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Trump Targets Transgender Rights & Changes at SEC · Bloomberg Law

• 0:02
  Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
• 0:09
  Speaker 2: With a stroke of my pen.
• 0:11
  Speaker 3: On day one, We're going to stop the transgender lunacy,
• 0:20
  Speaker 3: and I will sign executive orders to end child sexual mutilation,
• 0:25
  Speaker 3: get transgender out of the military and out of our
• 0:29
  Speaker 3: elementary schools and middle schools and high school.
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  Speaker 4: President Donald Trump had campaigned on ending what he called
• 0:37
  Speaker 4: the transgender lunacy, and on day one, he began by
• 0:41
  Speaker 4: targeting transgender people in a series of executive orders.
• 0:46
  Speaker 2: It will henceforth be the official policy of the United
• 0:49
  Speaker 2: States government that there are only two genders, male and female.
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  Speaker 4: Trump's followed that with executive orders barring transgender people from
• 0:59
  Speaker 4: serving in the US military and revoking federal funding from
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  Speaker 4: entities that provide gender affirming care to minors and educational
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  Speaker 4: institutions that allow transgender female athletes to compete in school sports.
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  Speaker 4: All of these executive actions have been challenged in court.
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  Speaker 4: Joining me is David Cole, a professor at Georgetown Law
• 1:22
  Speaker 4: and the former National Legal Director of the ACLU. On
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  Speaker 4: the first day of his presidency, he signed an order
• 1:29
  Speaker 4: declaring that only two genders exist. Does that order itself
• 1:35
  Speaker 4: have any effect on transgender people.
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  Speaker 5: Well, it's deeply demigrating of their very humanity. But I
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  Speaker 5: don't think the order itself has legal effect. The president
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  Speaker 5: can declare whatever he wants, but it doesn't make it.
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  Speaker 4: So let's discuss some of the executive orders he's issued.
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  Speaker 4: On January twenty seventh, Trump issued an executive order intended
• 1:58
  Speaker 4: to bar transgender people from serving in the US military,
• 2:03
  Speaker 4: and under new rules released by the Defense Secretary, transgender
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  Speaker 4: individuals are blocked from enlistment, and transgender troops already serving
• 2:12
  Speaker 4: are blocked from receiving some gender related medical care. Is
• 2:17
  Speaker 4: a complete ban likely next?
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  Speaker 5: Well, I'm not sure what's next, but what he put
• 2:22
  Speaker 5: in place already is deeply disturbing and very likely unconstitutional.
• 2:27
  Speaker 5: The executive order effectively says, or not effectively, literally says,
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  Speaker 5: transgender people cannot serve in the military because we need
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  Speaker 5: honest people serving in the military, and if you're transgender,
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  Speaker 5: you're not honest. That is simply pure ignorant prejudice. It's
• 2:49
  Speaker 5: nothing more than that there are one point five million
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  Speaker 5: people in this country who are transgender. The fact that
• 2:55
  Speaker 5: they are transgender has nothing whatsoever to do with whether
• 2:59
  Speaker 5: they are honest. Some of them are honest, some of
• 3:01
  Speaker 5: them are probably not, just like some presidents are honest
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  Speaker 5: and some are not. But that kind of an order,
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  Speaker 5: which is based on nothing more than bear animus against
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  Speaker 5: a minority group, is clearly unconstitutional. The fact that it
• 3:15
  Speaker 5: arises in the context of the military might make it
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  Speaker 5: a closer case, because the president, as commander in chief,
• 3:21
  Speaker 5: has special authority. But imagine if the president said black
• 3:26
  Speaker 5: people are not honest and so they can't serve in
• 3:29
  Speaker 5: the military. I don't think that order would stand, nor
• 3:33
  Speaker 5: should the transgender order stand.
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  Speaker 4: There are several lawsuits over that ban. There are suits
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  Speaker 4: by six service members. Less Thursday, Land Illegal in the
• 3:43
  Speaker 4: Human Rights Campaign filed a lawsuit, but in twenty nineteen,
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  Speaker 4: the Supreme Court allowed Trump's restrictions on transgender people in
• 3:52
  Speaker 4: the military.
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  Speaker 5: The case never reached the Supreme Court in the sense
• 3:56
  Speaker 5: the Supreme Court never agreed to hear the case. The
• 3:59
  Speaker 5: last time around, it was a more limited restriction, and
• 4:02
  Speaker 5: it was not as this one is, on its face,
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  Speaker 5: based on pure, unadulterated prejudice and animus. The Court has
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  Speaker 5: long ruled that when the government targets a group out
• 4:16
  Speaker 5: of pure animus out of animus against the group, not
• 4:20
  Speaker 5: based on any rational justification. Its actions are unconstitutional, and
• 4:26
  Speaker 5: so I am quite optimistic that the courts will declare
• 4:30
  Speaker 5: this ban unconstitutional and the Supreme Court will then take
• 4:34
  Speaker 5: it up, because the Supreme Court generally does take up
• 4:38
  Speaker 5: decisions that declare actions of the president unconstitutional. But this
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  Speaker 5: is deeply, deeply offensive. It is really no different than
• 4:45
  Speaker 5: writing an order saying black people are not honest and
• 4:48
  Speaker 5: therefore they can't serve in the military.
