Quietly, and over decades, “independent” federal agencies and the nonprofit bodies they oversee have accumulated substantial executive power, including the power to promulgate rules that bind Americans and their businesses. This 50-year “leakage” of executive power to unaccountable, difficult-to-remove government and nonprofit officials threatens the separation of powers scheme that the Constitution requires.

In 1975, Congress established the Municipal Securities Rulemaking Board (MSRB) as an independent, private, and self-regulatory organization to propose rules to protect investors in the municipal securities industry. The Securities and Exchange Commission (SEC) has statutory authority to review and approve the MSRB’s proposed regulations.

In theory, the rulemaking process proceeds as follows: the MSRB proposes rules for its industry, the MSRB submits these proposed rules to the SEC for review and public comment, and, if the Commissioners are satisfied with the proposed rules, they are approved and enforceable. But that is not how it usually works in practice. The SEC Commissioners have delegated authority to approve the MSRB’s proposed regulations to a senior staff member—the Director of the Office of Municipal Securities (the Director).

In 2024, the MSRB proposed a rule that would shorten the reporting time for municipal securities trades from 15 minutes down to one minute. The Director—on delegated authority from the Commission—eventually approved this “one-minute rule” and issued an order that gave it binding effect on municipal securities traders and other regulated parties. The American Securities Association (ASA) then petitioned the Eleventh Circuit Court of Appeals for review to set aside that order and rule.

Now Cato has filed an amicus brief in support of the American Securities Association.

Article II of the Constitution vests all executive power in the President. Anyone who exercises “executive power” must be subject to the President’s control. Accordingly, the Supreme Court’s decision in Free Enterprise Fund v. PCAOB held that more than one layer of for-cause removal protection for officers exercising executive power is “incompatible with the Constitution’s separation of powers.”

The one-minute rule raises an Article II problem because the rulemakers here—the Director and MSRB directors—are shielded by two or more layers of for-cause removal protections. The first layer is the SEC Commissioners, who have for-cause removal protections. The second layer is the Director, who, like most career staff, has for-cause removal protections and cannot be removed at will by the SEC Commissioners. And, finally, the MSRB officials who proposed the rule are also not removable at will by the SEC.

This means that all the parties who promulgated the one-minute rule operated independent of executive branch control. Therefore, the Director-MSRB joint rulemaking process runs afoul of both the Supreme Court’s decision in Free Enterprise Fund and Article II’s Take Care Clause.

The Eleventh Circuit should rule that the MSRB’s joint rulemaking process with the Director is unconstitutionally structured and set aside both the SEC order and the one-minute rule.