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Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.

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Speaker 2: With a stroke of my pen.

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Speaker 3: On day one, We're going to stop the transgender lunacy,

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Speaker 3: and I will sign executive orders to end child sexual mutilation,

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Speaker 3: get transgender out of the military and out of our

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Speaker 3: elementary schools and middle schools and high school.

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Speaker 4: President Donald Trump had campaigned on ending what he called

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Speaker 4: the transgender lunacy, and on day one, he began by

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Speaker 4: targeting transgender people in a series of executive orders.

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Speaker 2: It will henceforth be the official policy of the United

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Speaker 2: States government that there are only two genders, male and female.

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Speaker 4: Trump's followed that with executive orders barring transgender people from

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Speaker 4: serving in the US military and revoking federal funding from

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Speaker 4: entities that provide gender affirming care to minors and educational

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Speaker 4: institutions that allow transgender female athletes to compete in school sports.

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Speaker 4: All of these executive actions have been challenged in court.

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Speaker 4: Joining me is David Cole, a professor at Georgetown Law

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Speaker 4: and the former National Legal Director of the ACLU. On

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Speaker 4: the first day of his presidency, he signed an order

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Speaker 4: declaring that only two genders exist. Does that order itself

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Speaker 4: have any effect on transgender people.

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Speaker 5: Well, it's deeply demigrating of their very humanity. But I

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Speaker 5: don't think the order itself has legal effect. The president

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Speaker 5: can declare whatever he wants, but it doesn't make it.

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Speaker 4: So let's discuss some of the executive orders he's issued.

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Speaker 4: On January twenty seventh, Trump issued an executive order intended

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Speaker 4: to bar transgender people from serving in the US military,

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Speaker 4: and under new rules released by the Defense Secretary, transgender

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Speaker 4: individuals are blocked from enlistment, and transgender troops already serving

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Speaker 4: are blocked from receiving some gender related medical care. Is

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Speaker 4: a complete ban likely next?

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Speaker 5: Well, I'm not sure what's next, but what he put

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Speaker 5: in place already is deeply disturbing and very likely unconstitutional.

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Speaker 5: The executive order effectively says, or not effectively, literally says,

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Speaker 5: transgender people cannot serve in the military because we need

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Speaker 5: honest people serving in the military, and if you're transgender,

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Speaker 5: you're not honest. That is simply pure ignorant prejudice. It's

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Speaker 5: nothing more than that there are one point five million

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Speaker 5: people in this country who are transgender. The fact that

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Speaker 5: they are transgender has nothing whatsoever to do with whether

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Speaker 5: they are honest. Some of them are honest, some of

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Speaker 5: them are probably not, just like some presidents are honest

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Speaker 5: and some are not. But that kind of an order,

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Speaker 5: which is based on nothing more than bear animus against

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Speaker 5: a minority group, is clearly unconstitutional. The fact that it

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Speaker 5: arises in the context of the military might make it

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Speaker 5: a closer case, because the president, as commander in chief,

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Speaker 5: has special authority. But imagine if the president said black

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Speaker 5: people are not honest and so they can't serve in

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Speaker 5: the military. I don't think that order would stand, nor

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Speaker 5: should the transgender order stand.

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Speaker 4: There are several lawsuits over that ban. There are suits

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Speaker 4: by six service members. Less Thursday, Land Illegal in the

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Speaker 4: Human Rights Campaign filed a lawsuit, but in twenty nineteen,

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Speaker 4: the Supreme Court allowed Trump's restrictions on transgender people in

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Speaker 4: the military.

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Speaker 5: The case never reached the Supreme Court in the sense

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Speaker 5: the Supreme Court never agreed to hear the case. The

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Speaker 5: last time around, it was a more limited restriction, and

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Speaker 5: it was not as this one is, on its face,

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Speaker 5: based on pure, unadulterated prejudice and animus. The Court has

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Speaker 5: long ruled that when the government targets a group out

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Speaker 5: of pure animus out of animus against the group, not

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Speaker 5: based on any rational justification. Its actions are unconstitutional, and

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Speaker 5: so I am quite optimistic that the courts will declare

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Speaker 5: this ban unconstitutional and the Supreme Court will then take

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Speaker 5: it up, because the Supreme Court generally does take up

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Speaker 5: decisions that declare actions of the president unconstitutional. But this

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Speaker 5: is deeply, deeply offensive. It is really no different than

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Speaker 5: writing an order saying black people are not honest and

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Speaker 5: therefore they can't serve in the military.

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Speaker 4: So the next day, on January twenty eight, he issued

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Speaker 4: in executive order ending federal funding research and education grants

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Speaker 4: to medical institution, including hospitals and medical schools, that provide

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Speaker 4: gender affirming care to patients under nineteen. And you call

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Speaker 4: this protecting children from chemical and surgical mutilation. What about

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Speaker 4: the legality of withholding federal funds here?

