As we explained in last month’s legal newsletter, the federal courts have been inundated with lawsuits challenging a wide range of actions by the Trump Administration, including its attacks on everything from universities and media outlets to civil rights and immigrants.  They are all important cases, but Better Markets remains focused on litigation involving financial regulation and the agencies responsible for protecting investors from fraud and abuse, preserving the stability of our banking system, and maintaining the integrity and vitality of our securities markets. Here are some key cases we continue to watch in those areas.

THE SUPREME COURT THREATENS TO GIVE PRESIDENT TRUMP EVEN MORE AUTHORITY TO WEAKEN AGENCIES BY FIRING BOARD MEMBERS AT WILL.  Trump v. Wilcox, No. 24A966 (ruling on stay issued May 22, 2025).

In January, President Trump removed Gwynne Wilcox, a Democratic appointee, from the National Labor Relations Board (“NLRB”), without cause.  She filed suit arguing that the termination was unlawful because the National Labor Relations Act only allows the president to remove board members in cases of neglect of duty or malfeasance and only after notice and hearing, and none of those conditions were met.  The federal district court ruled in her favor, issuing a stay against her removal while the case is litigated, and the full D.C. Circuit (acting “en banc”) agreed.  Also under challenge in the consolidated case is the similar removal of Cathy Harris from the Merit Systems Protection Board (“MSPB”).

On May 22, the U.S. Supreme Court sided with the Administration and lifted the stay in a short, emergency order.  That means the firings will remain in effect over the course of the lengthy litigation.  As we explained in our press release, the Court got it wrong. As to the likelihood of success on the merits, the Court erred by summarily casting aside a 90-year-old Court precedent, known as Humphrey’s Executor, which unanimously held that Congress can indeed protect members of independent agency boards from removal by the President without cause.  As the D.C. Circuit explained, that’s still a binding precedent.

The Court also got it wrong as to the balance of harms.  The Court’s decision inflicts a profound harm by disregarding Congress’s judgment that the public benefits from independent agencies, headed by experts who have some protection from removal by the President at his or her whim.  That’s true not only of the MSPB and the NLRB, which protect workers’ rights, but also of some key financial regulators, including the Federal Trade Commission, which protects financial consumers.  The need for protections against the at-will removal of Fed officials is especially important, and it is starkly apparent from the daily headlines: Chair Powell recently felt compelled to insist, yet again, that the Fed’s policy decisions will be made “based solely on careful, objective, and non-political analysis.” To avoid the damage from the politically motivated firings in Wilcox, and because there was no reason for haste, the Court should have preserved the status quo by leaving those board members in their positions while the merits of the case are properly briefed, argued, and considered by the courts.

COURT UNDERMINES DETERRENCE AND ACCOUNTABILITY BY IMPOSING A LIGHT, TWO-YEAR PRISON SENTENCE ON TIM LEISSNER FOR HIS ROLE IN A MASSIVE FINANCIAL CRIME.

Strong enforcement against those who commit financial crime is essential to protect the public by punishing fraudsters and deterring future crimes.  Yet regulators, prosecutors, and courts have often failed in this mission, especially in banking and finance.  This Thursday, May 29^th, marked another example of this weak approach to white collar crime with the sentencing of Tim Leissner for his role in one of the most outrageous financial crimes in history, known as “1MDB.”  In 2012 and thereafter, Leissner, as a principal at Goldman Sachs and with the assistance of dozens of Goldman executives, led and implemented a scheme to set up and loot a Malaysian sovereign wealth fund intended for the benefit of the Malaysian people.  As a result, Leissner pocketed over $70 million, Goldman received $600 million in bloated fees, the fund was raided by other corrupt officials, and the despotic leader of the country was aided in his effort to remain in power for years. And as we explained in our May 27^th Memo to Interested Parties, while Leissner ended up cooperating with the government, that cooperation did not magically erase the gravity of his crimes.

Yet on the 29^th, the court imposed just a two-year sentence, barely more than a slap on the wrist for a crime of such historic proportions in its scope and harmful impact.  While some jail time is more meaningful than a get-out-of-jail free card, it’s not commensurate with the gravity of the crimes Leissner committed.  And through it all, the central role of Goldman Sachs in perpetrating or facilitating Leissner’s crimes has been conveniently shunted aside.  The effect will be to motivate corporate and financial lawbreakers to chase huge payoffs through criminal schemes and then become earnest cooperators to secure light sentences.

OTHER IMPORTANT CASES HAVE BEEN FULLY BRIEFED AND ARGUED, WITH COURT DECISIONS EXPECTED SOON.

• CBOE v. SEC, No. 24-1350 (D.C. Cir.). Exchanges challenge SEC’s sensible update to trading rules that will benefit investors. In September 2024, the SEC finalized a rule reducing the pricing increments for securities trades and limiting the fees that stock exchanges can charge investors for access to their trading platforms.  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 Americans.
  • Predictably, a group of major exchanges filed a court challenge in an effort to protect their profitable status quo.  However, as we argued in our brief in opposition to the industry’s claims, the SEC had clear authority from Congress to do precisely what the rule provides, and it conducted an exceptionally thorough analysis to arrive at a strong and sensible update to the rules that keep our markets running fairly and smoothly. The case was argued on May 15^th and we hope and expect that the D.C. Circuit will side with the SEC and uphold the rule.

• Institutional Shareholder Services, Inc. v. SEC, No. 24-5105 (D.C. Cir.). Corporate America fights to burden firms that help investors vote their proxies.  Proxy advisory firms help investors by providing research and making recommendations on matters subject to a shareholder vote. Because the volume, frequency, and complexity of proxy statements make it difficult for many investors to conduct their own analyses, these firms play a crucial role.  Ultimately, they provide investors with independent advice that is not tainted or spun by the inherently biased management of a company.
  • Unfortunately, the SEC during the Trump Administration sided with corporate interests and adopted a rule that equated proxy advice with proxy solicitation, thus imposing unnecessary and burdensome requirements on these advisory firms.  Although the SEC later toned down the rule, it left that provision intact, and the plaintiff, Institutional Shareholder Services, filed suit to challenge the rule.  It prevailed in the district court, which held that the ordinary meaning of “solicitation” did not encompass voting advice sought by investors and provided by a firm with no interest in the outcome of the vote.  Now the issue is before the D.C. Circuit.  Although the SEC has dismissed its appeal, the National Association of Manufacturers is defending the rule in its effort to burden the independent proxy advisers. The case was argued on May 2nd and we’re watching for the court’s decision.

• CFPB v. Townstone Financial, No. 1:20-cv-04176 (N.D. Ill.). CFPB seeks to drop its racial discrimination case, tear up the settlement, and refund the civil penalty.  In 2020, the Consumer Financial Protection Bureau (“CFPB”)—then headed by President 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, in effect arguing that this company had a license to discriminate under the guise of freedom of speech.  The agency wants the court to tear up the settlement so that it can refund the $105,000 civil penalty to Townstone.  Better Markets joined an amicus brief led by the National Fair Housing Alliance, filed in April.   We opposed the dismissal and argued that the rule invoked by the parties doesn’t permit such extraordinary and unfounded relief and that nullifying a perfectly valid settlement years after the fact would create damaging uncertainty in the enforcement arena.  The court has the matter under consideration and could rule any day.