There is lot going on in the US financial arena; and it is affecting financial services regulatory bodies, specifically the SEC and CFPB. These two institutions have set the tone for consumer financial protections since they were started nearly a century and over a decade ago. The SEC was set up in 1934 under US President Franklin D. Roosevelt, and the CFPB began in 2011 as a response to the Dodd-Frank Act.
Fast forward to April of 2025, and the landscape is quite different.
The SEC’s Enforcement Division’s autonomy to start investigations and formal orders, such as subpoenas, has been curtailed. This follows a recent Executive Order designed to have the Attorney General "take appropriate action to review the activities of all departments and agencies exercising civil or criminal enforcement authority of the United States," including the SEC.
What does this mean? For starters, this impacts the SEC’s Enforcement Division’s “independence” of initiating investigations or sweeps. The SEC enforcement and investigative staff now need Commission approval (i.e., majority vote of the commissioners) to issue a subpoena or start a formal investigation, which they have previously been able to do on their own.
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The next regulatory body that has been significantly affected is the CFPB. The Trump administration pushed to fully shutter the agency; however, this action has been challenged in court and a federal district court is currently evaluating the merits of the challenge. The CFPB Chief Legal Officer has taken steps to bring back some key CFPB functions, such as its congressionally mandated consumer response operation. One can still file a complaint at the CFBP. However, it is still uncertain where the result of the agency and all its functions will ultimately end up.
The SEC and CFBP are two critical agencies that are central to financial regulatory oversight and consumer protection and changes to them can have major ripple effects. If these federal agencies change, will others follow suit? And how will firms and investors react? Regulated firms could be under lessened regulatory scrutiny and consumers may have decreased support in bringing issues and matters to these agencies to resolve. Q2 may provide some direction. I’ll keep my ear to the ground and report out next quarter.
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