Reorganization
The Trump Administration continues to remake the federal government. This week was less about policy and more about function, as President Trump issued two executive orders that would consolidate and expand the regulatory power of his office.
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Organizational chart: The first EO “ reins in independent agencies” such as the SEC and FTC, by requiring these agencies to consult with the White House on their priorities and strategic plans, submit draft regulations for review, and permit the Office of Management and Budget (OMB) to adjust agency budgets. The directive also provides that the President and Attorney General interpret questions of law controls, and agencies may not take official actions that would contradict this position.
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Strategic review & deregulation: The second EO directs all agency heads to consult with DOGE and within 60 days provide a list of all regulations that, among other things, exceed authority, impose significant costs on private parties such as small businesses and entrepreneurs, impede technological innovation, harm the national interests, or are not based on the best reading of the underlying statute. OMB will coordinate a unified regulatory agenda to address these regulations.
What this means: In short, the org chart has every line going to the White House through OMB, and everyone is focused on stripping away regulations. In practice, much of this happened in previous administrations with agencies working with the White House on priorities and budget, but this EO formalizes that process, requires it to happen, and directly exerts control over the landscape of federal agencies and their respective jurisdictions. Such actions could potentially slow rulemaking and enforcement activity at the SEC.
Engagement matters: This could have substantial impacts on the policy framework for startups, growth-stage companies, and the private capital that invests in them. The issue will be bandwidth, as agencies focus on revamping the existing apparatus, so it will be incumbent on us to drive the debate on issues key to the innovation ecosystem. For instance, this could be the catalyst for the SEC to:
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Broaden access to capital access: Adjust exempt offering framework to make it easier for companies and funds to raise capital, including through modifications to the accredited investor definition.
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Expand retail access to private funds: Rescind its staff-imposed guidance that registered, closed-end funds not invest more than 15% of net assets in private assets.
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Streamline private fund regs: Reduce compliance burdens on private fund managers and expand the ability for venture capital funds to make secondary and fund-of-fund investments.
None of these or other priorities are a given, but engagement from your local private markets infrastructure company’s policy team (that’s us) and the broader industry (that’s you) can help.
Balancing deregulation: In the same week the Trump Administration issued these deregulatory directives, it also took seemingly dissonant actions.
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Affirming FTC/DOJ merger guidelines: In 2023, the FTC and the DOJ dramatically revamped the merger review process, expanding the factors it would use to determine which transactions may violate antitrust. This rule and the FTC’s posture purportedly chilled M&A even within smaller targets and the innovation ecosystem. Easy target for reversal, right?
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On February 18, FTC Chairman Andrew Ferguson announced that those guidelines will remain in effect: “Stability is good for enforcement agencies. The wholesale rescission and reworking of guidelines is time consuming and expensive.” Chairman Ferguson may be right on stability, but that rationale has not guided other aspects and actions of the administration.
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Implementing the Corporate Transparency Act: CTA requires the majority of startups and small businesses to provide FinCEN information on their beneficial owners. There was a widespread push to stop CTA, but the question was in the courts. The courts deemed CTA unconstitutional, reversed that decision, stayed that reversal, and then reversed that stay. Though confusing, here is the result: CTA is constitutional and is in effect (for now).
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But here is the thing: The Trump Administration could not ignore the law Congress passed, but it could have decided not to defend it in court, as they did in with other rules being challenged. But it did mount a defense. And it won. FinCEN could also delay enforcement as modifications to the reporting rules are being considered. The House unanimously passed a one-year delay bill, but FinCEN opted for 30 days, issuing new guidance noting the new filing deadline is March 21, 2025.
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To be fair, both of these actions were taken prior to the EOs, so this may change. And nonetheless, we are not criticizing these steps or making a value judgement. Ensuring proper competitive practices is critical to a well-functioning economy. And the CTA law was put in place to help identify and stop illicit finance, which has national security implications. These are important goals.
We note them because they speak to the fact that even though deregulation is important, every administration balances it with other goals. In this case, competition policy and national security.
So why does this matter?
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Direct compliance: The FTC/DOJ and CTA examples will impact the innovation economy. So even if you are not shopping for an acquisition, if you are covered by CTA, be prepared to file. Carta has plenty of resources and is already working with FinCEN to reinstate our API portal to help our customers file.
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Future rules: This may be signal for other rules. For instance, there is a new AML/CFT rule that would impose new AML compliance obligations on all private fund managers, RIAs, and ERAs. This rule increases burdens on the innovation economy, so it may seem like it should be addressed as part of the administration's deregulation effort. But this has national security implications similar to the CTA rule. There are countless examples where this balance comes into play.
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Engagement matters: Broken record, I know. But the policy framework is evolving and we need to engage to help shape it. These rules that may stand, the rules that may still be developed, the tax policy that affects your investment and bottom line, the requirements that affect who you can raise money from—all of that is in flux and if we as an industry do not engage, others will make those decisions for us.
Thanks for reading. But you want to know more? Or learn about this in a more interactive environment?
Mark your calendars: 2025 Policy Landscape webinar
Wednesday, March 12 at 10 am (PT)/1 pm (ET)
Register here Along with a Republican Congress, the Trump Administration is shifting governing dynamics and policy outcomes that impact the private capital ecosystem—from tax to tech policy to capital markets regulation. Join Carl Holshouser, EVP, Corporate Officer, Head of Federal Policy and Government Relations at TechNet, and the Carta Policy Team for a discussion on what to expect from Congress and the new administration in 2025, and how the policy agenda will impact private equity, venture capital, and the startups and small businesses they support.
Quick hits
Crypto corner: The SEC launched an enforcement unit focused on combating retail fraud in emerging technologies. The new Cyber and Emerging Technologies Unit will replace the crypto enforcement arm established under former Chair Gary Gensler and will focus on combatting retail fraud committed through AI, crypto-related fraud, and other cyber-related misconduct. This pivot underscores a broader realignment of the SEC’s enforcement agenda, where efforts are expected to be more targeted toward rooting out bad actors and fraudulent conduct to prevent investor harm rather than broader sweeps, common under the previous administration, targeting non-fraudulent securities law violations. To that end, there also appears to be an agreement in principle to drop the Coinbase lawsuit.
Court sides with Biden regulators in post-Chevron decision. A Texas court upheld a Biden-era rule that permits ESG factors to be considered in 401(k) investing. The decision was surprising to many in the legal community who expected the rule to be overturned after the Supreme Court struck down the Chevron doctrine, which allowed courts to give deference to agency interpretations of laws that are silent or ambiguous. While one case is not definitive, the decision shows that the repeal of Chevron may have a more limited impact in practice.
Delaware takes action to stem DExit fears. The Delaware General Assembly has introduced new corporate law reforms to ensure it remains the go-to corporate domicile. The proposals aimed at addressing recent Chancery Court decisions that have prompted some high-profile businesses to incorporate in other states.
