SEC Thins to Two Commissioners as New Quorum Rule Reshapes Crypto Oversight

Hester Peirce resigned effective Oct. 2, leaving Chairman Paul Atkins and Commissioner Mark Uyeda as the only listed SEC members. A new rule allows a single eligible commissioner to form a quorum when all other sitting members are disqualified from a specific matter.

With only two commissioners remaining, future crypto-policy decisions will rest with an even smaller group.

The exception hinges on disqualification from the particular matter, enabling either remaining commissioner to serve as the quorum when the other is disqualified.

Peirce’s resignation letter, dated Sept. 21, set her departure for Oct. 2. The updated roster as of Oct. 3 lists Chairman Atkins and Commissioner Uyeda, and the SEC’s historical service table confirms Peirce’s tenure ended Oct. 2.

Custody reform and a new offering regime are still proposals, while tokenized-stock trading relief has already been granted as a conditional order. With the Commission down to two members, further decisions will be made by a smaller body, subject to the legal limits on each type of action.

The quorum amendment, dated Sept. 30 and effective Oct. 2, revises 17 CFR 200.41, which governs how many commissioners must be eligible to conduct Commission business.

An existing vacancy exception already permitted the number of commissioners in office to constitute a quorum when fewer than three were serving, including a Commission with only one member.

Previously, a separate disqualification provision allowed two eligible commissioners to act after others were disqualified. The amendment extends that provision to a single eligible commissioner when every other member in office is disqualified from the matter.

Under the current roster, if Atkins were disqualified from a matter, Uyeda could form the quorum, and vice versa.

The rule draws a line between vacancies, nonattendance, and recusal: a commissioner’s mere disagreement with a proposal does not qualify as disqualification under the new provision.

The published rule explains that disqualifications can arise and that the agency must continue conducting business. The SEC describes the amendment as promoting flexibility and finality, and finds it concerns internal management and organization rather than substantive regulation.

That administrative rationale accompanies a change with practical consequences for who can make Commission decisions. Peirce’s letter expressed confidence that Atkins, Uyeda, and SEC staff will continue to balance individual choice with sensible regulatory protections.

Crypto measures still require different kinds of action

One pending rulemaking is the Oct. 1 custody proposal, which addresses how regulated investment companies may custody crypto securities and similar investments, how registered advisers may custody client crypto funds and securities, and related modernization and reporting requirements.

In his October statement, Atkins placed custody reform alongside the offering proposal, Commission interpretations, and staff tokenization work. That inventory spans several kinds of regulatory action, with different roles for commissioners and staff.

A second pending measure is Regulation Crypto Assets, issued Aug. 18 and published Aug. 21. It would create offering exemptions for certain investment contracts involving crypto assets, along with disclosure requirements and continuing antifraud and antimanipulation obligations, and proposes a conditional safe harbor concerning investment-contract status.

Tokenized-stock access is at a different stage. The Sept. 17 Innovation Exemption is a temporary conditional exemptive order covering specified tokenized National Market System (NMS) stock trading venues and certain liquidity providers.

The order’s fact sheet describes five-year conditional relief, with limits on stock symbols and volume, equivalent shareholder rights, public auditable smart contracts, and operating disclosures. For stock tokenized by an unaffiliated third party, it also requires issuer notice and an opportunity to object.

Those conditions remain part of the pathway available to qualifying participants. A future Commission decision on that relief would occur under the applicable quorum arrangements, but the new quorum rule itself neither broadens the exemption nor removes its safeguards.

A quorum does not replace voting or legal authority

For decisions circulated among commissioners, the SEC’s seriatim rule requires that a matter is not final until each member reports a vote or intended nonparticipation to the secretary.

Any commissioner can request that a circulated matter be withdrawn and scheduled for joint deliberation.

Under 17 CFR 200.60, commissioners must carefully weigh qualification in matters involving interests and relationships, and an individual member’s qualification rests with that member. The amended quorum clause also covers members otherwise disqualified.

Staff no-action letters and tokenized-securities statements are a separate part of the policy inventory described by Atkins.

The statutory delegation provision allows delegation through published orders or rules, while excluding general rulemaking from that authorization. It preserves Commission review and permits one member to bring a delegated action before the Commission for review.

The smaller body also remains constrained by applicable law. The Administrative Procedure Act imposes notice-and-comment requirements for covered rulemaking, with specified exceptions. The SEC’s finding that its organizational quorum amendment did not require notice and comment is not a general exemption for future crypto rules.

Under judicial-review law, courts can set aside agency action found unlawful, beyond statutory authority, or taken without required procedure. Reducing the number of eligible commissioners does not supply additional substantive authority or insulate a decision from review.

The SEC’s currently posted October tally contains the three-member custody vote, with no later one-member crypto decision listed. The agency says it generally posts votes only when the matter is final, so that tally supports a limited observation rather than an exhaustive claim about every action.

For crypto businesses, the next concrete milestones are the Oct. 20 offering-rule comment deadline, the Dec. 7 custody deadline, and any subsequent Commission decisions on those proposals or conditional trading relief.

Their legal status, recorded approvals, and participating members will show how the reduced Commission operates.

The new exception preserves the ability to act through disqualifications. Its effect on crypto policy will depend on which specific matters arise, who remains eligible to consider them, and the decisions they make.

Source link