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  Speaker 4: So the next day, on January twenty eight, he issued
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  Speaker 4: in executive order ending federal funding research and education grants
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  Speaker 4: to medical institution, including hospitals and medical schools, that provide
• 5:03
  Speaker 4: gender affirming care to patients under nineteen. And you call
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  Speaker 4: this protecting children from chemical and surgical mutilation. What about
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  Speaker 4: the legality of withholding federal funds here?
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  Speaker 5: Again deeply troubling and illegal. It's been challenged. I know
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  Speaker 5: the ACLU has challenged that action. It's illegal both because
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  Speaker 5: he is cut off funding that Congress specifically appropriated to
• 5:30
  Speaker 5: be spent for these purposes, and for the same reason
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  Speaker 5: that courts have enjoined his efforts to cut off other
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  Speaker 5: Congressional funding and other contexts. The president doesn't have the
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  Speaker 5: power to simply cut off funding because he disagrees with
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  Speaker 5: Congress's judgment. His job is to execute the laws that
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  Speaker 5: Congress passes, and so he can't override that because he
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  Speaker 5: happens to be prejudiced against transgender people this lass. It
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  Speaker 5: also will be challenged as a form of second discrimination
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  Speaker 5: in the provision of healthcare, which violate a federal statute,
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  Speaker 5: and the United States Court of Appeals for the Fourth
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  Speaker 5: Circuit has held that denying care to transgender people is
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  Speaker 5: a form of sex discrimination that violates that federal statute.
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  Speaker 5: So I am quite optimistic that this order will also
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  Speaker 5: be struck down once the courts take it up.
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  Speaker 4: Three states, Washington, Oregon, and Minnesota, have also filed a
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  Speaker 4: lawsuit over that executive order on medical treatment for transgender minors,
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  Speaker 4: saying it violates the Fifth Amendment's equal protection guarantees, the
• 6:39
  Speaker 4: constitutional separation of powers, and the Tenth Amendment. And the
• 6:43
  Speaker 4: tenth Amendment has been invoked in other lawsuits by the
• 6:48
  Speaker 4: states against Trump.
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  Speaker 5: So the tenth Amendment is because it's interfering with the
• 6:54
  Speaker 5: authorities of the states, and so if he's seeking to
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  Speaker 5: use federal funding to coerce states in the taking action
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  Speaker 5: that they don't want to take. That's a violation of
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  Speaker 5: the principles of federalism. And with respect to the Fifth Amendment,
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  Speaker 5: singling out a particular group for unequal treatment violates the
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  Speaker 5: Fifth Amendments protection of due process, which in turn requires
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  Speaker 5: the federal government to treat all people equally.
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  Speaker 4: You represent transgender families challenging Tennessee's ban on gender firming
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  Speaker 4: care from minors. At the Supreme Court. The Trump administration
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  Speaker 4: flipped the federal government's position in that case, which came
• 7:35
  Speaker 4: as no surprise, and now is in support of Tennessee's ban.
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  Speaker 4: Do you think that flip will have any effect on
• 7:43
  Speaker 4: the Supreme Court's decision in the case.
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  Speaker 5: Well, we'll see when they issue their decision. I don't
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  Speaker 5: think it's likely to have an effect. The case was
• 7:52
  Speaker 5: presented to the court, the court heard argument. I was
• 7:55
  Speaker 5: actually co counsel for the transgender families with the ACLU
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  Speaker 5: in that case, and at the Supreme Court, initially and
• 8:03
  Speaker 5: at our argument, the United States was on our side.
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  Speaker 5: Now that President Trump has taken office, he has switched
• 8:10
  Speaker 5: sides and he's against us. But all he did was
• 8:13
  Speaker 5: submit a letter saying we no longer support the plaintiffs
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  Speaker 5: in this case, and we think the law is constitutional.
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  Speaker 5: We think you should decide the case. So I suspect
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  Speaker 5: that the court will decide the case. I very much
• 8:25
  Speaker 5: doubt that the Trump administration shifting its position will affect
• 8:30
  Speaker 5: how the court decides the case. There's still a dispute
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  Speaker 5: between our clients and Tennessee, which is depriving the parents
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  Speaker 5: and their kids of the medical care that they and
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  Speaker 5: their doctors have determined as medically necessary.
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  Speaker 4: Let's say the Supreme Court upholds Tennessee's ban. Does that
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  Speaker 4: have any implications for Trump's executive order withholding funding from
• 8:53
  Speaker 4: institutions that provide gender firming care for minors.
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  Speaker 5: Yeah, so if the court rules for Tennessee. Depending on
• 9:01
  Speaker 5: how it rules for Tennessee, it would weaken the equal
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  Speaker 5: protection challenge to the extent there's an equal protection challenge
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  Speaker 5: to the Trump executive order, but it would have no
• 9:12
  Speaker 5: effect on the claims that he can't cut off funding
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  Speaker 5: that Congress appropriated, that he can't discriminate on the basis
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  Speaker 5: of sex in the provision of healthcare under a federal statute,
• 9:24
  Speaker 5: and that he can't commandeer the states to carry out
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  Speaker 5: programs that they disagree with, so all of those claims
• 9:31
  Speaker 5: would remain. The Fifth Amendment due process slash equal protection
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  Speaker 5: claim that is also in the case could be weakened
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  Speaker 5: if the court rules against Tennessee, and would obviously be
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  Speaker 5: very much strengthened if the court rules in favor of
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  Speaker 5: the transgender family.