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Speaker 5: Again deeply troubling and illegal. It's been challenged. I know

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Speaker 5: the ACLU has challenged that action. It's illegal both because

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Speaker 5: he is cut off funding that Congress specifically appropriated to

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Speaker 5: be spent for these purposes, and for the same reason

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Speaker 5: that courts have enjoined his efforts to cut off other

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Speaker 5: Congressional funding and other contexts. The president doesn't have the

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Speaker 5: power to simply cut off funding because he disagrees with

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Speaker 5: Congress's judgment. His job is to execute the laws that

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Speaker 5: Congress passes, and so he can't override that because he

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Speaker 5: happens to be prejudiced against transgender people this lass. It

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Speaker 5: also will be challenged as a form of second discrimination

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Speaker 5: in the provision of healthcare, which violate a federal statute,

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Speaker 5: and the United States Court of Appeals for the Fourth

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Speaker 5: Circuit has held that denying care to transgender people is

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Speaker 5: a form of sex discrimination that violates that federal statute.

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Speaker 5: So I am quite optimistic that this order will also

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Speaker 5: be struck down once the courts take it up.

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Speaker 4: Three states, Washington, Oregon, and Minnesota, have also filed a

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Speaker 4: lawsuit over that executive order on medical treatment for transgender minors,

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Speaker 4: saying it violates the Fifth Amendment's equal protection guarantees, the

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Speaker 4: constitutional separation of powers, and the Tenth Amendment. And the

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Speaker 4: tenth Amendment has been invoked in other lawsuits by the

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Speaker 4: states against Trump.

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Speaker 5: So the tenth Amendment is because it's interfering with the

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Speaker 5: authorities of the states, and so if he's seeking to

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Speaker 5: use federal funding to coerce states in the taking action

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Speaker 5: that they don't want to take. That's a violation of

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Speaker 5: the principles of federalism. And with respect to the Fifth Amendment,

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Speaker 5: singling out a particular group for unequal treatment violates the

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Speaker 5: Fifth Amendments protection of due process, which in turn requires

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Speaker 5: the federal government to treat all people equally.

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Speaker 4: You represent transgender families challenging Tennessee's ban on gender firming

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Speaker 4: care from minors. At the Supreme Court. The Trump administration

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Speaker 4: flipped the federal government's position in that case, which came

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Speaker 4: as no surprise, and now is in support of Tennessee's ban.

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Speaker 4: Do you think that flip will have any effect on

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Speaker 4: the Supreme Court's decision in the case.

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Speaker 5: Well, we'll see when they issue their decision. I don't

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Speaker 5: think it's likely to have an effect. The case was

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Speaker 5: presented to the court, the court heard argument. I was

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Speaker 5: actually co counsel for the transgender families with the ACLU

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Speaker 5: in that case, and at the Supreme Court, initially and

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Speaker 5: at our argument, the United States was on our side.

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Speaker 5: Now that President Trump has taken office, he has switched

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Speaker 5: sides and he's against us. But all he did was

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Speaker 5: submit a letter saying we no longer support the plaintiffs

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Speaker 5: in this case, and we think the law is constitutional.

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Speaker 5: We think you should decide the case. So I suspect

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Speaker 5: that the court will decide the case. I very much

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Speaker 5: doubt that the Trump administration shifting its position will affect

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Speaker 5: how the court decides the case. There's still a dispute

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Speaker 5: between our clients and Tennessee, which is depriving the parents

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Speaker 5: and their kids of the medical care that they and

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Speaker 5: their doctors have determined as medically necessary.

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Speaker 4: Let's say the Supreme Court upholds Tennessee's ban. Does that

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Speaker 4: have any implications for Trump's executive order withholding funding from

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Speaker 4: institutions that provide gender firming care for minors.

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Speaker 5: Yeah, so if the court rules for Tennessee. Depending on

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Speaker 5: how it rules for Tennessee, it would weaken the equal

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Speaker 5: protection challenge to the extent there's an equal protection challenge

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Speaker 5: to the Trump executive order, but it would have no

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Speaker 5: effect on the claims that he can't cut off funding

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Speaker 5: that Congress appropriated, that he can't discriminate on the basis

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Speaker 5: of sex in the provision of healthcare under a federal statute,

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Speaker 5: and that he can't commandeer the states to carry out

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Speaker 5: programs that they disagree with, so all of those claims

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Speaker 5: would remain. The Fifth Amendment due process slash equal protection

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Speaker 5: claim that is also in the case could be weakened

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Speaker 5: if the court rules against Tennessee, and would obviously be

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Speaker 5: very much strengthened if the court rules in favor of

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Speaker 5: the transgender family.

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Speaker 4: Last Wednesday, in a ceremony at the White House, Trump

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Speaker 4: signed an executive order denying federal funds to any educational

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Speaker 4: institution that allows transgender female athletes to compete in female

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Speaker 4: categories in school sports.

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Speaker 2: We're putting every school receiving taxpayer dollars on notice that

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Speaker 2: if you let men take over women's sports teams or

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Speaker 2: invade your locker rooms, you will be investigated for violations

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Speaker 2: of Title NINN and risk your federal funding. There will

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Speaker 2: be no federal fundement.

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Speaker 5: Well, I think again, this is, you know, consistent with

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Speaker 5: everything else he has done with respect to transgender people,

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Speaker 5: which is that he has targeted a very small minority

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Speaker 5: in this country for disparate treatment that no one else

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Speaker 5: has to suffer. And so he's basically saying we're going

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Speaker 5: to take away funding from schools that allow allow transgender

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Speaker 5: women to play on women's teams. There are many transgender

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Speaker 5: women who are playing on women's teams. Some of them are,

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Speaker 5: you know, very good, others are not. They're in the

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Speaker 5: NC DOUBLEA, they're governed by NC DOUBLEA rules. If they're

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Speaker 5: club sports, they're governed by whatever the school's rules are.

