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President Donald Trump issued an executive order yesterday empowering the heads of federal agencies to directly appoint judges who decide cases ranging from Wall Street sanctions to environmental disputes, Bloomberg News reported. The Supreme Court undermined the authority of administrative law judges last month by ruling that they are constitutional officers, potentially casting doubt on whether some of their appointments were properly handled and opening up hundreds of cases to potential legal challenges. The Supreme Court ruling pertained to the Securities and Exchange Commission, a top financial regulator that is one of dozens of federal agencies that use the in-house judges to rule on internal trials and disputes. Now, many other cases may have to be reconsidered because of improperly hired judges, said James Sherk, a special assistant to the president for domestic policy. Trump’s order grants agency chiefs greater leeway to choose judges, which could also allow them to ratify currently sitting judges at the Social Security Administration, Department of Health and Human Services, Department of Labor and several other agencies — including a number of financial regulators. Still, the Supreme Court decision leaves many of the administrative law judges’ past decisions in jeopardy. The Court said that administrative law judges must be appointed by the president or heads of agencies, not hired as ordinary government workers. Trump’s order discards a complex Office of Personnel Management selection process and establishes a new employment status that allows agencies to appoint judges much like they now hire federal attorneys.

Former top executives at ITT Educational Services, the parent company of defunct ITT Technical Institute, have settled fraud cases with the Securities and Exchange Commission, avoiding a trial slated to begin yesterday, the Washington Post reported. A judgment order entered on Friday puts to rest civil fraud charges filed in 2015 against former ITT chief executive Kevin Modany and former chief financial officer Daniel Fitzpatrick for allegedly deceiving investors about high rates of late payments and defaults on student loans backed by the company. Neither Modany nor Fitzpatrick admitted or denied wrongdoing, but they agreed to pay penalties of $200,000 and $100,000, respectively. Both are barred from serving as officers and directors of public companies for five years. The agreement arrives nearly a year after SEC commissioners rejected an earlier settlement with the executives. In 2015, the SEC accused ITT’s top brass of making secret payments on delinquent accounts to delay defaults instead of disclosing the tens of millions of dollars in impending losses to investors. Executives assured investors in conference calls the programs were performing well, while ITT’s obligations to pay out on soured loans began to balloon, according to the complaint.

The Securities and Exchange Commission on Thursday voted to ease financial reporting requirements for nearly 1,000 companies by expanding the definition of which firms qualify as smaller sized and therefore are eligible for less stringent disclosure requirements, the Wall Street Journal reported. Newly adopted amendments define a “smaller reporting company” as one with less than $250 million in publicly traded shares, up from the previous definition of $75 million. The agency also expanded the definition to include companies with less than $100 million in annual revenue if they also have less than $700 million in publicly held shares. The previous revenue test allowed “scaled disclosure” of a company with no publicly traded shares and less than $50 million in annual revenues. The SEC estimates that the move will allow an additional 966 to be eligible for smaller reporting company status over the first year under the new definition.

Wells Fargo & Co. will pay more than $5.1 million to settle U.S. Securities and Exchange Commission charges it improperly pushed retail customers to actively trade complex investments in order to generate higher fees, Reuters reported. The SEC on Monday said the payout includes a $4 million civil fine, plus the return of ill-gotten gains and interest, over misconduct by the Wells Fargo Advisors brokerage in its sale of so-called market-linked investments. Wells Fargo was accused of reducing investor returns by encouraging customers to actively trade the investments though they were intended to be held to maturity, and despite an internal policy prohibiting “short-term trading” and “flipping.” The San Francisco-based bank did not admit or deny wrongdoing, but has taken steps to address sales practices that occurred from January 2009 to June 2013, the SEC said.

The U.S. Supreme Court agreed to consider narrowing the nation’s securities-fraud laws, accepting an appeal from an investment banker found by the Securities and Exchange Commission to have duped investors about a startup company’s financial condition, Bloomberg News reported. The banker, Francisco V. Lorenzo, said the SEC didn’t have enough proof to hold him liable for taking part in a scheme to defraud investors. A divided federal appeals court said that it was enough that Lorenzo, who worked at Charles Vista LLC, sent two emails misrepresenting the financial condition of a client, Waste2Energy Holdings Inc. The company was seeking to develop a way to generate electricity from solid waste, but the technology never materialized. An in-house judge at the SEC concluded the emails were “staggering” in their falsity. In his appeal, Lorenzo says allegations of false statements, without more, aren’t enough to hold someone liable for a fraudulent scheme. Lorenzo was also accused of violating securities-fraud provisions that specifically concern false statements, but the appeals court threw those claims out. The panel said Lorenzo wasn’t the one who actually made false statements, because the emails were drafted by Lorenzo’s boss and sent at his direction.

The Securities and Exchange Commission is trying to bridge the gap in investment advice standards for brokers and financial advisers, but the rift remains wide in one particular area: advice to 401(k) plan sponsors, Investment News reported. The SEC proposed Regulation Best Interest in mid-April as part of a broader rulemaking package. It would up the ante for brokers interacting with several retirement-account stakeholders — for example, owners of individual retirement accounts, employees rolling money out of a retirement plan and 401(k) participants deciding how to invest their money in-plan. Instead of just having to choose investments that are suitable for clients, brokers would be held to a more-stringent "best interest" standard, which isn't specifically defined in the proposal. However, 401(k) plan sponsors are left out of the equation because they don't appear to fall within the SEC rule's definition of "retail" investor, according to legal experts.

Post-crisis rules have created new challenges for Trump-appointed regulators as they look at recalibrating the financial rule book, but the vast majority of the 2010 Dodd-Frank Act isn’t going anywhere, Securities and Exchange Commission Chairman Jay Clayton said yesterday, the Wall Street Journal reported. Clayton said that regulators are evaluating how post-crisis rules have performed in practice, and that he had concerns about some of the unintended side effects from some regulations. But any changes will be around the edges, keeping the core of post-crisis overhauls in place, he added. One area Mr. Clayton singled out for rule changes are clearinghouses, which act as middlemen between the buyers and sellers of financial instruments such as commodities and derivatives. Clearinghouses are seen as a possible threat to financial stability, given how rapidly they have grown since Dodd-Frank mandated the routing of more transactions through them. He didn’t offer any potential suggestions as to how to deal with supersized clearinghouses, also known as central counterparties, but said they are a common topic of discussion when international regulators list potential risks to financial stability.