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  Speaker 4: Last Wednesday, in a ceremony at the White House, Trump
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  Speaker 4: signed an executive order denying federal funds to any educational
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  Speaker 4: institution that allows transgender female athletes to compete in female
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  Speaker 4: categories in school sports.
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  Speaker 2: We're putting every school receiving taxpayer dollars on notice that
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  Speaker 2: if you let men take over women's sports teams or
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  Speaker 2: invade your locker rooms, you will be investigated for violations
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  Speaker 2: of Title NINN and risk your federal funding. There will
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  Speaker 2: be no federal fundement.
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  Speaker 5: Well, I think again, this is, you know, consistent with
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  Speaker 5: everything else he has done with respect to transgender people,
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  Speaker 5: which is that he has targeted a very small minority
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  Speaker 5: in this country for disparate treatment that no one else
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  Speaker 5: has to suffer. And so he's basically saying we're going
• 10:39
  Speaker 5: to take away funding from schools that allow allow transgender
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  Speaker 5: women to play on women's teams. There are many transgender
• 10:50
  Speaker 5: women who are playing on women's teams. Some of them are,
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  Speaker 5: you know, very good, others are not. They're in the
• 10:56
  Speaker 5: NC DOUBLEA, they're governed by NC DOUBLEA rules. If they're
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  Speaker 5: club sports, they're governed by whatever the school's rules are.
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  Speaker 5: But at the end of the day, sports are about
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  Speaker 5: two things, competition and participation. And to say to a
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  Speaker 5: trans woman, the only way you can participate or compete
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  Speaker 5: is if you deny your gender identity and you act
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  Speaker 5: as if you are a man when you are a woman.
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  Speaker 5: No one else has to deny who they are to
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  Speaker 5: play a sport. So it's a deeply again, a deeply
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  Speaker 5: cruel effort to use the power of the federal purse
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  Speaker 5: to coerce universities and schools to harm people who they're
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  Speaker 5: simply allowing to participate in extracurricular activities. And there are
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  Speaker 5: concerns in the sports context about the fairness of competition
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  Speaker 5: and the like, but most of the sport governing bodies
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  Speaker 5: have dealt with that through gender neutral rules. To say,
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  Speaker 5: you know, if you're going to play on the women's team,
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  Speaker 5: have been identified as a woman for a certain period
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  Speaker 5: of time, you have to have low testosterone level so
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  Speaker 5: that you're playing essentially on an equal playing field with
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  Speaker 5: the other women on the team. But that's a totally
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  Speaker 5: permissible set of rules to apply to come in and say,
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  Speaker 5: where a transgender woman is harming nobody, she cannot participate
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  Speaker 5: simply because I have an ideological view that rejects the
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  Speaker 5: reality of one point five million people in this country.
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  Speaker 5: Is again nothing more than pure animus and prejudice, and
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  Speaker 5: should be invalid.
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  Speaker 4: And two transgender girls in New Hampshire brought the first
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  Speaker 4: legal action against that executive order, and it's actually an
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  Speaker 4: expansion of a lawsuit filed last August against a state
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  Speaker 4: law prohibiting transgender girls from participating in female sports. So
• 12:51
  Speaker 4: we'll see where that goes. Trump also issued an order
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  Speaker 4: requiring officials to ensure that transgender women detained in federal
• 13:01
  Speaker 4: facilities be housed in men's facilities, and prohibiting the Bureau
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  Speaker 4: of Prisons from providing gender affirming care to inmates.
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  Speaker 5: And that has already been challenged by two transgender women
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  Speaker 5: and has been and joined by the courts because the
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  Speaker 5: law is and President Trump doesn't seem to care what
• 13:21
  Speaker 5: the law is, but the law is, the constitutional law
• 13:24
  Speaker 5: is that prison officials have to keep their detainees safe.
• 13:29
  Speaker 5: They have a lot of discretion in how they make
• 13:32
  Speaker 5: those decisions, but they have to make those decisions on
• 13:35
  Speaker 5: an individualized basis. And so if a prison official determines
• 13:38
  Speaker 5: that a particular trans inmate cannot be kept safe if
• 13:44
  Speaker 5: she is held in the men's prison where she will
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  Speaker 5: be abused, raped, and the like, that's fully within the
• 13:52
  Speaker 5: discretion of the Bureau of Prisons to decide. They have
• 13:56
  Speaker 5: to decide it based on medical and safety concerns, not
• 14:00
  Speaker 5: based on ideology. What President Trump's executive or says is
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  Speaker 5: even where Bureau of Prison officials have determined that the
• 14:07
  Speaker 5: only way to keep a trans woman safe is to
• 14:10
  Speaker 5: hold her in a woman's prison, she must be put
• 14:13
  Speaker 5: into a male prison where she faces abuse, rape, and
• 14:18
  Speaker 5: the like. So it's not surprising that both courts that
• 14:21
  Speaker 5: have faced that have and enjoined the President Trump's executive order. Again,
• 14:25
  Speaker 5: it's cruelty driven by animus, prejudice, and ideology, and that's
• 14:31
  Speaker 5: not permissible under our constitution.