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Speaker 5: But at the end of the day, sports are about

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Speaker 5: two things, competition and participation. And to say to a

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Speaker 5: trans woman, the only way you can participate or compete

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Speaker 5: is if you deny your gender identity and you act

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Speaker 5: as if you are a man when you are a woman.

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Speaker 5: No one else has to deny who they are to

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Speaker 5: play a sport. So it's a deeply again, a deeply

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Speaker 5: cruel effort to use the power of the federal purse

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Speaker 5: to coerce universities and schools to harm people who they're

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Speaker 5: simply allowing to participate in extracurricular activities. And there are

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Speaker 5: concerns in the sports context about the fairness of competition

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Speaker 5: and the like, but most of the sport governing bodies

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Speaker 5: have dealt with that through gender neutral rules. To say,

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Speaker 5: you know, if you're going to play on the women's team,

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Speaker 5: have been identified as a woman for a certain period

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Speaker 5: of time, you have to have low testosterone level so

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Speaker 5: that you're playing essentially on an equal playing field with

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Speaker 5: the other women on the team. But that's a totally

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Speaker 5: permissible set of rules to apply to come in and say,

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Speaker 5: where a transgender woman is harming nobody, she cannot participate

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Speaker 5: simply because I have an ideological view that rejects the

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Speaker 5: reality of one point five million people in this country.

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Speaker 5: Is again nothing more than pure animus and prejudice, and

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Speaker 5: should be invalid.

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Speaker 4: And two transgender girls in New Hampshire brought the first

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Speaker 4: legal action against that executive order, and it's actually an

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Speaker 4: expansion of a lawsuit filed last August against a state

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Speaker 4: law prohibiting transgender girls from participating in female sports. So

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Speaker 4: we'll see where that goes. Trump also issued an order

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Speaker 4: requiring officials to ensure that transgender women detained in federal

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Speaker 4: facilities be housed in men's facilities, and prohibiting the Bureau

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Speaker 4: of Prisons from providing gender affirming care to inmates.

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Speaker 5: And that has already been challenged by two transgender women

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Speaker 5: and has been and joined by the courts because the

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Speaker 5: law is and President Trump doesn't seem to care what

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Speaker 5: the law is, but the law is, the constitutional law

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Speaker 5: is that prison officials have to keep their detainees safe.

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Speaker 5: They have a lot of discretion in how they make

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Speaker 5: those decisions, but they have to make those decisions on

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Speaker 5: an individualized basis. And so if a prison official determines

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Speaker 5: that a particular trans inmate cannot be kept safe if

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Speaker 5: she is held in the men's prison where she will

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Speaker 5: be abused, raped, and the like, that's fully within the

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Speaker 5: discretion of the Bureau of Prisons to decide. They have

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Speaker 5: to decide it based on medical and safety concerns, not

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Speaker 5: based on ideology. What President Trump's executive or says is

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Speaker 5: even where Bureau of Prison officials have determined that the

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Speaker 5: only way to keep a trans woman safe is to

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Speaker 5: hold her in a woman's prison, she must be put

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Speaker 5: into a male prison where she faces abuse, rape, and

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Speaker 5: the like. So it's not surprising that both courts that

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Speaker 5: have faced that have and enjoined the President Trump's executive order. Again,

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Speaker 5: it's cruelty driven by animus, prejudice, and ideology, and that's

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Speaker 5: not permissible under our constitution.

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Speaker 4: He campaigned on this, and I assume he knew that

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Speaker 4: there were the fierce opposition and lawsuits challenging these orders.

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Speaker 5: It's not surprising that he has targeted transgender people. He

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Speaker 5: targeted transgender people during his campaign. He targeted immigrants during

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Speaker 5: his campaign. He knows you know who to target. He

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Speaker 5: targets the vulnerable. He targets those without a voice in

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Speaker 5: the political process. He makes them scapegoats. You know, that's

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Speaker 5: a tried and true political tactic. Unfortunately, but the Constitution

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Speaker 5: protects the vulnerable, and the Constitution requires you treat everybody

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Speaker 5: equally and you not impose burdens on people simply for

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Speaker 5: political gain or because you entertain prejudice against them. And

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Speaker 5: that's exactly what President Trump has done with his executive

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Speaker 5: orders on the trans community.

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Speaker 4: And we'll see how the courts react. As you mentioned,

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Speaker 4: a few courts have already blocked some of these orders

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Speaker 4: from taking effect, at least temporarily. Tomorrow is Seattle federal

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Speaker 4: judge is going to hold a hearing on a request

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Speaker 4: for a temporary restraining order on the executive order that

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Speaker 4: haults funding for institutions that provide gender affirming care for minors.

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Speaker 4: That's in the case brought by the three States, and

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Speaker 4: on February eighteenth, the judge is going to hear arguments

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Speaker 4: for a preliminary injunction that would block the Trump administration

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Speaker 4: and the US military from enacting the executive order barring

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Speaker 4: transgender Americans from the Arms services. And I'm sure there'll

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Speaker 4: be a lot more hearing scheduled in these cases. Thanks

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Speaker 4: so much for joining me today, David. That's Professor David

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Speaker 4: Cole of Georgetown Law. During his campaign, Donald Trump said

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Speaker 4: he would make the United States the crypto capital of

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Speaker 4: the planet and the bitcoin superpower of the world.

