.”

“Indeed, when Atkins was first on the Commission for a five year term some years ago, he often raised issues. And this caused the Commission to slow down and to consider his thoughts and for all I know, at some point to actually change what they were going to do.”

If the law requires five commissioners, why can’t there be a legal challenge to compel five commissioners?

“That’s not what the law requires. The law simply states that the SEC shall have five commissioners, no more than three of which shall be from any one party. There is no compulsion that five commissioners be appointed at any one point.”

“And the quorum rule for the SEC is not a majority. But it is whatever number are in office.That is a regulatory rule. One of the things I have written about is the fairly urgent need for the SEC statute to be amended to require minority or bipartisan commissioners and to in effect overrule the Commission’s internal quorum rule.”

“The second point, we have seen under President Trump a fairly ferocious attack on the concept of independent commissioners. There are some regulatory agencies, perhaps the best known of which is the Federal Reserve System, which have in their statutes that commissioners can only be removed with cause.” 

“The Supreme Court has two cases pending before it to explore whether or not those provisions are Constitutional. If the Court were to hold – and it’s a good possibility it may – that at least with commissions like the SEC, commissioners can be removed without cause, that is at will.”

“This undermines the capacity of the SEC to pursue what was originally envisioned for the SEC – an expert agency proceeding in a bipartisan way to deal with complex problems in the financial and securities industry.” 

“Right now, there is a separate case pending before the Federal Reserve system, and it seems more likely that the independent Federal Reserve Governors will be preserved, but we don’t know. Neither case has been handed down to date.”

“It’s important to understand that when you use the term independent, it doesn’t quite mean they are all powerful unto themselves. The SEC for example is not self-funding. It has to go through the Office of Management and Budget and Congress to get a budget. SEC Commissioners are appointed by the President. And this gives the President enormous leverage. Congress can limit the powers of an agency, through not just its budget, but also through statutory means as well.”

“When you look at the SEC now, you see a one party agency with an ongoing assault being made on the right of any independent agency to avoid at will appointments.” 

This attack arises from Trump’s view that he actually controls these independent agencies through something called the unitary executive. 

“Correct. That was the basis of the Heritage Foundation’s Project 2025. But it’s a theory that misunderstands our constitutional model which is based on checks and balances. Often, people will rationalize Alexander Hamilton’s famous line about energy in the executive. That is, it’s important to have an energetic and effective executive.”

“It’s also fair to say that when you read that quotation from Hamilton, what you discover is it had a quite different meaning when he wrote it in the late 18th century. The Revolutionary War had just ended. He had been one of George Washington’s closest advisers. He witnessed winter camps where there wasn’t enough food and blankets and uniforms. You had a dysfunctional confederation of states trying to create a new country. So when he wrote this, he was saying – I’m writing in the Federalist Papers proposal to have separation of powers between Congress, the President, and the courts. But I’m also saying that the President has to be strong enough to do a real job. And that had not been the case in Hamilton’s experience during the revolutionary war.”

What are the two other factors?

“The Supreme Court’s immunity decision recently limits the ability, among other things, to subpoena the President, limits the ability to bring litigation against the President while he is in office. The Court does refer to the fact that the President can be charged with crimes when he is no longer in office. But by and large the decision strengthened the power of a President not to adopt ethics rules, not to doubt that he has great power to proceed largely without restraint.”

“And the fourth factor is the Citizens United decision. That gave opportunities to those with great wealth to try and influence the President by providing tremendous contributions to the President’s political campaigns.” 

“What is different about this current assault on the SEC has been the combination of these devices for weakening the SEC and the willingness of the President to seek personal wealth and contributions to his family and his family trust. And it is extraordinary.” 

“We have had Presidents who have clearly had close relationships to donors in the past, who sometimes favored policies that the donors favored. But we have not seen, to my knowledge, a systematic effort to use the Presidency to enrich oneself while in office. This is what makes the war on the SEC different.”

Another difference is in enforcement. When I went to law school many decades ago, my securities law professor was Stanley Sporkin, who at the time was head of enforcement at the SEC. And through Sporkin I secured a part time job at the enforcement division during law school. And my eyes were opened to what an active, aggressive enforcement agency looks like in real time.

One of things Sporkin used to say was – we can’t bring enforcement actions against everyone who violates the law. We have to chop at the top – the biggest firms – and that will send a deterrent message down the line to smaller firms.

Where are we today in terms of enforcement?

“It’s a dismal, not complete, but large reversal from what Irv Pollack and Stanley Sporkin were responsible for – the great SEC enforcement program for some decades. Stanley is probably the most important figure in the history of enforcement at the SEC. He was certainly a man of great talent.”

“In the cryptocurrency space, virtually every major crypto case – Binance, Coindesk, something like over twenty cases – were either withdrawn, dismissed or settled within the last fourteen months or so, since Paul Atkins arrived. We have seen the support of a statute called the Genius Act, a law which in effect says the SEC does not have the power to address stablecoins. Stablecoins are coins that are backed up by so-called fiat currency, like dollars or Euros. But it is an important part of the crypto industry.” 

“We have seen the SEC support the Clarity Act which would further limit its ability to bring enforcement cases in the cryptocurrency space. That has not been enacted yet, although it appears Congress is moving toward enactment.”

“And President Trump has pardoned crypto executives.” 

“It’s not fair to say that the SEC is bringing no cases. It is bringing cases. But it is fair to say that the major cases initiated during the Biden administration have essentially been all closed down. And this administration is strikingly different from the SEC under the first Trump Presidency, which ran from 2017 to 2021 under Jay Clayton. He was the chair of the SEC and the SEC brought 57 cases against crypto firms. This is like a night and day change. I have not seen such a tremendous change.”

