Yesterday, the White House announced it would nominate Lisa Fairfax and Hester Peirce to serve on the Securities and Exchange Commission (SEC). As is often the case with partisan commissions, the administration paired a Democrat (Fairfax) with a Republican (Peirce) as a package, in a sense. What often goes unnoticed about these package nominations is that the lengths of each nominee’s terms are generally not equal.
The reason is that most independent financial regulatory agencies have terms that are fixed according to the calendar, not to when nominees are confirmed by the Senate. The five SEC commissioners have five-year terms, one of which expires each year on June 5. In fact, all independent financial regulatory agencies with boards or commissions use a fixed-term structure for their members. Commissioners on the Commodity Futures Trading Commission (CFTC) follow the same five-year rolling pattern as the SEC. One of the seven seats on the Federal Reserve Board of Governors, which have 14-year terms, expires on January 31 every other year. The Federal Deposit Insurance Corporation and the National Credit Union Administration each have three directors who serve six-year terms that also are fixed to the calendar.
The heads of single-director financial regulatory agencies and the chairs and vice chairs of boards or commissions are different, with Senate confirmation starting the clock running on their terms. Consumer Financial Protection Bureau Director Richard Cordray, for example, was confirmed in July 2013 to a five-year term that will expire in July 2018. Office of Financial Research Director Richard Berner was confirmed in January 2013 to a six-year term that expires in Jan. 2019. The Comptroller of the Currency receives a five-year term, also dating from when he or she is confirmed.
Either Fairfax or Peirce will be nominated to a single SEC term that ends in June 2020. The other will presumably be nominated twice, once to serve the remainder of the term that ends in June 2016, and for a second full term ending in June 2021. The president might want to nominate Fairfax for the two terms, thus securing an extra year for the nominee from his own party.
However, in addition to specifying that no more than three of the five commissioners may be from the same political party, the law says that “members of different political parties shall be appointed alternately as nearly as may be practicable.” Presidents have generally followed this practice; Republican nominees to the SEC (and the CFTC) usually take the place of Republican commissioners, and Democrats usually replace Democrats. On May 19, 2011, for example, President Barack Obama announced two nominations to the SEC: Republican Daniel Gallagher to a term that will expire in 2016 and Democrat Luis Aguilar to a term expired earlier in 2015. Similarly, on May 23, 2013, the president made two additional SEC nominations: Republican Michael Piwowar to term that will expire in 2018 and Democrat Kara Stein to a term that will expire in 2017. In both cases, each seat on the SEC maintained partisan continuity.
Nominating a chair can change this dynamic. In 2005, President George W. Bush nominated soon-to-be Chairman Christopher Cox to a seat on the SEC formerly held by Democrat Harvey Goldschmid, and that would expire in 2009. The following month, he nominated Democrat Annette Nazareth to a seat on the SEC that was formerly held by Republican William Donaldson, and would expire in 2007.
If the president continues the typical pattern of partisan continuity, he will nominate Fairfax to the term that expires in 2020 and Peirce to two terms, the latter of which would expire in 2021.