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Speaker 6: We will have regulations, but from now on, the rules

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Speaker 6: will be written by people who love your industry, not

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Speaker 6: hate your industry. People that want to make it clear

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Speaker 6: and simple, straightforward and fair. People that want to see

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Speaker 6: your industry thrive.

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Speaker 4: Trump also vowed to end the so called weaponization of

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Speaker 4: the federal government, including the Securities and Exchange Commission. Trump's

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Speaker 4: choice for SEC chair, former SEC Commissioner Paul Atkins, hasn't

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Speaker 4: been confirmed yet, but there are changes underway at the

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Speaker 4: agency already, with more to come. My guest is securities

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Speaker 4: law attorney Robert him a partner at Tartar, Krinsky and Drogan,

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Speaker 4: and a former SEC Assistant Regional Director, Gary Gensler had

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Speaker 4: an aggressive enforcement agenda and he ended up levying over

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Speaker 4: twenty billion dollars in penalties and other charges. Former SEC

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Speaker 4: Commissioner Paul Atkins. Trump has tapped him to be the

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Speaker 4: SEC chair if confirmed. How different do you think his

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Speaker 4: strategy will be?

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Speaker 1: Well, I think if mister Atkins is confirmed, there is

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Speaker 1: definitely going to be a sea change at the SEC

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Speaker 1: in terms of their approach and their strategy to crypto.

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Speaker 1: Probably the biggest complaint that the crypto industry had is

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Speaker 1: that the SEC was engaging in regulation by enforcement activities.

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Speaker 1: So instead of promulgating rules and setting guidelines and rules

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Speaker 1: for the road for the industry to follow, the SEC

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Speaker 1: didn't do any of that. Instead just started bringing enforcement

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Speaker 1: actions against various players in the industry, which was a

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Speaker 1: huge concern to the industry participants because you know these

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Speaker 1: actions can lead to find there's reputational damage and other

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Speaker 1: problems with that approach. So I think mister Atkins is

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Speaker 1: going to really take a different attack. He's most likely

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Speaker 1: going to start more of a rulemaking process for the industry,

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Speaker 1: so there's going to be clarity on all the different

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Speaker 1: parts of the regulatory system that touch on crypto in

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Speaker 1: terms of whether their securities or whether their commodities.

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Speaker 4: He previously recommended that the SEC act more predictably and

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Speaker 4: proposed that the agency adopt an open jacket policy to

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Speaker 4: discourage it from bringing cases where evidence was deficient. What

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Speaker 4: does that mean, an open jacket policy.

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Speaker 1: Well, that could mean a couple of different things. You know.

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Speaker 1: One is it certainly indicates that there was likely going

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Speaker 1: to be much more transparency at the SEC regarding its

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Speaker 1: rulemaking process and its decisions about who it sues and

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Speaker 1: enforcement proceedings or not. One of the complaints that the

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Speaker 1: crypto industry has had is that there has been a

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Speaker 1: lack of transparency at the SEC in terms of, you know,

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Speaker 1: exactly how the SEC is looking to regulate these products. So,

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Speaker 1: for instance, there are several crypto organizations like Coinbase that

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Speaker 1: had repeatedly tried to come in and meet with the

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Speaker 1: SEC to find out, you know, the SEC's blots on

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Speaker 1: how to register, you know, how to have proper regulatory oversight,

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Speaker 1: what the SEC was expecting from these different organizations and

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Speaker 1: the SEC while they took the meetings, they never provided

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Speaker 1: any sort of guidance or even opened up a path

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Speaker 1: for crypto firms to register with them, and that's been

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Speaker 1: a huge point of contention because the crypto firms say,

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Speaker 1: you know, we do want to comply and we do

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Speaker 1: want to follow the rules, but you, the SEC, have

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Speaker 1: to let us know what they are. You have to

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Speaker 1: give us transparency into what you're thinking in terms of

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Speaker 1: what the proper steps are that we need to take

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Speaker 1: and not just you know, sue us and see millions

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Speaker 1: of dollars in fines.

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Speaker 4: The SEC has already created a task force to work

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Speaker 4: with the crypto industry. It's led by Republican Commissioner Hester Pierce,

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Speaker 4: known as Crypto Mom due to her favorable stance toward

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Speaker 4: the sector. I mean, do you think there'll be any

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Speaker 4: regulation of crypto?

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Speaker 1: Yes, I do think that there's going to be regulation

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Speaker 1: of crypto. And the industry also is not arguing that

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Speaker 1: there shouldn't be any regulation. What the industry is arguing

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Speaker 1: is more for common sense regulation, but also transparency and

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Speaker 1: clarity on what those regulations are. And yes, the new

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Speaker 1: Crypto task Force I believe is going to be very

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Speaker 1: helpful and playing a big role in that process because

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Speaker 1: what the task Force is doing right now is studying

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Speaker 1: various aspects of the crypto industry and also doing a

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Speaker 1: wholesale review of the SEC's actions in the crypto space,

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Speaker 1: particularly it's enforcement cases. And we saw the other day

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Speaker 1: probably the first concrete step to come out of the

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Speaker 1: Crypto Task Force is that there was a sixty day

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Speaker 1: pause that was entered in the SEC's enforcement proceedings against Finance,

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Speaker 1: which was a major case the SEC brought against the

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Speaker 1: Crypto Exchange. So that certainly signals the SEC is taking

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Speaker 1: a deep dive and doing a serious review of the

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Speaker 1: case and may either wind up dropping the case or

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Speaker 1: may wind up proposing terms for a settlement that are

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Speaker 1: much more reasonable than what the Commission was seeking under

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Speaker 1: the prior administration.

