SEC watchers say Trump may not follow traditional party split on regulatory panel

The president could appoint two independent members or simply leave the vacancies open.

President Donald J. Trump’s unpredictability may extend to his appointment of Securities and Exchange Commissioner members, financial industry government relations officials said on Tuesday.

Traditionally, the SEC’s five commissioners are split 3-2, with the majority representing the party in power in the White House. But Mr. Trump, who has nominated political independent Jay Clayton for SEC chairman, may switch things up.

Currently, there are two members serving on the panel, Republican member Michael Piwowar, who is the acting chairman, and Democratic member Kara Stein. Instead of taking recommendations from lawmakers for filling the remaining two slots with a Democrat and a Republican, Mr. Trump could go in a new direction.

“He may choose independents. He may not even follow the Democratic/Republican staffing of the commission,” Jeffrey Brown, senior vice president at Charles Schwab & Co., said at the Securities Industry and Financial Markets Association compliance and legal conference in San Diego. “He’s going to say [to Congress]: ‘You’ve had your opportunity, and now I’m going to decide who I want on the commission. Trump could do extraordinary things. We’ve seen that as a candidate, and now we’re seeing that as a president.”

In fact, Mr. Trump may not even fill out the commission. Assuming that Mr. Clayton is confirmed by the Senate, the three-member commission would have a 2-1 majority in favor of the White House.

“Mr. Clayton likely will be viewed as a Republican appointment despite his self-professed independence,” Jim Lundy, a partner at Drinker Biddle & Reath, said in an interview.

Mr. Trump may stop when he has the votes and “it could be a while” before he nominates anyone else to the panel, Joanne Medero, managing director at BlackRock, said at the SIFMA conference.

Mr. Clayton’s nomination hearing is scheduled for Thursday in the Senate Banking Committee. It will be his first chance to lay out an agenda for the agency.

Enacting the regulatory reform that Mr. Trump has called for could be a challenge at the SEC, and not just because it is an independent agency, according to the SIFMA panelists. The approximately 4,000 SEC staff will have a strong say in what happens — and some of them are not necessarily supporters of Mr. Trump.

“Ultimately, agencies act through staff,” Ms. Medero said. “Change is really hard. It’s going to take a long time to get change.”

The short-staffing at the SEC goes beyond the commission itself, which is missing three members. Almost every division head has departed since the election, which also caused former Chairmwoman Mary Jo White to exit.

But the tumult is not changing daily operations, according to Stephanie Avakian, acting SEC enforcement director.

“Enforcement remains on track,” Ms. Avakian said at the SIFMA conference. “I wouldn’t expect a pullback in enforcement.”

Mr. Trump’s push for regulatory reform won’t mean that enforcement is neutered, according to Stephen Cutler, vice chairman of J.P. Morgan Chase & Co.

“You may see the end of ‘creative enforcement,’” Mr. Cutler said at the SIFMA conference. “I don’t think we’re going to see enforcement disarmament.”