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  Speaker 4: He campaigned on this, and I assume he knew that
• 14:37
  Speaker 4: there were the fierce opposition and lawsuits challenging these orders.
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  Speaker 5: It's not surprising that he has targeted transgender people. He
• 14:46
  Speaker 5: targeted transgender people during his campaign. He targeted immigrants during
• 14:51
  Speaker 5: his campaign. He knows you know who to target. He
• 14:55
  Speaker 5: targets the vulnerable. He targets those without a voice in
• 14:59
  Speaker 5: the political process. He makes them scapegoats. You know, that's
• 15:03
  Speaker 5: a tried and true political tactic. Unfortunately, but the Constitution
• 15:09
  Speaker 5: protects the vulnerable, and the Constitution requires you treat everybody
• 15:12
  Speaker 5: equally and you not impose burdens on people simply for
• 15:17
  Speaker 5: political gain or because you entertain prejudice against them. And
• 15:22
  Speaker 5: that's exactly what President Trump has done with his executive
• 15:25
  Speaker 5: orders on the trans community.
• 15:27
  Speaker 4: And we'll see how the courts react. As you mentioned,
• 15:29
  Speaker 4: a few courts have already blocked some of these orders
• 15:32
  Speaker 4: from taking effect, at least temporarily. Tomorrow is Seattle federal
• 15:37
  Speaker 4: judge is going to hold a hearing on a request
• 15:39
  Speaker 4: for a temporary restraining order on the executive order that
• 15:44
  Speaker 4: haults funding for institutions that provide gender affirming care for minors.
• 15:49
  Speaker 4: That's in the case brought by the three States, and
• 15:52
  Speaker 4: on February eighteenth, the judge is going to hear arguments
• 15:55
  Speaker 4: for a preliminary injunction that would block the Trump administration
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  Speaker 4: and the US military from enacting the executive order barring
• 16:05
  Speaker 4: transgender Americans from the Arms services. And I'm sure there'll
• 16:09
  Speaker 4: be a lot more hearing scheduled in these cases. Thanks
• 16:12
  Speaker 4: so much for joining me today, David. That's Professor David
• 16:15
  Speaker 4: Cole of Georgetown Law. During his campaign, Donald Trump said
• 16:18
  Speaker 4: he would make the United States the crypto capital of
• 16:21
  Speaker 4: the planet and the bitcoin superpower of the world.
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  Speaker 6: We will have regulations, but from now on, the rules
• 16:29
  Speaker 6: will be written by people who love your industry, not
• 16:32
  Speaker 6: hate your industry. People that want to make it clear
• 16:35
  Speaker 6: and simple, straightforward and fair. People that want to see
• 16:39
  Speaker 6: your industry thrive.
• 16:41
  Speaker 4: Trump also vowed to end the so called weaponization of
• 16:44
  Speaker 4: the federal government, including the Securities and Exchange Commission. Trump's
• 16:49
  Speaker 4: choice for SEC chair, former SEC Commissioner Paul Atkins, hasn't
• 16:55
  Speaker 4: been confirmed yet, but there are changes underway at the
• 16:58
  Speaker 4: agency already, with more to come. My guest is securities
• 17:02
  Speaker 4: law attorney Robert him a partner at Tartar, Krinsky and Drogan,
• 17:06
  Speaker 4: and a former SEC Assistant Regional Director, Gary Gensler had
• 17:11
  Speaker 4: an aggressive enforcement agenda and he ended up levying over
• 17:16
  Speaker 4: twenty billion dollars in penalties and other charges. Former SEC
• 17:20
  Speaker 4: Commissioner Paul Atkins. Trump has tapped him to be the
• 17:25
  Speaker 4: SEC chair if confirmed. How different do you think his
• 17:30
  Speaker 4: strategy will be?
• 17:32
  Speaker 1: Well, I think if mister Atkins is confirmed, there is
• 17:35
  Speaker 1: definitely going to be a sea change at the SEC
• 17:38
  Speaker 1: in terms of their approach and their strategy to crypto.
• 17:42
  Speaker 1: Probably the biggest complaint that the crypto industry had is
• 17:45
  Speaker 1: that the SEC was engaging in regulation by enforcement activities.
• 17:50
  Speaker 1: So instead of promulgating rules and setting guidelines and rules
• 17:55
  Speaker 1: for the road for the industry to follow, the SEC
• 17:58
  Speaker 1: didn't do any of that. Instead just started bringing enforcement
• 18:01
  Speaker 1: actions against various players in the industry, which was a
• 18:05
  Speaker 1: huge concern to the industry participants because you know these
• 18:09
  Speaker 1: actions can lead to find there's reputational damage and other
• 18:13
  Speaker 1: problems with that approach. So I think mister Atkins is
• 18:17
  Speaker 1: going to really take a different attack. He's most likely
• 18:21
  Speaker 1: going to start more of a rulemaking process for the industry,
• 18:25
  Speaker 1: so there's going to be clarity on all the different
• 18:27
  Speaker 1: parts of the regulatory system that touch on crypto in
• 18:30
  Speaker 1: terms of whether their securities or whether their commodities.
• 18:34
  Speaker 4: He previously recommended that the SEC act more predictably and
• 18:39
  Speaker 4: proposed that the agency adopt an open jacket policy to
• 18:44
  Speaker 4: discourage it from bringing cases where evidence was deficient. What
• 18:48
  Speaker 4: does that mean, an open jacket policy.
