(In paragraph 18, changes reference to last week from this week)
WASHINGTON/NEW YORK (Reuters) -President Donald Trump’s Department of Government Efficiency initiative has pushed the U.S. markets watchdog to loosen Wall Street rules around blank-check companies and confidential reporting by private investment funds, according to two people familiar with the matter.
DOGE officials at the SEC, who have so far focused on cutting costs, have in recent weeks sought meetings with staff to explore relaxing what some companies have described as burdensome and unnecessary regulations, including reworking Biden-era rules adopted last year on so-called Special Purpose Acquisition Companies, or SPACs, and requirements that private investment advisers confidentially disclose more data so regulators can better spot systemic risk, the sources said.
The efforts, which have not been previously reported, are part of a broader deregulatory push by the administration, which has said it wants to spur economic growth by slashing government oversight.
In a February executive order, Trump directed DOGE officials at federal agencies to identify regulations the administration may seek to eliminate for any of a range of different reasons, such as imposing “undue burdens” or costs on businesses.
But the same sources, who requested anonymity to speak about confidential discussions, said DOGE’s involvement in crafting new policy has rankled some SEC officials, raising concerns over whether a White House initiative should be involved in the core work of an agency long seen as independent.
Under the Biden administration, the SEC adopted the SPAC and private funds regulations to protect investors from potentially unscrupulous claims by investment promoters and prevent the unchecked buildup of risks to financial stability in the private funds sector.
Taylor Rogers, a White House spokesperson, said DOGE was working with the SEC “to more efficiently maintain fair and orderly markets while protecting everyday investors.”
“Under President Trump’s leadership, Chairman [Paul] Atkins and the SEC will ensure that the United States remains the best and most secure place in the world to invest and do business.”
A spokesperson for the SEC said: “The SEC is working with DOGE to find cost efficiencies and ensure public funds are being used as effectively as possible.”
The SEC and White House did not comment further on Reuters’ questions for this story.
To be sure, the commission is led by a presidentially appointed chairman who guides the agency’s regulatory agenda, making it rare for the agency to depart drastically from White House priorities, current and former officials told Reuters.
But the SEC, like other financial regulators, has long been treated as independent from the White House – both through legal protections and decades of norms, those experts said. The agency has traditionally limited communications with the White House over rules to avoid political interference, or the appearance of it.
Trump and key players in his administration have taken a view that these agencies should be under direct supervision of the White House and Trump has fired officials who say they are legally shielded from dismissal in most cases.
Amanda Fischer, policy director and chief operating officer at financial reform advocacy group Better Markets, said any DOGE involvement in SEC rulemaking raises serious concerns about potential conflicts of interest and political influence overriding staff expertise.
“It’s outrageous that outside designees to the agency, who presumably were not selected by the chair, would have a say in rulemaking activities,” said Fischer, who previously served as chief of staff to former SEC Chair Gary Gensler.
KICK IN THE PANTS?
It is unclear what impact, if any, the DOGE efforts will have. Much of the deregulatory pressure appears in line with traditional Republican views that the SEC may have pursued under new leadership anyway. Indeed, Republican SEC Commissioners Mark Uyeda and Hester Peirce have in the past both objected to what they said were needless regulatory burdens for SPACs and private funds.
Some movement on dismantling such regulations is already underway. The SEC has been in talks with U.S. exchange operators to loosen some regulatory requirements for SPACs, in which shell companies raise funds through a listing with the intention of acquiring a private company, Reuters reported last week.
SPACs are listed shell companies that raise funds to acquire a private company with the purpose of taking it public, allowing such targets to sidestep a traditional initial public offering.
Taking companies public via SPAC had been booming business and a strategy deployed by Lucid Motors, DraftKings and Trump’s social media operation. The SEC under Biden cracked down on the sector amid concerns over weak diligence compared to the more rigorous IPO process, and over hidden costs to retail investors.
But interest in SPACs has again risen. In one instance, several of the people involved in the Trump Media transaction disclosed plans earlier this year to pursue a SPAC deal in the tech sector, possibly involving cryptocurrency. They did not respond to requests for comment.
SPAC advocates warned against the SEC’s stricter rules, concerned over changes such as the removal of a “safe harbor” that had helped shield SPAC sponsors from legal liability for unrealistic or potentially misleading financial projections. Uyeda and Peirce at the time both objected to the changes, saying the rule would unduly inhibit a potentially valuable investor tool.
The Republican commissioners also objected to additional reporting requirements for private funds the SEC and another agency voted for in February 2024, known as Form PF. The SEC earlier this month decided to delay firms’ compliance with those new requirements.
Some experts told Reuters they support a push to reduce old or outdated regulations, even if DOGE is involved.
“I daresay it is a departure from past practice, but whether White House influence is a ‘risk’ or an opportunity depends on your perspective,” said Adam Pritchard, a law professor at the University of Michigan.
“I am quite open to the idea that the staff could use a good kick in the pants to get them to repeal a few [rules]. I’ll bet Paul Atkins agrees with that instinct.”
(Reporting by Douglas Gillison and Chris Prentice; editing by Pete Schroeder, Megan Davies and Anna Driver)
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