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Speaker 4: So Atkins has said that corporate finds unfairly penalized shareholders.

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Speaker 4: Does that mean that, you know, we're going to see

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Speaker 4: less corporate finds and more concentration on individuals.

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Speaker 1: Perhaps, Yeah, I do think that is the implication of approach. So,

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Speaker 1: for instance, with with Coinbase, which registered with the SEC

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Speaker 1: and when public you know, had an IPO, one of

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Speaker 1: their chief complaints is that you know, hey, look we

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Speaker 1: put together a registration statement, the SEC reviewed it, were approved.

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Speaker 1: We're trading our business model has been transparent for years,

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Speaker 1: and all of a sudden, the SEC comes in and

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Speaker 1: sues us for violating the securities laws and not registering

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Speaker 1: as a broken dealer, not following all these other requirements

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Speaker 1: that we feel don't apply. And you know, if the

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Speaker 1: SEC was to succeed on that sort of case and

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Speaker 1: a large fine was levied against the company, yeah, that

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Speaker 1: comes out of the pockets of shareholders, you know, innocent investors,

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Speaker 1: you know who didn't have anything to do with the violations.

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Speaker 1: You know that being said once, the SEC maybe reduces

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Speaker 1: their focus on finding corporativities. Yes, the focus con then

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Speaker 1: shift to finding individual bad actors when that's a problem,

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Speaker 1: or potentially having injunctive relief, where a court can order

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Speaker 1: certain changes in a company's business practices so that violations

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Speaker 1: or other problematic conduct can occur in the future. So

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Speaker 1: just because the corporations themselves may be getting smaller fines

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Speaker 1: doesn't mean that there's not other tools in the toolbox

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Speaker 1: to ensure that companies and the people that work there

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Speaker 1: as senior managers are complying with the relevant laws.

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Speaker 4: Lawyers at the SEC have been told they need to

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Speaker 4: seek permission from the politically appointed leadership the commissioners before

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Speaker 4: formally launching investigations. That's according to Reuters. So tell us

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Speaker 4: what the old procedure was like and the implications of

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Speaker 4: these changes.

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Speaker 1: Yeah, that is somewhat of a change. Typically in the

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Speaker 1: past the SEC, where I used to work for about

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Speaker 1: six years, typically the commissioners themselves would delegate the responsibility

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Speaker 1: to determine which enforcement actions to pursue, especially in the

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Speaker 1: early stages, to the Director of Enforcement. There was a

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Speaker 1: lot of discretion in terms of looking at what areas

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Speaker 1: to focus on, what investigations to launch. You know, ultimately,

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Speaker 1: any enforcement actions even under past administrations, did have to

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Speaker 1: be approved by the commissioners, but they placed a lot

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Speaker 1: of reliance on the judgment and the recommendations of the

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Speaker 1: Director of Enforcement. Now that's going to change. The commissioners

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Speaker 1: are going to have a much more active role in

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Speaker 1: setting the priorities for not only the Enforcement Division, but

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Speaker 1: other divisions at the SEC, and I think taking a

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Speaker 1: much harder look at what sort of cases are being

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Speaker 1: filed so that they can make sure that the cases

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Speaker 1: are in alignment with the philosophy of the new administration

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Speaker 1: in terms of crypto and other agency priorities and endeavors.

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Speaker 4: So the Supreme Court delta near fatal blow to the

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Speaker 4: SEC's administrative law judge program. Do you think that under

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Speaker 4: weakens the SEC will weaken the ALJ program even more?

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Speaker 1: Well, yeah, I think that under Atkins, there really isn't

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Speaker 1: that much of a choice given the Supreme Court's decision

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Speaker 1: in the area. And you know, this gets into people's

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Speaker 1: rights to have a jury trial and whether an administrative

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Speaker 1: forum is appropriate for administrative law judges to be imposing

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Speaker 1: these substantial civil penalties. But yes, I do think that

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Speaker 1: we're going to see a pretty dramatic shift in SEC

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Speaker 1: enforcement proceedings over to federal courts, where defendants will have

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Speaker 1: much more robust procedural rights in terms of the way

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Speaker 1: cases proceed and they'll also have more rights in terms

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Speaker 1: of discovery and getting evidence and taking depositions. So certainly

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Speaker 1: from defense perspective, and for the rights of individuals who

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Speaker 1: very often are not part of the securities industry or

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Speaker 1: not you know, licensed brokers, they historically have been dragged

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Speaker 1: into these administrative proceedings where they have a lot less

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Speaker 1: in the way of rights than they would if they

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Speaker 1: were in the federal court.

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Speaker 4: In accord with Donald Trump's anti DEI focus or obsession.