• 18:50
  Speaker 1: Well, that could mean a couple of different things. You know.
• 18:53
  Speaker 1: One is it certainly indicates that there was likely going
• 18:56
  Speaker 1: to be much more transparency at the SEC regarding its
• 19:00
  Speaker 1: rulemaking process and its decisions about who it sues and
• 19:04
  Speaker 1: enforcement proceedings or not. One of the complaints that the
• 19:08
  Speaker 1: crypto industry has had is that there has been a
• 19:11
  Speaker 1: lack of transparency at the SEC in terms of, you know,
• 19:15
  Speaker 1: exactly how the SEC is looking to regulate these products. So,
• 19:19
  Speaker 1: for instance, there are several crypto organizations like Coinbase that
• 19:24
  Speaker 1: had repeatedly tried to come in and meet with the
• 19:27
  Speaker 1: SEC to find out, you know, the SEC's blots on
• 19:30
  Speaker 1: how to register, you know, how to have proper regulatory oversight,
• 19:34
  Speaker 1: what the SEC was expecting from these different organizations and
• 19:39
  Speaker 1: the SEC while they took the meetings, they never provided
• 19:42
  Speaker 1: any sort of guidance or even opened up a path
• 19:45
  Speaker 1: for crypto firms to register with them, and that's been
• 19:48
  Speaker 1: a huge point of contention because the crypto firms say,
• 19:52
  Speaker 1: you know, we do want to comply and we do
• 19:54
  Speaker 1: want to follow the rules, but you, the SEC, have
• 19:58
  Speaker 1: to let us know what they are. You have to
• 20:00
  Speaker 1: give us transparency into what you're thinking in terms of
• 20:03
  Speaker 1: what the proper steps are that we need to take
• 20:07
  Speaker 1: and not just you know, sue us and see millions
• 20:09
  Speaker 1: of dollars in fines.
• 20:11
  Speaker 4: The SEC has already created a task force to work
• 20:14
  Speaker 4: with the crypto industry. It's led by Republican Commissioner Hester Pierce,
• 20:19
  Speaker 4: known as Crypto Mom due to her favorable stance toward
• 20:22
  Speaker 4: the sector. I mean, do you think there'll be any
• 20:25
  Speaker 4: regulation of crypto?
• 20:27
  Speaker 1: Yes, I do think that there's going to be regulation
• 20:29
  Speaker 1: of crypto. And the industry also is not arguing that
• 20:33
  Speaker 1: there shouldn't be any regulation. What the industry is arguing
• 20:37
  Speaker 1: is more for common sense regulation, but also transparency and
• 20:41
  Speaker 1: clarity on what those regulations are. And yes, the new
• 20:45
  Speaker 1: Crypto task Force I believe is going to be very
• 20:49
  Speaker 1: helpful and playing a big role in that process because
• 20:53
  Speaker 1: what the task Force is doing right now is studying
• 20:56
  Speaker 1: various aspects of the crypto industry and also doing a
• 21:00
  Speaker 1: wholesale review of the SEC's actions in the crypto space,
• 21:04
  Speaker 1: particularly it's enforcement cases. And we saw the other day
• 21:08
  Speaker 1: probably the first concrete step to come out of the
• 21:11
  Speaker 1: Crypto Task Force is that there was a sixty day
• 21:14
  Speaker 1: pause that was entered in the SEC's enforcement proceedings against Finance,
• 21:19
  Speaker 1: which was a major case the SEC brought against the
• 21:22
  Speaker 1: Crypto Exchange. So that certainly signals the SEC is taking
• 21:27
  Speaker 1: a deep dive and doing a serious review of the
• 21:29
  Speaker 1: case and may either wind up dropping the case or
• 21:33
  Speaker 1: may wind up proposing terms for a settlement that are
• 21:36
  Speaker 1: much more reasonable than what the Commission was seeking under
• 21:39
  Speaker 1: the prior administration.
• 21:41
  Speaker 4: So Atkins has said that corporate finds unfairly penalized shareholders.
• 21:48
  Speaker 4: Does that mean that, you know, we're going to see
• 21:50
  Speaker 4: less corporate finds and more concentration on individuals.
• 21:55
  Speaker 1: Perhaps, Yeah, I do think that is the implication of approach. So,
• 22:01
  Speaker 1: for instance, with with Coinbase, which registered with the SEC
• 22:05
  Speaker 1: and when public you know, had an IPO, one of
• 22:07
  Speaker 1: their chief complaints is that you know, hey, look we
• 22:11
  Speaker 1: put together a registration statement, the SEC reviewed it, were approved.
• 22:15
  Speaker 1: We're trading our business model has been transparent for years,
• 22:20
  Speaker 1: and all of a sudden, the SEC comes in and
• 22:23
  Speaker 1: sues us for violating the securities laws and not registering
• 22:26
  Speaker 1: as a broken dealer, not following all these other requirements
• 22:30
  Speaker 1: that we feel don't apply. And you know, if the
• 22:33
  Speaker 1: SEC was to succeed on that sort of case and
• 22:35
  Speaker 1: a large fine was levied against the company, yeah, that
• 22:38
  Speaker 1: comes out of the pockets of shareholders, you know, innocent investors,
• 22:42
  Speaker 1: you know who didn't have anything to do with the violations.
