This is another dual-author section. David R. Burton begins with Securities and Exchange Commission (SEC) and Related Agencies, and Robert Bowes follows with the Consumer Financial Protection Bureau.

Burton begins by arguing that the rules governing the SEC are neither coherent nor rational. Without remarking on that, I’ll get right into the proposed reforms.

“With regulatory authority delegated by the government, both the Public Company Accounting Oversight Board (PCAOB) and FINRA have proved to be ineffective, costly, opaque, and largely impervious to reform. To reduce costs and improve transparency, due process, congressional oversight, and responsiveness, PCAOB and FINRA should be abolished, and their regulatory functions should be merged into the SEC.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 862, paragraph 2.)

FINRA is a self-regulatory organization (SRO) that oversees broker-dealers and securities firms in the United States. Its role is to maintain fairness in the financial markets and protect investors by ensuring that securities firms and brokers operate with integrity and compliance. FINRA operates under the supervision of the Securities and Exchange Commission (SEC) but is largely independent.

PCAOB is a nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies. Its primary function is to ensure that audit reports are accurate and that companies provide reliable financial information to investors. The PCAOB operates independently but is overseen by the SEC.

The potential pros of shuttering FINRA and PCAOB include streamlining regulatory oversight, cost savings, increased accountability and transparency, and greater Congressional oversight.

PCAOB and FINRA are often criticized for a lack of transparency and accountability, partly because they are self-regulatory organizations or independent entities. Merging them into the SEC, which is directly accountable to Congress, could improve visibility and make regulatory actions more transparent and subject to public scrutiny.

Possible drawbacks include loss of specialized expertise, overburdening the SEC, regulatory gaps, and industry pushback. Many industry stakeholders may fear that a more centralized regulatory body could result in tougher regulations or a more rigid enforcement environment under the SEC compared to the relatively more flexible and specialized structures of FINRA and PCAOB.

The success of such a move would largely depend on how well the merger is managed and whether the SEC can effectively handle the expanded responsibilities.

Burton then goes on to argue for a number of deregulation tactics the SEC should undertake. These amount briefly to the following:

• Simplify and Streamline Regulations A and CF. These allow small businesses to raise capital and crowdfund. He’s also advocating for pre-empting blue sky registration, which means that Regulation A offerings don’t have to comply with state requirements. Pros: Easier and faster access to capital for small businesses, as they wouldn’t have to navigate complex state regulations. It also encourages crowdfunding. Cons: Reducing state oversight might lead to less investor protection, especially in offerings where federal regulations may not provide adequate safeguards. Some states could even lose regulatory power, which may affect their ability to enforce fraud protections at the local level.
• Broaden or eliminate the definition of accredited investor. Currently, the accredited investor rule restricts access to private investments (under Regulation D) to individuals with a high level of income or net worth. Broadening this definition or eliminating it would allow more people—especially those with lower income or net worth—to participate in private offerings. Pro: More people would have the opportunity to invest in high-growth startups and private offerings, potentially benefiting from early-stage investment opportunities. Con: There’s a greater risk that inexperienced or less financially secure individuals could invest in high-risk ventures and suffer significant losses, since private offerings typically have less regulatory oversight and disclosure than public markets.
• Self-Certification of Accredited Investor Status for All Rule 506 Offerings. This would allow individuals to self-certify as accredited investors (rather than providing financial proof). Pro: Lower administrative burdens on investors and companies, making it easier for private companies to raise capital. Con: The risk of abuse increases, as individuals may falsely claim accredited investor status, potentially exposing themselves to high-risk investments they are not equipped to handle.
• Exempt Small Micro-Offerings from Registration Requirements. Micro-offerings, or small fundraising rounds, would be exempt from the usual registration requirements, simplifying the process for startups and small businesses to raise small amounts of capital. Pro: Easier access to capital for small businesses and startups with fewer regulatory hurdles, fostering entrepreneurship. Con: Investors in these micro-offerings could face less transparency and fewer protections, increasing the risk of fraud or loss.
• Exempt Small and Intermittent Finders from Broker-Dealer Registration Requirements. Individuals who occasionally introduce investors to businesses (“finders”) would be exempt from the broker-dealer registration process, as would small, private placement brokers. Pro: Facilitates capital-raising for smaller businesses by reducing regulatory costs. Con: Lack of oversight could lead to more unregulated activity, and unscrupulous finders or brokers might engage in risky or fraudulent practices.
• Exempt Peer-to-Peer Lending from Securities Laws. Peer-to-peer (P2P) lending would be exempt from federal and state securities laws, potentially fostering more lending between individuals without regulatory burdens. Pros: Could lead to more innovation and expansion in the P2P lending market, allowing individuals and small businesses greater access to loans. Cons: Reduced regulatory oversight could increase risks of predatory lending practices, fraud, or losses for investors who lend through P2P platforms.
• Make Title I Emerging Growth Company (EGC) Exemptions Permanent. Exemptions granted to emerging growth companies (EGCs) under Title I of the JOBS Act would become permanent, making it easier for such companies to comply with securities regulations. Pros: Encourages more companies to go public, reducing regulatory burdens and fostering growth. Cons: Long-term reduction in disclosure and reporting requirements for EGCs may reduce transparency for investors.
• Reduce Regulatory Burden on Small Broker-Dealers. Exempt privately held, non-custodial broker-dealers from the requirement to use a PCAOB-registered firm for audits, potentially saving small firms costs. Pros: Could lower operational costs for small broker-dealers, allowing them to remain competitive in the market. Cons: Reducing audit requirements could lead to weaker financial oversight and potentially higher risks of mismanagement or fraud.
• Amend the Internal Revenue Code to Exclude Crowdfunding and Regulation A Shareholders from the 100-Shareholder Limit for S Corporations. Amending tax law to exclude crowdfunding and Regulation A shareholders would make it easier for S corporations to raise capital without violating the 100-shareholder limit. Pros: Facilitates crowdfunding and equity raising for small businesses organized as S corporations without jeopardizing their tax status. Cons: While this could help small businesses, it may also lead to tax code complexity and potential exploitation of loopholes.