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Speaker 4: They've ended programs such as affinity groups, things like that.

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Speaker 4: I mean, does that make a difference in the culture

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Speaker 4: at the SEC.

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Speaker 1: I think to a certain extent, when you eliminate certain

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Speaker 1: programs along those lines, it can have a negative morale

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Speaker 1: boos for a time. But I think overall, the direction

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Speaker 1: that the SEC and other federal agencies are heading in

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Speaker 1: is more of a back to basics approach, you know,

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Speaker 1: focusing on financial regulation, focus on fighting fraud, focus on

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Speaker 1: traditional investor protections, and not trying to expand, you know,

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Speaker 1: the regulatory powers of the SEC into these very contentious

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Speaker 1: social issues in terms of items like representation on companies

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Speaker 1: boards and certain diversity goals and things that really stray

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Speaker 1: pretty far from the core mandate of the SEC. So

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Speaker 1: I think in the short term you could see some

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Speaker 1: morale issues with the SEC and other agencies, but in

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Speaker 1: the long term, I don't think it's really going to

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Speaker 1: hamper their core mission of enforcement and investor protection.

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Speaker 4: Coming up, I'll continue this conversation with securities attorney Robert Heim.

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Speaker 4: Why is Trump putting a pause on enforcement of the

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Speaker 4: Foreign Corrupt Practices Act? You're listening to Bloomberg. I've been

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Speaker 4: talking to securities law attorney Robert Heim, a partner at Tartar,

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Speaker 4: Krinsky and Drogan. So let's turn now to the Foreign

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Speaker 4: Corrupt Practices Act. First of all, explain what the Foreign

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Speaker 4: Corrupt Practices Act is if.

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Speaker 1: The Foreign Corrupt Practices Act is a law that came

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Speaker 1: into being in the nineteen seventies, and it was designed

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Speaker 1: to prohibit American companies from essentially bribing foreign officials and

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Speaker 1: foreign government officials in particular to help win business for

440
00:28:02,480 --> 00:28:06,960
Speaker 1: the companies. It's essentially an anti corruption law that's designed

441
00:28:06,960 --> 00:28:11,400
Speaker 1: to ensure that US companies when they operate overseas, are

442
00:28:11,520 --> 00:28:15,000
Speaker 1: playing by the rules and not engaging in corrupt activities

443
00:28:15,119 --> 00:28:18,720
Speaker 1: like bribes to government officials in order to win contracts

444
00:28:18,920 --> 00:28:20,760
Speaker 1: and other government concessions.

445
00:28:21,200 --> 00:28:25,480
Speaker 4: It's no secret that Donald Trump has hated this law,

446
00:28:25,680 --> 00:28:30,280
Speaker 4: and so he signed an executive order Monday pausing enforcement

447
00:28:30,359 --> 00:28:34,880
Speaker 4: of that law and ordered the new age to immediately

448
00:28:34,920 --> 00:28:38,360
Speaker 4: stop actions under this act. What effect do you think

449
00:28:38,360 --> 00:28:42,800
Speaker 4: it will have if they just stop bringing actions under

450
00:28:42,840 --> 00:28:44,520
Speaker 4: the Foreign Corrupt Practices Act.

451
00:28:45,080 --> 00:28:50,000
Speaker 1: Well, there's companies American businesses do have in placed very

452
00:28:50,120 --> 00:28:57,200
Speaker 1: robust systems currently for detecting and preventing corruption and improper

453
00:28:57,280 --> 00:29:02,320
Speaker 1: payments to foreign government officials. Trump's rationale for this is

454
00:29:02,440 --> 00:29:05,280
Speaker 1: essentially that, you know, he believes that the Foreign Corrupt

455
00:29:05,320 --> 00:29:08,960
Speaker 1: Practices Act, which generally the DOJ in the past, you know,

456
00:29:09,000 --> 00:29:13,240
Speaker 1: has applied to American companies doing business overseas. President Trump's

457
00:29:13,320 --> 00:29:16,120
Speaker 1: rationale is that, you know, we were hurting our own

458
00:29:16,240 --> 00:29:21,040
Speaker 1: businesses and going after companies for practices that perhaps companies

459
00:29:21,040 --> 00:29:25,120
Speaker 1: from other countries were engaging in. Now that's not to

460
00:29:25,160 --> 00:29:29,280
Speaker 1: say that if an American company engages in corrupt practices

461
00:29:29,640 --> 00:29:32,600
Speaker 1: or bribes the local government official, there's still going to

462
00:29:32,600 --> 00:29:35,600
Speaker 1: be consequences for that at the local country level. So

463
00:29:36,080 --> 00:29:39,080
Speaker 1: President Trump is saying that if a bribery occurs, you know,

464
00:29:39,160 --> 00:29:42,080
Speaker 1: overseas in a foreign country, that's going to have to

465
00:29:42,120 --> 00:29:46,120
Speaker 1: be something that the local prosecutors and that country handle,

466
00:29:46,560 --> 00:29:49,120
Speaker 1: and that the DOJ in the United States is not

467
00:29:49,160 --> 00:29:53,160
Speaker 1: going to be prosecuting US companies for those sort of practices,

468
00:29:53,360 --> 00:29:58,840
Speaker 1: because in their view, it places unfair competitive restraints on

469
00:29:59,200 --> 00:30:03,640
Speaker 1: companies that maybe foreign companies from Europe and other regions

470
00:30:03,640 --> 00:30:06,080
Speaker 1: of the world don't have. In the same way that

471
00:30:06,120 --> 00:30:07,239
Speaker 1: the US company would have.