• 22:45
  Speaker 1: You know that being said once, the SEC maybe reduces
• 22:48
  Speaker 1: their focus on finding corporativities. Yes, the focus con then
• 22:52
  Speaker 1: shift to finding individual bad actors when that's a problem,
• 22:57
  Speaker 1: or potentially having injunctive relief, where a court can order
• 23:02
  Speaker 1: certain changes in a company's business practices so that violations
• 23:07
  Speaker 1: or other problematic conduct can occur in the future. So
• 23:11
  Speaker 1: just because the corporations themselves may be getting smaller fines
• 23:15
  Speaker 1: doesn't mean that there's not other tools in the toolbox
• 23:19
  Speaker 1: to ensure that companies and the people that work there
• 23:22
  Speaker 1: as senior managers are complying with the relevant laws.
• 23:26
  Speaker 4: Lawyers at the SEC have been told they need to
• 23:28
  Speaker 4: seek permission from the politically appointed leadership the commissioners before
• 23:34
  Speaker 4: formally launching investigations. That's according to Reuters. So tell us
• 23:40
  Speaker 4: what the old procedure was like and the implications of
• 23:44
  Speaker 4: these changes.
• 23:45
  Speaker 1: Yeah, that is somewhat of a change. Typically in the
• 23:47
  Speaker 1: past the SEC, where I used to work for about
• 23:50
  Speaker 1: six years, typically the commissioners themselves would delegate the responsibility
• 23:55
  Speaker 1: to determine which enforcement actions to pursue, especially in the
• 24:00
  Speaker 1: early stages, to the Director of Enforcement. There was a
• 24:03
  Speaker 1: lot of discretion in terms of looking at what areas
• 24:06
  Speaker 1: to focus on, what investigations to launch. You know, ultimately,
• 24:10
  Speaker 1: any enforcement actions even under past administrations, did have to
• 24:14
  Speaker 1: be approved by the commissioners, but they placed a lot
• 24:17
  Speaker 1: of reliance on the judgment and the recommendations of the
• 24:20
  Speaker 1: Director of Enforcement. Now that's going to change. The commissioners
• 24:24
  Speaker 1: are going to have a much more active role in
• 24:27
  Speaker 1: setting the priorities for not only the Enforcement Division, but
• 24:31
  Speaker 1: other divisions at the SEC, and I think taking a
• 24:34
  Speaker 1: much harder look at what sort of cases are being
• 24:37
  Speaker 1: filed so that they can make sure that the cases
• 24:41
  Speaker 1: are in alignment with the philosophy of the new administration
• 24:44
  Speaker 1: in terms of crypto and other agency priorities and endeavors.
• 24:49
  Speaker 4: So the Supreme Court delta near fatal blow to the
• 24:53
  Speaker 4: SEC's administrative law judge program. Do you think that under
• 25:00
  Speaker 4: weakens the SEC will weaken the ALJ program even more?
• 25:06
  Speaker 1: Well, yeah, I think that under Atkins, there really isn't
• 25:09
  Speaker 1: that much of a choice given the Supreme Court's decision
• 25:13
  Speaker 1: in the area. And you know, this gets into people's
• 25:16
  Speaker 1: rights to have a jury trial and whether an administrative
• 25:20
  Speaker 1: forum is appropriate for administrative law judges to be imposing
• 25:25
  Speaker 1: these substantial civil penalties. But yes, I do think that
• 25:29
  Speaker 1: we're going to see a pretty dramatic shift in SEC
• 25:32
  Speaker 1: enforcement proceedings over to federal courts, where defendants will have
• 25:37
  Speaker 1: much more robust procedural rights in terms of the way
• 25:41
  Speaker 1: cases proceed and they'll also have more rights in terms
• 25:45
  Speaker 1: of discovery and getting evidence and taking depositions. So certainly
• 25:49
  Speaker 1: from defense perspective, and for the rights of individuals who
• 25:53
  Speaker 1: very often are not part of the securities industry or
• 25:56
  Speaker 1: not you know, licensed brokers, they historically have been dragged
• 26:00
  Speaker 1: into these administrative proceedings where they have a lot less
• 26:04
  Speaker 1: in the way of rights than they would if they
• 26:06
  Speaker 1: were in the federal court.
• 26:07
  Speaker 4: In accord with Donald Trump's anti DEI focus or obsession.
• 26:14
  Speaker 4: They've ended programs such as affinity groups, things like that.
• 26:18
  Speaker 4: I mean, does that make a difference in the culture
• 26:20
  Speaker 4: at the SEC.
• 26:22
  Speaker 1: I think to a certain extent, when you eliminate certain
• 26:25
  Speaker 1: programs along those lines, it can have a negative morale
• 26:29
  Speaker 1: boos for a time. But I think overall, the direction
• 26:32
  Speaker 1: that the SEC and other federal agencies are heading in
• 26:36
  Speaker 1: is more of a back to basics approach, you know,
• 26:39
  Speaker 1: focusing on financial regulation, focus on fighting fraud, focus on
• 26:43
  Speaker 1: traditional investor protections, and not trying to expand, you know,
• 26:48
  Speaker 1: the regulatory powers of the SEC into these very contentious
• 26:53
  Speaker 1: social issues in terms of items like representation on companies
• 26:58
  Speaker 1: boards and certain diversity goals and things that really stray
• 27:03
  Speaker 1: pretty far from the core mandate of the SEC. So
• 27:07
  Speaker 1: I think in the short term you could see some
• 27:09
  Speaker 1: morale issues with the SEC and other agencies, but in
• 27:13
  Speaker 1: the long term, I don't think it's really going to
• 27:16
  Speaker 1: hamper their core mission of enforcement and investor protection.
