Policy
Two Days Before It Shrank to Two Commissioners, the SEC Made One a Quorum
Hester Peirce's last day at the Securities and Exchange Commission was October 2. The same day, a rule dated September 30 took effect letting a single commissioner constitute a quorum on any matter from which every other sitting commissioner is disqualified, a step the Commission said in 1995 it did not think necessary. The agency now has two members, three vacancies, no nominee, a crypto custody proposal one day old, and a crypto offering rule whose comment period closes October 20.
The Securities Exchange Act of 1934 never said how many commissioners it takes to run the SEC. For sixty years the agency simply acted as if the answer were three, and in March 1995 it wrote that practice into a rule, 17 CFR 200.41. The 1995 release allowed two exceptions: if fewer than three commissioners were in office, those in office were a quorum, and if recusals on a particular matter left only two, two would do. It drew the line there. "The Commission does not believe it is necessary, at this time, to provide that one commissioner may constitute a quorum when disqualifications result in only one commissioner being available to deal with a particular matter."
On September 30, 2026, the Commission decided that it is. Release No. 34-106537, four pages, signed by the Secretary and dated the day of an open meeting at which Atkins praised Peirce's "independent mind," revises the rule so that "on any matter of business as to which the number of members in office, minus the number of members who either have disqualified themselves from consideration of such matter pursuant to §200.60 or are otherwise disqualified from such consideration, is two or one, that number of members shall constitute a quorum for purposes of such matter." The amendments, the release says, "are designed to promote flexibility and finality of agency rulemaking." Their effective date is October 2.
What changed and what did not
Two things about the new rule are easy to overstate, and one is easy to miss. The first: a two-member Commission is not new, and did not need this rule. The 1995 text already said that when fewer than three commissioners are in office, "a quorum shall consist of the number of members in office." Holland & Knight, in a July note anticipating Peirce's exit, called this the rule of two, recalled that the Clinton-era Commission ran for a stretch with only Chair Arthur Levitt and Commissioner Steven Wallman, and wrote that the provision had been upheld by the D.C. Circuit and the Southern District of New York. Chairman Paul Atkins and Commissioner Mark Uyeda could act as a Commission on October 3 with or without the September 30 amendment, provided both participate and agree.
The second: the new text does not let one commissioner act whenever he likes. It applies to a specific matter, and only when every other commissioner in office is disqualified from it. With five members that is a rare alignment. With two, it is the ordinary consequence of one recusal. If either Atkins or Uyeda is conflicted out of a matter, the other is now a quorum of one for that matter. The Lever, which reported the change on September 30, quoted Corey Frayer of the Consumer Federation of America calling it "ultimately the end of independent financial regulators." The rule's text is narrower than that sentence, and the arithmetic of a two-member Commission is what makes the narrow text matter.
The thing easy to miss is how it was adopted. The release states that the amendments "relate solely to agency management and organization and do not constitute a substantive rule," so the Administrative Procedure Act's notice and comment provisions "are not applicable." There was no proposal and no comment period. The explanation offered is two sentences: the Commission "has occasionally been in the position of having fewer than three members and believes it prudent to adapt its quorum rule to further accommodate that contingency," and "situations often arise in which one or more Commissioners have disqualified themselves or are otherwise disqualified from participating in a matter." Law360 noted it was the first change to the quorum rule in three decades.
Who counts as a quorum, before and after September 30
| In office | Recused on the matter | 1995 rule | 2026 rule |
|---|---|---|---|
| 5 | 0 | 3 needed | 3 needed |
| 3 | 1 | 2 suffice | 2 suffice |
| 3 | 2 | No quorum | 1 suffices |
| 2 | 0 | 2 suffice | 2 suffice |
| 2 | 1 | No quorum | 1 suffices |
The last three-member day
Peirce's resignation letter to the President is dated September 21 and was posted on September 25, CoinDesk reported; she is joining Regent University School of Law. Her SEC biography records that she was sworn in on January 11, 2018, and that she led the agency's Crypto Task Force. The statement Atkins and Uyeda issued on October 1 adds an earlier tour on staff from 2000 to 2008 and describes her crypto work in a phrase that reads differently the day after: "Often an army of one, she never hesitated to challenge regulation by enforcement or to press the Commission to give entrepreneurs a clear path to innovate on American shores."
Among her last acts as a commissioner was a statement on crypto custody. On October 1 the Commission proposed amendments to the custody rules for registered investment advisers and regulated funds that would, in the SEC's summary, permit crypto assets to be held in self-custody under certain circumstances and allow state trust companies to serve as custodians, with a 60-day comment period after Federal Register publication. Peirce's statement, titled "Roller Coaster Ride," said advisers "have been gritting their teeth and holding on for dear life hoping the regulatory roller coaster will soon end in workable custody rules," and that "regulators should zealously protect investors' right to self-custody and not attempt to force investors to custody their assets with someone else." That proposal, like Regulation Crypto Assets, whose comment period closes October 20, will be finalized, if it is finalized, by a Commission she is no longer on.
Two seats, three vacancies, no names
Jaime Lizárraga left in January 2025 and Caroline Crenshaw in January 2026, by AltsWire's account, which leaves Atkins and Uyeda, both Republican appointees, and three empty chairs, two of which by custom go to the other party. Holland & Knight wrote in July that the White House had asked Senate Democrats for recommendations and, as of July 10, "had not received any names in response." The desk found no nomination since. Confirmation, when a name arrives, runs through the Senate Banking Committee and the floor.
None of this stops the agency from working. Under the rule of two it never did. What the September 30 amendment changes is the failure mode. Before it, a conflict for either remaining commissioner on a given rule, order or enforcement action meant that matter waited for a third member. After it, the matter proceeds on one signature. The release does not say which pending matters prompted the change, and the desk is not going to guess. It says only that such situations "often arise."
The Take
The crypto industry's reaction to Peirce's departure has been, correctly, gratitude, and it has mostly missed the procedural news that arrived with it. A Commission of two, each able to act alone when the other steps aside, adopted that arrangement for itself without asking anyone, on the stated ground that it is about agency management. Maybe it is. The 1995 Commission looked at the same question and declined, and said why. This one changed the answer in four pages with no proposal, and timed it to the day its membership fell to the level where the change bites. The rules now out for comment, custody and Regulation Crypto Assets among them, are the ones the industry waited a decade for. Whoever signs them should expect the question of how many people were in the room, and the SEC has just made sure the answer can be one.