472
00:30:07,800 --> 00:30:11,680
Speaker 4: During his first term, Trump asked administration officials to help

473
00:30:11,760 --> 00:30:15,080
Speaker 4: kill the act that never gained traction. It would take

474
00:30:15,160 --> 00:30:16,600
Speaker 4: Congress to get rid of this law.

475
00:30:16,680 --> 00:30:19,880
Speaker 1: Right, the only way to really get rid of the

476
00:30:19,920 --> 00:30:23,600
Speaker 1: Financial corupt Practices Act would be to have Congress repeal

477
00:30:23,640 --> 00:30:27,200
Speaker 1: the law, because Congress was the body that passed the

478
00:30:27,240 --> 00:30:29,280
Speaker 1: law in the first place, and it is a statue

479
00:30:29,480 --> 00:30:32,920
Speaker 1: on the books. But the DOJ, under the direction of

480
00:30:33,000 --> 00:30:35,920
Speaker 1: President Trump, does have a tremendous amount of discretion in

481
00:30:36,040 --> 00:30:39,720
Speaker 1: terms of what laws it enforces and what law enforcement

482
00:30:39,840 --> 00:30:43,760
Speaker 1: priorities it sets. So I think President Trump has accomplished

483
00:30:44,040 --> 00:30:47,280
Speaker 1: ninety nine percent of what he wants by directing the

484
00:30:47,360 --> 00:30:51,160
Speaker 1: DOJ not to focus on enforcement of the Foreign Corrupt

485
00:30:51,200 --> 00:30:55,000
Speaker 1: Practices Act. And really, I don't think it would be

486
00:30:55,240 --> 00:30:58,320
Speaker 1: necessary for the Congress to repeal the law because under

487
00:30:58,360 --> 00:31:02,240
Speaker 1: President Trump and the the law, it doesn't look like

488
00:31:02,280 --> 00:31:04,240
Speaker 1: it's really going to be enforced at all.

489
00:31:04,960 --> 00:31:06,680
Speaker 4: I don't know if this is instructive or not, but

490
00:31:06,920 --> 00:31:11,600
Speaker 4: nine of the ten biggest FCPA prosecutions have actually been

491
00:31:11,640 --> 00:31:15,800
Speaker 4: against foreign companies. Do you think that DOJ might still

492
00:31:15,840 --> 00:31:18,400
Speaker 4: try to enforce the law against foreign companies?

493
00:31:18,840 --> 00:31:21,840
Speaker 1: I don't think so, because the DOJ today is really

494
00:31:21,840 --> 00:31:25,240
Speaker 1: going to have a different set of enforcement priorities, particularly

495
00:31:25,320 --> 00:31:29,560
Speaker 1: with respect to drug cartels and terrorism. So it's not

496
00:31:29,800 --> 00:31:32,120
Speaker 1: really going to be high on the DJ's list to

497
00:31:32,160 --> 00:31:37,240
Speaker 1: go after foreign companies that engage in Corrupt Practices Act.

498
00:31:37,320 --> 00:31:39,640
Speaker 1: That's going to really be up to the home country

499
00:31:39,640 --> 00:31:43,800
Speaker 1: prosecutors and the local prosecutors in the countries where you know,

500
00:31:43,840 --> 00:31:47,080
Speaker 1: any of these acts might be occurring. You know. That

501
00:31:47,480 --> 00:31:52,160
Speaker 1: being said, other countries in Europe and local laws and

502
00:31:52,200 --> 00:31:55,040
Speaker 1: countries where a lot of business is done, they all

503
00:31:55,040 --> 00:31:58,760
Speaker 1: have anti Corrupt Practices Acts of their own. So I

504
00:31:58,800 --> 00:32:01,080
Speaker 1: don't think we're going to you know, see the Floodgates

505
00:32:01,200 --> 00:32:06,280
Speaker 1: Unleashing of Corrupt Practices Act, bribery being done by US companies.

506
00:32:06,640 --> 00:32:09,120
Speaker 1: There's laws still very much on the books that you know,

507
00:32:09,280 --> 00:32:11,640
Speaker 1: prevent that, and it's really just a question of what

508
00:32:11,720 --> 00:32:14,960
Speaker 1: agency is going to be responsible for prosecuting those sort

509
00:32:15,000 --> 00:32:16,000
Speaker 1: of corrupt practices.

510
00:32:16,760 --> 00:32:19,680
Speaker 4: Let's turn to the Consumer Financial Protection Bureau, or what's

511
00:32:19,760 --> 00:32:22,680
Speaker 4: left of the Consumer Financial Protection Bureau. I'm not quite

512
00:32:22,720 --> 00:32:25,959
Speaker 4: sure you know what actually is left of it, because

513
00:32:26,000 --> 00:32:31,520
Speaker 4: the acting Director, Russ Vaught, has ordered the Bureau's work

514
00:32:31,640 --> 00:32:34,960
Speaker 4: to be stopped and has said he won't be asking

515
00:32:35,040 --> 00:32:39,400
Speaker 4: for any more funding for the agency. What effect will

516
00:32:39,400 --> 00:32:42,960
Speaker 4: it have if the CFPB is just shut down.