So, a bit of a mixed bag, there. Overall, these proposals would reduce the regulatory burden on small businesses and startups, allowing easier access to capital. However, loosening restrictions, especially around the accredited investor rule and broker-dealer requirements, increases the risk of fraud, mismanagement, and financial losses for inexperienced investors. Additionally, reduced oversight could create systemic risks in financial markets if not carefully monitored.

Burton’s next recommendations for deregulating the SEC are geared toward improving capital markets:

“[the SEC should] Preempt blue sky registration, qualification, and continuing reporting requirements for securities traded on established securities markets (including a national securities exchange or an alternative trading system).” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 862, paragraph 10.)

This would override state-level regulations (blue sky laws) for securities traded on national exchanges or alternative trading systems. This would simplify trading by creating a single, nationwide regulatory framework. It reduces the complexity and cost for companies and traders dealing with multiple state regulations. However, it would limit states’ ability to enforce their own protections, potentially reducing investor safeguards.

“[the SEC should] Terminate the Consolidated Audit Trail (CAT) program.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 862, paragraph 11.)

Ending the CAT program would stop the collection of trading data aimed at improving market surveillance and transparency. This would reduce compliance costs for brokers and exchanges, making market operations less burdensome. However, loss of oversight makes it harder to detect market manipulation and fraud.

“[the SEC should] Abolish Rule 144 and other regulations that restrict securities resales and instead require a company that has sold securities to provide sufficient current information to the market to permit reasonable investment decisions and secondary sales.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 862, paragraph 12.)

This would increase liquidity by making it easier to resell securities, potentially improving market efficiency, but weakens investor protection when insufficient company information is available.

“[Congress should] Prohibit the SEC from requiring issuer disclosure of social, ideological, political, or “human capital” information that is not material to investors’ financial, economic, or pecuniary risks or returns. The proposed SEC climate change rule, which would quadruple the costs of being a public company, is particularly problematic.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 864, paragraph 1.)

This would stop the SEC from mandating disclosures on non-financial issues like climate change, diversity, or other social/political topics unless directly relevant to financial risk. Investors who value social, environmental, or governance information might find themselves lacking crucial data on companies’ practices. 

The suggestion that requiring this disclosure would “quadruple” the costs of being a public company is transparently ludicrous (and it’s possible that this is a typo by which he means it would quadruple the regulatory costs of being a public company), but it’s not cheap, either. Dechert, LLP lists the estimated costs⁴ on their website, which vary by the types of disclosures the company would require.

“[Congress should] Repeal the Dodd–Frank mandated disclosures relating to conflict minerals, mine safety, resource extraction, and CEO pay ratios.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 864, paragraph 2.)

This would remove requirements to disclose information about issues like conflict minerals, mine safety, resource extraction, and CEO pay ratios. This loss of transparency could weaken consumer trust or investor interest in companies tied to ethical concerns. It also sidesteps environmental concerns.

“[Congress should] Oppose efforts to redefine the purpose of business in the name of social justice; corporate social responsibility (CSR); stakeholder theory; environmental, social, and governance (ESG) criteria; socially responsible investing (SRI); sustainability; diversity; business ethics; or common-good capitalism.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 864, paragraph 3.)

This is pushback on what Project 2025 has deemed “woke” concerns. This could alienate investors and consumers who prioritize social and environmental responsibility in companies. It’s funny to me how blatantly, cartoonishly evil this is. Businesses have no business engaging in ethics? Really? 

