On Wednesday, the Senate confirmed Gary Gensler as Securities and Exchange Commission Chair. The veteran regulator and banker will now take charge of President Joe Biden’s directive to tighten oversight of Wall Street. The new chairman will serve a term that technically ends by June this year.
However, he can still continue working as SEC chair until the current Congress adjourns. Senate Democrats can schedule a separate session to confirm him for a full five-year term.
Tight Vote Confirms Gensler As SEC Chair
In a 53-45 vote, senators confirmed Gensler’s nomination as the top Securities cop. This makes him the most prominent financial regulator who joined Biden’s cabinet. In the course of the voting, three Republican senators voted in his favor.
However, the overall GOP vote made it clear that they are in not favor. They oppose unnecessary transparency and climate change effects on business.
Upon his assumption to the seat, Gensler will need to deal with a host of issues bedeviling the red hot stock market. This includes allegations of market plumbing, as exemplified by the GameStop tug of war between short-sellers and wallstreetbet investors.
In addition, Gensler needs to address the recent collapse of private hedge fund Archegos Capital, and the mushrooming of special purpose acquisition companies (SPACs).
Hit The Ground Running
David Grim, partner at Stradley Ronon Stevens & Young and a former SEC division director, thinks Gensler is at the mercy of the market. “Any chairman comes to the SEC with their ideas of what they want their priorities to be.
But those priorities are in some ways at the mercy of what’s happening in the markets at the time,” he said.
In fact, one of Gensler’s first acts should involve hiring new directors for the SEC’s major divisions. Specifically, this includes a chief for enforcement as well as senior advisers for the Chairman.
A former Goldman Sachs executive, Gensler knows the ins and outs of Wall Street. In Washington DC, Gensler is known as a hard-nosed regulator and the architect of the swaps market overhaul. During his tenure as chair of the Commodity Futures Trading Commission, he set rules that helped the market survive the pandemic.
Among the Democrats’ wish list is requiring public companies to disclose more information about risks from climate change. The SEC already said last month that it plans to increase scrutiny of asset managers and companies.
This can prevent investors from being misled by their socially responsible or environmentally friendly strategies.
Progressives Cheer Nomination
Progressives who batted for Gensler’s nomination hope that he retains his hard-nosed ways at the SEC. In particular, the agency employs 4,300 workers that oversee the stock market and dictates disclosure requirements for public companies.
The progressives say that during the previous administration, the SEC went too far removing protections for the everyday investor.
One of Gensler’s supporters is progressive senator Elizabeth Warren (D-MA). “The SEC has been asleep on the job for long enough. It’s time for the commission to get up off its behind and protect investors and consumers,” she said during his confirmation hearing.
Meanwhile, Gensler himself reiterated the need for more company disclosures.“There are tens of trillions of dollars of invested assets that are looking for more information about climate risk. I think then the SEC has a role to play to help bring some consistency and comparability to those guidelines,” he told Senators during his meeting.
Conservatives Wary Of Gensler’s Plans
Meanwhile, conservatives warn that saddling public companies with additional requirements can hamper competitiveness. Consequently, it will drive more capital onto private markets and out of reach of middle-class investors.
Pennsylvania Senator Pat Toomey issued a statement regarding this potential conflict. “I’m concerned [Mr. Gensler] will cause the SEC to use its regulatory powers to advance a liberal social agenda focused on issues such as global warming, political spending disclosures, and racial inequality and diversity.
Securities laws are not the appropriate vehicle to address these topics. That is why we have environmental, political spending, and civil-rights laws, and other federal agencies to enforce them,” he said in a statement.
Gensler also indicated during the hearing that he plans to examine issues surrounding the wild trading by individual investors in GameStop shares.
Specifically, he’d like to investigate the business model known as payment for order flow. This is where online brokers offer commission-free trading by selling their clients’ orders to high-frequency market makers.
Can Gensler Do It?
Former SEC Commissioner Annette Nazareth said Gensler’s record at the CFTC showed he can juggle multiple priorities. “When I hear all of these different possible agenda items, I’m not sure that it would be all that daunting for him. What we’re going to see is a very muscular regulatory regime,” she said.
Watch the Digital Perspectives April 15 episode featuring a segment about Gary Gensler’s confirmation as SEC Chairman:
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