517
00:32:43,920 --> 00:32:47,600
Speaker 1: Well, the CFPP has never really been a favorite agency

518
00:32:47,640 --> 00:32:51,360
Speaker 1: at all among Republicans and conservatives. You know, the thought

519
00:32:51,440 --> 00:32:54,600
Speaker 1: on the CFPB is that it was really duplicative of

520
00:32:54,640 --> 00:32:58,880
Speaker 1: other work that agencies were doing, like the SEC and

521
00:32:59,360 --> 00:33:03,680
Speaker 1: the Command, these Futures Trading Commission and other financial regulators.

522
00:33:03,840 --> 00:33:07,920
Speaker 1: And the other issue that Republicans and conservatives have had

523
00:33:07,960 --> 00:33:10,200
Speaker 1: with this CFP b is that it, you know, every

524
00:33:10,280 --> 00:33:14,040
Speaker 1: year it seemed to really be expanding its mandate. And

525
00:33:14,280 --> 00:33:16,719
Speaker 1: you know, while traditionally it would look at things like

526
00:33:17,000 --> 00:33:20,920
Speaker 1: credit card charges and credit reports and student loans, that

527
00:33:21,680 --> 00:33:26,360
Speaker 1: started expanding, you know, into more ideological areas. And the

528
00:33:26,440 --> 00:33:30,160
Speaker 1: finds that it was imposing on companies was was really

529
00:33:30,240 --> 00:33:32,840
Speaker 1: quite high. And I think, you know, in line with

530
00:33:32,920 --> 00:33:37,120
Speaker 1: President Trump's desire to you know, reduce regulatory burdens and

531
00:33:37,240 --> 00:33:41,120
Speaker 1: finds on American businesses to try to help the economy

532
00:33:41,360 --> 00:33:46,440
Speaker 1: and businesses operate more efficiently, they really had this CFPB

533
00:33:46,600 --> 00:33:49,480
Speaker 1: in their sites. And you know, one of the issues is,

534
00:33:50,000 --> 00:33:53,520
Speaker 1: you know, it's a developing situation. We're really in uncharted

535
00:33:53,840 --> 00:33:57,440
Speaker 1: territory right now to respect to the stop work order

536
00:33:57,840 --> 00:34:01,400
Speaker 1: at the agency and the fact agencies not drawing down

537
00:34:01,400 --> 00:34:05,240
Speaker 1: on any more funds from the Federal Reserve to fund

538
00:34:05,280 --> 00:34:08,920
Speaker 1: its operations. That raises all sorts of legal questions, because

539
00:34:09,120 --> 00:34:13,400
Speaker 1: you know, Congress is the body under our constitutional system

540
00:34:13,480 --> 00:34:17,120
Speaker 1: that sets up agencies with both within the executive branch

541
00:34:17,160 --> 00:34:21,160
Speaker 1: and independent agencies, and Congress is also the body that

542
00:34:21,680 --> 00:34:24,920
Speaker 1: passes laws to fund these agencies in the form of

543
00:34:25,000 --> 00:34:29,400
Speaker 1: annual appropriations for budgets. So here, you know, the issue

544
00:34:29,400 --> 00:34:31,719
Speaker 1: that the courts will ultimately have to decide is, you know,

545
00:34:31,840 --> 00:34:36,120
Speaker 1: is President Trump as the executive overstepping his bounds when

546
00:34:36,360 --> 00:34:39,960
Speaker 1: he basically moves to shut down agencies that have been

547
00:34:40,080 --> 00:34:44,040
Speaker 1: established and funded by Congress, Or is this within his

548
00:34:44,400 --> 00:34:47,640
Speaker 1: purview as an elected official with the mandate to try

549
00:34:47,680 --> 00:34:49,000
Speaker 1: to make government more efficient.

550
00:34:49,480 --> 00:34:52,160
Speaker 4: That same question is going to come up in a

551
00:34:52,200 --> 00:34:56,080
Speaker 4: lot of other cases as well. Always a pleasure to

552
00:34:56,080 --> 00:34:59,080
Speaker 4: have you on, Bob, Thanks so much. That's Robert him

553
00:34:59,200 --> 00:35:02,920
Speaker 4: of tartarkrein Drogen. And that's it for this edition of

554
00:35:02,920 --> 00:35:05,600
Speaker 4: The Bloomberg Law Show. Remember you can always get the

555
00:35:05,640 --> 00:35:08,879
Speaker 4: latest legal news on our Bloomberg Law podcasts. You can

556
00:35:08,920 --> 00:35:13,120
Speaker 4: find them on Apple Podcasts, Spotify, and at www dot

557
00:35:13,160 --> 00:35:17,360
Speaker 4: bloomberg dot com, slash podcast slash Law, and remember to

558
00:35:17,360 --> 00:35:20,439
Speaker 4: tune into The Bloomberg Law Show every weeknight at ten

559
00:35:20,480 --> 00:35:24,240
Speaker 4: pm Wall Street Time. I'm June Grosso and you're listening

560
00:35:24,360 --> 00:35:25,040
Speaker 4: to Bloomberg