“[Congress should] Prohibit securities regulators, including SROs, from promulgating rules or taking other actions that discriminate, either favorably or unfavorably, on the basis of the race, color, religion, sex, or national origin of such individual or group.” (Project 2025, Section 5.1: Financial Regulatory Agencies, David R. Burton, page 864, paragraph 4.)

This would prevent regulators from making decisions based on race, gender, or other characteristics in favor or against any group. This promotes fairness on its face, but equity and equality are not the same things. See the FAQ¹ for an explanation of that.

In short, this amounts to more deregulation, less government oversight, less transparency and protection for investors and consumers. So, how has deregulating the SEC played out historically?

In a 2009 research paper, Norman S. Poser writes, “Two of the SEC’s most notorious failures came to light in 2008: the demise of several of the largest investment banking firms under its regulatory care and the SEC’s disregard of the warning signs that could have alerted it to Bernard Madoff’s $50 billion Ponzi scheme. Ironically, there are close similarities between the state of the nation’s securities markets and economy at the present time and at the time of the SEC’s birth. In 1934, the country was in the worst depression in its history. These are only the most recent results of a rot that set in several years earlier. Although several partial explanations have been given for the SEC’s decline, including budgetary problems and a fragmented regulatory system that has not kept up with developments in the financial markets, the main reason for them decline is that the Commission succumbed to the anti-regulatory climate of recent years. Too many of its members just did not believe in regulation.” [Source]²

The Harvard Law School Forum on Corporate Governance writes, “Nearly two years into the Trump presidency, extensive deregulation is raising risks for investors. Several of the administration’s priorities are endangering financial markets by reducing corporate accountability and transparency. SEC enforcement actions under the Administration continue to lag previous years. The Trump administration has also instructed the SEC to study reducing companies’ reporting obligations to investors, including by abandoning a hallmark of corporate disclosure: the quarterly earnings report.” [Source]³

So when I point out above that these actions “could” result in increased fraud, it’s because historically, they HAVE.

Burton goes on detailing many more deregulation efforts for the SEC, with the notable exception of digital assets (like bitcoin), which he thinks should be regulated more heavily.

Now, on to Robert Bowes’ part of the section regarding the Consumer Financial Protection Bureau.

Bowes begins by claiming that the CFPB is corrupt:

“In 2015, for example, Investor’s Business Daily accused the CFPB of “diverting potentially millions of dollars in settlement payments for alleged victims of lending bias to a slush fund for poverty groups tied to the Democratic Party” and planning “to create a so-called Civil Penalty Fund from its own shakedown operations targeting financial institutions” that would use “ramped-up (and trumped-up) anti-discrimination lawsuits and investigations” to “bankroll some 60 liberal non-profits, many of whom are radical Acorn-style pressure groups.”” (Project 2025, Section 5.1: Financial Regulatory Agencies, Robert Bowes, page 869, paragraph 2.)

The claim that the Consumer Financial Protection Bureau (CFPB) was diverting settlement funds to politically connected groups, as Investor’s Business Daily accused in 2015, is a matter of contention and has not been definitively proven. The allegations stemmed from criticisms of how the CFPB used its Civil Penalty Fund, but there is no conclusive evidence showing that the bureau engaged in illegal or unethical activity regarding its disbursement of funds to political organizations. For Bowes to mention the allegations when they are unproven and never even went to court (as far as I am aware) is irresponsible. (I was unable to find a related lawsuit, but inability to find it doesn’t necessarily mean one did not exist. I have no doubt that if it had gone to court, Bowes would mention it here if the allegations were proven by evidence.)

A “radical Acorn-style pressure group”, if you were wondering, refers to organizations which are perceived to be using aggressive or confrontational tactics to advocate for social and political change. Historically, this has meant desegregation, voting rights, affordable housing, workers’ rights, and more. The term ACORN means Association of Community Organizations for Reform Now, which was a grassroots organization beginning in the 1970’s, which disbanded in 2010. ACORN became known for its activism in low-income communities. The “confrontational tactics” they used included legislative action, protests, and public demonstrations.

“Congress should abolish the CFPB and reverse Dodd–Frank Section 1061, thus returning the consumer protection function of the CFPB to banking regulators and the Federal Trade Commission.” (Project 2025, Section 5.1: Financial Regulatory Agencies, Robert Bowes, page 871, paragraph 2.)

This would have significant consequences for consumer protection, financial regulation, and more.

The CFPB was created to provide specialized oversight of consumer financial products and services, focusing on issues like mortgage lending, credit cards, and student loans. Without the CFPB, consumer protection might become fragmented and less effective, as banking regulators (like the Office of the Comptroller of the Currency or the Federal Reserve) may not prioritize consumer issues as strongly. This means consumers could face increased risks of predatory lending practices.