The Securities and Exchange Commission has long been one of the most attractive platforms for lawyers seeking a stint in public service. The agency offers high-profile work and generous salaries, at least by government standards. When it comes time to join the private sector, SEC attorneys generally have appealing options. That’s true now more than ever: as enforcement actions rise and the SEC extends its reach into new domains, law firm demand for attorneys with SEC experience is booming.
Unprecedented SEC rule-making activity
Bloomberg columnist Matt Levine frequently observes that “everything is securities fraud.” He’s joking, but only barely. The insight is that holding a company liable for failing to disclose socially undesirable behavior to the market is substantially easier for a plaintiff’s lawyer than winning a suit over the underlying conduct. Securities regulation has morphed into our default vehicle for deterring corporate malfeasance and encouraging “good” behavior, regardless of how attenuated the conduct is from traditional financial metrics.
Under Chairman Gary Gensler’s leadership, the SEC has pressed ahead with extending its reach into new frontiers, most strikingly through the proposed climate-related risk disclosure rules. If the extensive proposed disclosure obligations take effect, public companies will face a range of novel compliance challenges on which legal advice will be essential. Law firms offering counsel from former SEC officials who played a role in the rule-making process will be in a strong position to capitalize.
Another notable area of expanded SEC rule-making is the proposed new rules in relation to special purpose acquisition companies (SPACs). Regulating disclosures for SPAC IPOs and mergers is perhaps a less ambitious project than the climate risks proposal, but it will still represent a business development opportunity for law firms.
Greater demand for SEC enforcement defense and ESG advice
Some major firms tell me client demand for SEC enforcement defense is up as much as fifty percent. They attribute this increase to a substantial uptick in SEC enforcement actions, combined with the agency’s expansion of its enforcement priorities, especially in relation to ESG (Environmental, Social, and Governance) matters. For example, the SEC recently secured a settlement from BNY Mellon Investment Adviser over alleged misstatements regarding how BNY Mellon mutual funds incorporated ESG factors into the investment selection process.
Firm clients are also seeking out more advisory and counseling services involving ESG. Sidley, Kirkland, and Latham are examples of the many firms expanding their ESG-related practices. With Blackrock CEO Larry Fink predicting that the next 1,000 “unicorns” will be sustainable companies focused on decarbonization and the energy transition, the outlook for ESG counseling work is bright.
The SEC’s expanding role in crypto regulation
Regulation of the crypto sector is less broadly relevant than ESG rules, but it is worth highlighting as an area of growing focus for the SEC. Crypto companies have been pushing the SEC to provide the sector with more concrete guidance, an invitation the agency has largely rebuffed thus far. Instead, the SEC has concentrated on expanding its enforcement capabilities, announcing in May that it was nearly doubling the size of the Crypto Assets and Cyber Unit in its Division of Enforcement. As enforcement actions ramp up, there will be demand not just for defense but also for advice on complying with the emerging standards.
The value of SEC expertise
The more active the SEC becomes, the more law firm clients will value the knowledge and expertise that former SEC officials bring to the table. Law firms sometimes hesitate to bring on partners directly from government posts because those attorneys do not have immediately portable business. However, last year’s record law firm profits, combined with steadily increasing client demand in this area, will mitigate business development concerns.
For SEC officials and senior attorneys looking to make the transition from government to private practice, now is the ideal time. If you’re considering this move, you are welcome to contact me at 703-937-7023 or asavage@laterallink.com to learn more about the potential options.
Amy K. Savage is a Principal and the National Chair of the Government Transitions Group at Lateral Link, where she has a special focus on government and environmental hiring. Amy has placed government attorneys of all levels, from junior associates to practice group chairs and high-level officials.
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