BETTER MARKETS FILES BRIEF IN SUPPORT OF SEC’S RULE LIMITING FEES THAT EXCHANGES CAN CHARGE TO INVESTORS – CBOE v. SEC, No. 24-1350 (D.C. Cir.). Earlier this month, Better Markets filed an amicus brief supporting the Securities and Exchange Commission in yet another industry challenge to an important SEC rule, which reduces the pricing increments for stock quotes and limits fees that stock exchanges can charge for access to their trading platforms.

The rule improves the way securities are traded at the major stock exchanges, and it’s an important update to a 20-year-old rule that the markets have outgrown.  That means savings for investors and more efficient markets for the benefit of companies and the economy.    And by reducing the fees that exchanges can charge for access—which is the real target of the lawsuit—the SEC will also be helping investors save trading costs and receive fairer treatment from the brokers who route their orders for execution.  While the rule makes seemingly small adjustments to fees, in fractions of a cent, the money adds up to huge savings, especially for institutional investors that manage the 401(k)s and pension funds of millions of everyday Americans.

Predictably, a group of major exchanges filed a court challenge to nullify the core provisions in the rule.  They claim the SEC didn’t have the authority under the securities laws to write it and that the result was ‘arbitrary and capricious’ under the Administrative Procedure Act.   But like most industry challenges to SEC rules, their legal arguments are hollow, and what’s really in play is an attempt to protect the exchanges’ profitable status quo.  As we argued in our brief, the SEC had clear authority from Congress to do precisely what the rule provides: reset pricing increments and limit fees to ensure that the markets operate more smoothly and fairly.   As to the challengers’ second claim, the SEC conducted an exceptionally thorough analysis to arrive at a strong and sensible update to the rules that keep our markets in good repair. We hope and expect that the D.C. Circuit will side with the SEC, reject the exchanges’ arguments, and uphold the rule.

TRUMP ADMINISTRATION PULLS BACK MULTIPLE ENFORCEMENT ACTIONS. In a huge gift to corporate America, the Administration is conducting a massive assault on the regulatory agencies that help protect the American people from threats to their health, safety, and financial security.  In the realm of financial regulation and elsewhere, this demolition campaign includes abandoning enforcement actions aimed at holding bad actors accountable for a wide variety of abuses that victimized millions of American investors and consumers.  Here are just a few notable examples, among others.

• SEC is dropping its appeal in the landmark Ripple case – SEC v. Ripple Labs, Inc., No. 24-2648 (2d Cir.) Several years ago, the SEC filed an enforcement action against Ripple Labs and its principals for the sale of unregistered securities in the form of the XRP crypto token. Ripple promoted the token far and wide to institutional and retail investors as an investment opportunity that would produce huge returns as the promoters worked to find practical applications for the token in the financial system. The district court, however, held that the tokens lost their character as “investment contract securities” simply by virtue of being sold to retail investors on trading platforms.  Under the decision, many retail investors are deprived of the protections under the securities laws, including disclosures about risks and remedies for fraud.  The SEC rightly appealed to the Second Circuit.  As we explained in our amicus brief, the district court’s decision had no support in the securities laws or under the facts of the case.  Yet the SEC’s current leadership has reportedly decided to drop its appeal, thus turning its back on investors in favor of a crypto industry notorious for lawlessness and investor exploitation.
• CFPB seeks to drop its racial discrimination case, tear up the settlement, and refund the civil penalty – CFPB v. Townstone Financial, No. 1:20-cv-04176 (N.D. Ill.). In 2020, the CFPB—then headed by Trump’s appointee—filed an enforcement action against Townstone Financial for discouraging mortgage applications from African-Americans.  The case arose after its CEO made multiple racially disparaging statements during the firm’s Chicago-based radio programming.  Townstone agreed to a settlement that provided for a significant civil penalty, among other relief.  But in an astonishing turn of events, the CFPB now claims it never should have brought the case, calling the complaint “unmerited”—notwithstanding the audiotapes and ample statistical evidence supporting the CFPB’s claims.  In addition, the CFPB is telling the court that the case violated Townstone’s First Amendment rights. The agency wants the court to tear up the settlement so that it can refund the $105,000 civil penalty to Townstone.  Trump’s CFPB is in effect granting this company a license to discriminate under the guise of freedom of speech.
• CFPB dismisses a series of enforcement actions addressing illegal conduct. In December 2024, the CFPB filed suit against Rocket Homes for providing illegal kickbacks to real estate brokers in exchange for their steering homebuyers to more costly loans from Rocket Mortgage. However, a mere two months later, the Trump administration dismissed the lawsuit. This dismissal joined a handful of other dismissals from the CFPB on the same day, all involving serious financial misconduct against consumers, including bilking customers out of more than $2 billion in interest (Capital One), ignoring signs that customers couldn’t afford mortgages (Vanderbilt Mortgage and Finance), and improperly collecting loans (Pennsylvania Higher Education Assistance Agency).