• 27:20
  Speaker 4: Coming up, I'll continue this conversation with securities attorney Robert Heim.
• 27:24
  Speaker 4: Why is Trump putting a pause on enforcement of the
• 27:27
  Speaker 4: Foreign Corrupt Practices Act? You're listening to Bloomberg. I've been
• 27:31
  Speaker 4: talking to securities law attorney Robert Heim, a partner at Tartar,
• 27:35
  Speaker 4: Krinsky and Drogan. So let's turn now to the Foreign
• 27:39
  Speaker 4: Corrupt Practices Act. First of all, explain what the Foreign
• 27:42
  Speaker 4: Corrupt Practices Act is if.
• 27:45
  Speaker 1: The Foreign Corrupt Practices Act is a law that came
• 27:47
  Speaker 1: into being in the nineteen seventies, and it was designed
• 27:51
  Speaker 1: to prohibit American companies from essentially bribing foreign officials and
• 27:57
  Speaker 1: foreign government officials in particular to help win business for
• 28:02
  Speaker 1: the companies. It's essentially an anti corruption law that's designed
• 28:06
  Speaker 1: to ensure that US companies when they operate overseas, are
• 28:11
  Speaker 1: playing by the rules and not engaging in corrupt activities
• 28:15
  Speaker 1: like bribes to government officials in order to win contracts
• 28:18
  Speaker 1: and other government concessions.
• 28:21
  Speaker 4: It's no secret that Donald Trump has hated this law,
• 28:25
  Speaker 4: and so he signed an executive order Monday pausing enforcement
• 28:30
  Speaker 4: of that law and ordered the new age to immediately
• 28:34
  Speaker 4: stop actions under this act. What effect do you think
• 28:38
  Speaker 4: it will have if they just stop bringing actions under
• 28:42
  Speaker 4: the Foreign Corrupt Practices Act.
• 28:45
  Speaker 1: Well, there's companies American businesses do have in placed very
• 28:50
  Speaker 1: robust systems currently for detecting and preventing corruption and improper
• 28:57
  Speaker 1: payments to foreign government officials. Trump's rationale for this is
• 29:02
  Speaker 1: essentially that, you know, he believes that the Foreign Corrupt
• 29:05
  Speaker 1: Practices Act, which generally the DOJ in the past, you know,
• 29:09
  Speaker 1: has applied to American companies doing business overseas. President Trump's
• 29:13
  Speaker 1: rationale is that, you know, we were hurting our own
• 29:16
  Speaker 1: businesses and going after companies for practices that perhaps companies
• 29:21
  Speaker 1: from other countries were engaging in. Now that's not to
• 29:25
  Speaker 1: say that if an American company engages in corrupt practices
• 29:29
  Speaker 1: or bribes the local government official, there's still going to
• 29:32
  Speaker 1: be consequences for that at the local country level. So
• 29:36
  Speaker 1: President Trump is saying that if a bribery occurs, you know,
• 29:39
  Speaker 1: overseas in a foreign country, that's going to have to
• 29:42
  Speaker 1: be something that the local prosecutors and that country handle,
• 29:46
  Speaker 1: and that the DOJ in the United States is not
• 29:49
  Speaker 1: going to be prosecuting US companies for those sort of practices,
• 29:53
  Speaker 1: because in their view, it places unfair competitive restraints on
• 29:59
  Speaker 1: companies that maybe foreign companies from Europe and other regions
• 30:03
  Speaker 1: of the world don't have. In the same way that
• 30:06
  Speaker 1: the US company would have.
• 30:07
  Speaker 4: During his first term, Trump asked administration officials to help
• 30:11
  Speaker 4: kill the act that never gained traction. It would take
• 30:15
  Speaker 4: Congress to get rid of this law.
• 30:16
  Speaker 1: Right, the only way to really get rid of the
• 30:19
  Speaker 1: Financial corupt Practices Act would be to have Congress repeal
• 30:23
  Speaker 1: the law, because Congress was the body that passed the
• 30:27
  Speaker 1: law in the first place, and it is a statue
• 30:29
  Speaker 1: on the books. But the DOJ, under the direction of
• 30:33
  Speaker 1: President Trump, does have a tremendous amount of discretion in
• 30:36
  Speaker 1: terms of what laws it enforces and what law enforcement
• 30:39
  Speaker 1: priorities it sets. So I think President Trump has accomplished
• 30:44
  Speaker 1: ninety nine percent of what he wants by directing the
• 30:47
  Speaker 1: DOJ not to focus on enforcement of the Foreign Corrupt
• 30:51
  Speaker 1: Practices Act. And really, I don't think it would be
• 30:55
  Speaker 1: necessary for the Congress to repeal the law because under
• 30:58
  Speaker 1: President Trump and the the law, it doesn't look like
• 31:02
  Speaker 1: it's really going to be enforced at all.
