Notice & Comment

Taken for Granted? SEC Implied For-Cause Removal Protection and Its Implications, by Jameson M. Payne

The Fifth Circuit’s [WG1] recent decision in Jarkesy v. SEC has breathed new life into the debate over the propriety of double for-cause tenure. And whereas there is no shortage of thoughtful commentary about the constitutional validity of tenure protections—including from contributors on this blog—far less has been said about an equally important step of the inquiry: do SEC commissioners have tenure protection to begin with?  If they don’t, what does that mean for cases like Jarkesy and the administrative state at-large? This post seeks to bring attention to recent commentary on these issues and their potential implications for the SEC and similarly situated agencies.


It is widely assumed that SEC commissioners are insulated from removal by the President without good cause, but this view lacks any clear statutory basis. The Commission’s organic statute, 15 U.S.C. § 78d, contains no explicit tenure protections, in contrast with the statutes governing many other independent agencies; many of those have explicit provisions for removal only in the case of, for example, “inefficiency, neglect of duty, or malfeasance in office.”1 Hence, if SEC commissioners enjoy for-cause removal protection, it must be an implied condition.

Implied removal protection, however, is generally disfavored by courts because it upsets the strong presumption of direct presidential control over executive branch subordinates. As a note in the Harvard Law Review argues, this presumption is rooted in a strong historical pedigree: starting with at least Ex parte Hennen (1839) and being formulated as a clear-statement rule by the time of Shurtleff v. United States (1903), the Supreme Court in the early 20th century found implied restrictions on removal only where congressional intent was made clear “in words plain enough to call upon the courts to determine that such intention existed.” Id.

The clear-statement rule has not always led to a finding of no removal protection—the Court has been willing to read for-cause protection into statutes at times. The most notable example is Wiener v. United States, where the Court held that members of the War Claims Commission, a body established to adjudicate WWII claims against enemy parties, were not subject to removal by the President. Although the War Claims Act (like the Securities Exchange Act of 1934) did not explicitly grant tenure protection, the Court nonetheless concluded that the Commission’s nature as an “adjudicatory body… precludes such a claim [that the commissioners were removable at the President’s pleasure].”

Whether Wiener extends to the SEC commissioners is an open question. The Court in Free Enterprise Fund v. Public Company Accounting Oversight Board had the opportunity to address this question but declined to. Instead, the Court relied upon the parties’ stipulation that SEC commissioners are protected by for-cause tenure protection and decided the case “with that understanding.” This dodge raised vociferous dissent by Justice Breyer, who noted that “[i]t is certainly not obvious that the SEC Commissioners enjoy ‘for cause’ protection.”


Besides the canonical presumption against implied removal, there are other reasons to doubt that Congress secretly intended SEC commissioners to enjoy for-cause tenure protection. As Justice Breyer’s dissent in Free Enterprise Fund noted, the historical context around the creation of the SEC negates an inference of congressional intent to bestow such protection: the Securities Exchange Act was passed several years after Myers v. United States but before Humphrey’s Executor v. United States. At the time, the working understanding of presidential removal power was that all officials within the executive branch were subject to the removal power. [WG2] It was not until Humphrey’s Executor a year later that carveouts to this rule were recognized for officials with quasi-legislative or quasi-judicial power, after which Congress began creating new agencies with leaders protected by explicit for-cause removal restrictions. See 29 U.S.C. §153 (establishing a tenure-protected National Labor Relations Board just one month after Humphrey’s Executor was decided).

To further the problem, it is not clear that Wiener remains applicable to the Court’s modern separation-of-powers jurisprudence. Although Justice Breyer’s dissent in Free Enterprise Fund tacitly assumed that the majority might reason that all independent agency leaders enjoy for-cause tenure protection in the absence of statutory language to contrary, this is unlikely for a few reasons.

First, the Court’s most recent mention of Wiener was in Collins v. Yellen, where the Court noted (possibly in dicta—it was a footnote) that Wiener’s implied-protection doctrine applies solely to adjudicatory bodies. Although this could conceivably be read to include any body of quasi-judicial character, the context of Wiener suggests that a more restrictive reading is appropriate. Furthermore, as Zachary Grouev notes, Wiener was rooted in a functionalist theory of separation, which is unlikely to retain robust support in light of Seila Law LLC v. CFPB’s expressed skepticism towards the notions of quasi-legislative and quasi-judicial power embodied in Humphrey’s Executor.2

In short, the Court’s recent precedents do not bode well for theories of implied removal protection. What exactly does this mean for the SEC and other agencies, though?