“The crypto industry has seen many cases of major fraud. There have been major cases of money laundering. You have consistently had firms with inadequate corporate leadership, inadequate internal controls. The New York Times and other newspapers have documented Trump profiting by several millions of dollars from this industry. It is shocking and different from any previous activities we have seen from any President of this magnitude.”

Did Atkins cut back on the staff at the SEC?

“The last public data that I saw indicated that the staff at the SEC has decreased by twenty percent over a two year period. That’s serious. What’s much more serious is the number of senior staff who have left the SEC – staff who have experience and who were most likely to be able to lead the most important cases. Those have been significant departures.” 

“In terms of regional offices, there have been some reductions, but they are not all closed down.”

Judge Margaret Ryan was appointed to be enforcement director last year. When she came in, she made a speech in February where she said this: “Reports that enforcement work at the SEC has been tossed to the wayside are not only greatly exaggerated but flat out wrong. But I will say that I am far more concerned with the quality and impact of the enforcement actions that we bring than with chasing numbers.”

A couple of weeks later she resigned. And there were reports that she resigned because she faced resistance pursuing cases against Trump’s circle.

Do you know anything more about that?

“I don’t know anything more about that specific case. But look at the crypto currency cases. In most instances, there will be one senior SEC attorney out of the division of enforcement working with junior SEC attorneys and accountants. But now, most of the senior SEC attorneys in the crypto space have departed. That’s deeply concerning.”

What about the resistance to the stripping down of the SEC? There is an SEC alumni association.

There are academics like yourself. But there appears to be no organized resistance.

“I’ve been working with Jack Coffee at Columbia Law School, John Coates at Harvard Law School, Jim Cox of Duke Law School and Merritt Fox of Columbia. We have formed a group of the five of us, which we call The Shadow SEC. It was inspired by the Shadow Open Market Committee, which was created by those concerned about the direction many years earlier that the Federal Reserve System was taking with interest rates and the money supply.” 

“We have published to date eight statements addressing topics like independence, the budget and staff. We have addressed the Public Company Accounting Oversight Board. We publish our statements on the Columbia Law School’s Blue Sky Blog. And we will be filing copies of our statements with the SEC when they make rule proposals.” 

“Fairly recently there was a proposal on semi-annual reporting. And of the comments that came in, 96 percent were opposed to the SEC’s proposal. There were something like 1,000 different comments to date, noting that the change will make it harder for investors to understand the investments they are making, will make prices less stable and will undermine confidence in management and undermine the ability of investors to monitor whether or not managers are complying with federal securities and other laws.” 

“Paul Atkins argues that these detailed rules, particularly under Gary Gensler, were stultifying innovation, drove some firms abroad and needlessly added costs. The point of our Shadow SEC statements is to take those kinds of points seriously. But we say yes, the benefits of full and complete reporting far outweigh those apparent costs.” 

“Before you can adopt a rule, it has to be out in most instances for notice and comment. Any of your readers, or those who are concerned about these types of issues, I encourage them to make a comment and write to the SEC. It’s not hard. Go to the SEC website, find the proposal, and comment.” 

How far will this go?

“I am really concerned about this notion of a one party SEC. Even when you have had both parties, often the members of the minority party are sympathetic to the majority party members. But the quality of the debate is more likely to be affected when you have both parties at the table.” 

“We will see whether or not the 2026 elections have any bearing on the future of the SEC. If the House or Senate or both change hands, that might have some bearing on the direction of the SEC.” 

“I have a feeling that one of the themes you are likely to hear during the 2026 campaign and may have real consequence for the outcome will be a repulsion at what appears to be corruption in the Trump administration, its willingness to have accepted money and investment from individuals who simultaneously receive benefits, whether in the form of cases dismissed, pardons or other financial emoluments. This will be explored in the 2026 elections.” 

“But until then, we have the weakening of the independence of the SEC alongside the willingness of President Trump and others in his administration, to receive benefits of unprecedented magnitude.”

There is an active revolving door feeding former SEC staffers into the big corporate law firms representing the corporations that benefit from the weakening of the SEC. Many of these former SEC staffers are outraged at what is happening at the SEC, but they are effectively gagged by their employment at these corporate law firms.

“It’s a reality. Many people will work many years at the SEC, being paid far less than they would be paid in a private firm. Under some circumstances, if you appear to be hostile to what the client firms want, it’s harder to get a job.” 

“However, not every private firm is defense oriented. There is a fair amount of litigation brought in federal and state courts by those who are more than happy to be critical of what the SEC has done. But as a practical matter, the jobs available to people who leave the SEC are not unbounded. That is a real factor and unfortunately, with human nature being what it is, it has some force.”

Corporate crime and corruption rarely becomes a major political issue. What makes you think that might change in these upcoming elections?

“Because I remember Teapot Dome. Because I remember vicuna coats. Because I remember the significance of Enron and WorldCom. It’s not any corporate crime that becomes a political issue. It has to be a major corporate crime. The sense that the Trump administration is exploiting its position for financial benefit is widespread, frequently commented upon, and there is a chance it will break through and have political consequences.” 

“You have seen a lot of news stories recently about people complaining that with gas prices up, food prices up, unemployment up, for Trump to spend so much time focusing on projects that place his identity all over Washington – that has an impact on people. And people are troubled by how much money he’s making being President and they think – I thought his job was to serve the people.”

[For the complete q/a format Interview with Joel Seligman, see 40 Corporate Crime Reporter 26(13), June 29, 2026, print edition only.]