• 31:04
  Speaker 4: I don't know if this is instructive or not, but
• 31:06
  Speaker 4: nine of the ten biggest FCPA prosecutions have actually been
• 31:11
  Speaker 4: against foreign companies. Do you think that DOJ might still
• 31:15
  Speaker 4: try to enforce the law against foreign companies?
• 31:18
  Speaker 1: I don't think so, because the DOJ today is really
• 31:21
  Speaker 1: going to have a different set of enforcement priorities, particularly
• 31:25
  Speaker 1: with respect to drug cartels and terrorism. So it's not
• 31:29
  Speaker 1: really going to be high on the DJ's list to
• 31:32
  Speaker 1: go after foreign companies that engage in Corrupt Practices Act.
• 31:37
  Speaker 1: That's going to really be up to the home country
• 31:39
  Speaker 1: prosecutors and the local prosecutors in the countries where you know,
• 31:43
  Speaker 1: any of these acts might be occurring. You know. That
• 31:47
  Speaker 1: being said, other countries in Europe and local laws and
• 31:52
  Speaker 1: countries where a lot of business is done, they all
• 31:55
  Speaker 1: have anti Corrupt Practices Acts of their own. So I
• 31:58
  Speaker 1: don't think we're going to you know, see the Floodgates
• 32:01
  Speaker 1: Unleashing of Corrupt Practices Act, bribery being done by US companies.
• 32:06
  Speaker 1: There's laws still very much on the books that you know,
• 32:09
  Speaker 1: prevent that, and it's really just a question of what
• 32:11
  Speaker 1: agency is going to be responsible for prosecuting those sort
• 32:15
  Speaker 1: of corrupt practices.
• 32:16
  Speaker 4: Let's turn to the Consumer Financial Protection Bureau, or what's
• 32:19
  Speaker 4: left of the Consumer Financial Protection Bureau. I'm not quite
• 32:22
  Speaker 4: sure you know what actually is left of it, because
• 32:26
  Speaker 4: the acting Director, Russ Vaught, has ordered the Bureau's work
• 32:31
  Speaker 4: to be stopped and has said he won't be asking
• 32:35
  Speaker 4: for any more funding for the agency. What effect will
• 32:39
  Speaker 4: it have if the CFPB is just shut down.
• 32:43
  Speaker 1: Well, the CFPP has never really been a favorite agency
• 32:47
  Speaker 1: at all among Republicans and conservatives. You know, the thought
• 32:51
  Speaker 1: on the CFPB is that it was really duplicative of
• 32:54
  Speaker 1: other work that agencies were doing, like the SEC and
• 32:59
  Speaker 1: the Command, these Futures Trading Commission and other financial regulators.
• 33:03
  Speaker 1: And the other issue that Republicans and conservatives have had
• 33:07
  Speaker 1: with this CFP b is that it, you know, every
• 33:10
  Speaker 1: year it seemed to really be expanding its mandate. And
• 33:14
  Speaker 1: you know, while traditionally it would look at things like
• 33:17
  Speaker 1: credit card charges and credit reports and student loans, that
• 33:21
  Speaker 1: started expanding, you know, into more ideological areas. And the
• 33:26
  Speaker 1: finds that it was imposing on companies was was really
• 33:30
  Speaker 1: quite high. And I think, you know, in line with
• 33:32
  Speaker 1: President Trump's desire to you know, reduce regulatory burdens and
• 33:37
  Speaker 1: finds on American businesses to try to help the economy
• 33:41
  Speaker 1: and businesses operate more efficiently, they really had this CFPB
• 33:46
  Speaker 1: in their sites. And you know, one of the issues is,
• 33:50
  Speaker 1: you know, it's a developing situation. We're really in uncharted
• 33:53
  Speaker 1: territory right now to respect to the stop work order
• 33:57
  Speaker 1: at the agency and the fact agencies not drawing down
• 34:01
  Speaker 1: on any more funds from the Federal Reserve to fund
• 34:05
  Speaker 1: its operations. That raises all sorts of legal questions, because
• 34:09
  Speaker 1: you know, Congress is the body under our constitutional system
• 34:13
  Speaker 1: that sets up agencies with both within the executive branch
• 34:17
  Speaker 1: and independent agencies, and Congress is also the body that
• 34:21
  Speaker 1: passes laws to fund these agencies in the form of
• 34:25
  Speaker 1: annual appropriations for budgets. So here, you know, the issue
• 34:29
  Speaker 1: that the courts will ultimately have to decide is, you know,
• 34:31
  Speaker 1: is President Trump as the executive overstepping his bounds when
• 34:36
  Speaker 1: he basically moves to shut down agencies that have been
• 34:40
  Speaker 1: established and funded by Congress, Or is this within his
• 34:44
  Speaker 1: purview as an elected official with the mandate to try
• 34:47
  Speaker 1: to make government more efficient.
• 34:49
  Speaker 4: That same question is going to come up in a
• 34:52
  Speaker 4: lot of other cases as well. Always a pleasure to
• 34:56
  Speaker 4: have you on, Bob, Thanks so much. That's Robert him
• 34:59
  Speaker 4: of tartarkrein Drogen. And that's it for this edition of
• 35:02
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• 35:05
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• 35:08
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• 35:13
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• 35:20
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• 35:24
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