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As Supreme Court decisions loom, a legal assault is weakening SEC's power

Livemint · 3m

A legal attack on the U.S. Securities and Exchange Commission (SEC) is eroding its ability to regulate Wall Street, with the Supreme Court expected to issue two rulings that could further limit its powers. The recent overturning of a major SEC rule on oversight of private funds by a U.S. appeals court is seen as a blow to SEC Chair Gary Gensler's efforts to increase transparency and clamp down on conflicts of interest. The ruling could also expose other SEC draft rules to legal challenges. Conservative-leaning courts have been used by business groups to challenge SEC rules and enforcement actions, part of a broader assault on federal agencies known as the "war on the administrative state". Gensler's aggressive agenda has made the SEC a prime target, as it oversees a wide range of entities with significant financial stakes. The agency is currently facing several lawsuits from financial firms and trade groups, accusing it of exceeding its authority and imposing burdensome regulations. Critics argue that weakening the SEC will harm ordinary Americans, while the industry says it is merely defending its profits. Despite the challenges, Gensler stated that the agency would adjust and adapt to adverse court rulings. The current litigation often alleges violations of the Administrative Procedure Act, which requires regulators to justify rules and consider public feedback. The Supreme Court is also expected to rule on two cases that could have significant implications for the SEC, one relating to its use of in-house judges for enforcement actions and the other challenging the "Chevron deference" doctrine, which requires judges to defer to federal agencies' interpretations of ambiguous laws. Both rulings could further curtail the SEC's authority and impact its ability to enforce regulations.