Securities and Exchange Commission chair Gary Gensler’s ambitious regulatory agenda is sparking intense opposition from the financial industry. The industry sees the SEC’s expanding legal authority as excessive and is pushing back through lawsuits and resistance.
Lawsuits have been filed against the SEC in recent months. The US Chamber of Commerce has challenged a rule that expands stock buyback disclosures. A coalition of private equity, venture capital, and hedge fund groups has sued to block new rules for private fund managers. Additionally, the company behind the Ripple digital token is challenging an SEC civil lawsuit, arguing that it goes beyond the agency’s regulatory power.
The SEC faced another setback when a federal appeals court ruled against its rejection of asset manager Grayscale’s application for a US-listed exchange-traded fund tracking the price of bitcoin. The court deemed the denial “arbitrary and capricious.”
Gensler, appointed by President Joe Biden, is part of a group of senior regulators pursuing a more stringent approach to rulemaking and enforcement. He argues that this approach is necessary to fulfill the SEC’s mandate and protect US investors. Gensler’s previous experience as chair of the Commodity Futures Trading Commission during the 2008 financial crisis has influenced his active regulatory stance.
Under Gensler’s leadership, the SEC has proposed a significant number of rules and regulatory proposals, surpassing his predecessors since the 2008 global financial crisis.
According to the Committee on Capital Markets Regulation, Gensler’s SEC has presented 47 proposals that have substantially affected market participants. Of these, 22 have been adopted within the first 850 days of his leadership, marking a record compared to ex-SEC chair Mary Schapiro. Schapiro presented 59 proposals and 18 final rules during her tenure.
Gensler’s detractors, including Republican policymakers and market participants, believe he has exceeded the SEC’s authority, while supporters argue that his rules are long overdue and necessary in modern-day markets.
The SEC has defended its proposals, stating that they are grounded in authorities granted by Congress and aligned with the agency’s mission to ensure the markets work for investors and issuers.
Gensler’s proposals cover a wide range of areas, from mutual fund pricing to cyber security and climate disclosures for public companies.
Regulatory limitations imposed by recent court rulings have led to some paralysis within the SEC on certain issues. This has caused critics to accuse Gensler of pursuing an overly aggressive rulemaking agenda.
The SEC’s agenda has faced opposition from industry groups, such as the Managed Funds Association (MFA), who argue that the regulator’s actions impede the capital markets and harm the economy. The MFA specifically criticized the SEC’s private fund rules as exceeding its statutory authority.
Consumer groups, on the other hand, believe the rules will improve accountability and transparency in the $27tn private fund industry.
In response to criticism, Gensler has emphasized that his rules will promote efficiency, competition, integrity, and transparency for private fund advisers, benefiting investors, issuers, and the markets. Supporters argue that Gensler’s work is long overdue and necessary to address anti-investor practices.
Despite financial industry resistance and the potential impact on profits and bonuses, SEC rulemaking fulfills the regulator’s mandate to seek disclosures and limit illegal conduct.
Opposition from the financial industry often results in lawsuits against the SEC, reflecting the industry’s determination to protect profits.
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