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Wednesday, May 13, 2015

Are Two of the SEC's Five About to Leave?

News summary by MFWire's editors

Two of the five people who rule the Securities and Exchange Commission (SEC) are about to leave.

Dave Michaels and Robert Schmidt of Bloomberg report that Commissioner Daniel Gallagher, a 42-year-old Republican, "is resigning his post," though his term is not set to expire until June 5, 2016. And Commissioner Luis Aguilar, a 61-year-old Democrat, is set to see his term expire in less than a month, on June 5, 2015.

A spokeswoman for the SEC declined to comment for this story, and she told MFWire that "Commissioner Gallagher is declining comment on these inquiries."

The Wall Street Journal and Reuters also reported on the news.

Bloomberg writes that, according to three unnamed sources, Gallagher will stay on the SEC "until a successor is confirmed," and an unnamed source tells the WSJ that Aguilar is likely to stick around for a bit, too. The President appoints the SEC's Commissioners to five year terms, which are staggered, and the Senate has to weigh in and confirm those appointees. There are two Democratic seats on the commission, and two Republican seats, while the Chair normally ends up being chosen from the President's party.

Aguilar and Gallagher are the two commissioners who pre-date Chair Mary Jo White, who took over in April 2013.

The term lengths and expiration dates of the five commissioners, and of their many predecessors, are publicly available, so one would expect the Obama Administration to already be preparing for Aguilar's departure. Indeed, Bloomberg and the WSJ both point to a pair of former SEC attorneys, Keir Gumbs (now of Covington & Burling) and Philip Khinda (now of Steptoe & Johnson), as already being under consideration to fill Aguilar's Democratic seat on the commission. Yet neither pub offers speculation on who might fill Gallagher's Republican shoes.

An SEC veteran who once served as counsel to then-Chairman Chris Cox, Gallagher was appointed to the commission by President Barack Obama in 2011. He's been an outspoken critic of the Dodd-Frank Act, an advocate for curtailing asset managers' reliance on proxy advisory shops, and a key player in the money market mutual fund reform debate; Gallagher helped defeat then-SEC Chair Mary Schapiro's plan, and after White took over the commission Gallagher worked with her on the eventual passage of an alternate money fund reform plan.

As for Aguilar, he was appointed to the Commission by then-President George W. Bush in 2008, and then reappointed by Obama in 2011. A former general counsel of the mutual fund shop Invesco, Aguilar also previously specialized in securities law at McKenna Long & Alridge. Like Gallagher, Aguilar was one of three SEC commissioners who defeated Mary Schapiro's money fund reform plan. He's also the only still-serving Commissioner of the five who unanimously approved the summary prospectus requirement for mutual funds. 

Edited by: Neil Anderson, Managing Editor

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