The fleeting vigor of implied removal protection in agency statutes is already becoming palpable in the lower courts. The most emblematic demonstration of this phenomenon is the Sixth Circuit’s opinion in Calcutt v. FDIC, released only a week ago.

Although the Calcutt majority did not reach the statutory question à la Free Enterprise Fund, Judge Eric Murphy nonetheless raised the point in dissent. The Federal Deposit Insurance Corporation—much like the SEC—was created in the interstices between Myers and Humphrey’s Executor, likely without any congressional intent to bestow for-cause removal protections on FDIC leaders. Judge Murphy also protested the perceived contradictions of reading for-cause protection into the statute based on the fixed term lengths held by Board members: if the removal is barred for the term’s duration, why read “for-cause” into the removal conditions rather than seeing it as an absolute bar? And if the reason is for want of avoiding the inevitable constitutional issue that arises from preventing removal based on extraordinary reasons (e.g., fraud), then why not avoid the issue altogether and simply infer that there are no restrictions on removal?

Jarkesy and Calcutt are likely not the last cases to implicate the issue. Grouev notes several cases currently working their way through the district courts involving issues of implied for-cause removal protection. But the bigger question remains: What do the aggregate of these attacks on implied removal restrictions mean for the structure of administrative agencies?


The effect on the SEC would be uncertain. As the Fifth Circuit noted in Jarkesy, the constitutional claims lodged against tenure protections for ALJs would probably be the same whether or not SEC Commissioners are removable without cause. This is because ALJs are subject to at least two levels of removal protection: first, good cause must be established by the Merit Systems Protection Board (the members of which are themselves subject to for-cause protection); and only then can the SEC commissioners remove an ALJ.

This is not to say that the SEC would not be impacted. The reversal of the Court’s Glomar-response attitude towards implied removal would still have potentially significant implications. Subjecting the SEC to direct accountability to the President would open securities markets to far more exposure to the executive branch’s policy imperatives,3 the wisdom of which you may draw your own conclusions about.

A denial of implied removal protection would also impact several other agencies that occupy a sort of removal-protection ‘limbo’. Justice Breyer’s Appendix D in Freedom Enterprise notes at least twenty-nine departments and agencies that do not contain explicit removal protection; at least thirteen of them are considered “independent” agencies. Some of the major agencies on the chopping block might include the Federal Communications Commission, the Federal Elections Commission, the Central Intelligence Agency, the Farm Credit Administration, and the International Trade Commission.


In summary, much of the current impetus around implied removal protection suggests that, were the Supreme Court to address the issue squarely, presidential removal power would win the day. The actual effect on agencies is less clear. Although an absence of removal protection might implicate a litany of independent agencies, many of these agencies have other features at their disposal to forestall unwanted incursions onto their buffer of independence: bipartisan balancing requirements, statutory eligibility requirements, independent litigation authority, and independent budgetary authority (for at least some agencies) to name a few.4 The ultimate effect depends on executive willpower to play hardball with independent agencies and whether agencies are capable of withstanding the threat of removal. Nothing can be said with certainty, but this re-emerging question has the potential to shake up the dynamics of administrative-presidential relations and how much influence the President has on a wide-ranging field of affairs.

  1. Appendix A of Breyer’s dissent in Free Enterprise Fund lists numerous such instances.
  2. See Seila Law LLC at 2199 (“Backing away from the reliance in Humphrey’s Executor on the concepts of “quasi-legislative” and “quasi-judicial” power, we viewed the ultimate question as whether a removal restriction is of such a nature that it impedes the President’s ability to perform his constitutional duty.”) (internal quotation marks omitted).
  3. The SEC Is Not An Independent Agency, 126 Harv. L. Rev. 781, 801 (2013).
  4. See also Henry Hogue, Marc Labonte, and Baird Webel, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues (2017).

Jameson M. Payne is an intern at the New Civil Liberties Alliance. Major thanks to Russ Ryan and Will Gale for their thoughtful comments and feedback.

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