On Wednesday, April 14, the
Senate confirmed Gary Gensler to be Chairman of the SEC by a 53 – 45 vote. Mr. Gensler previously served under President Obama as the head of the Commodity Futures Trading Commission following the 2008-09 financial crisis. The Senate approved Gensler for a term lasting until early June, though under SEC rules he would be able to serve through next year. Democrats plan to vote on another Gensler term that would allow him to stay in office into 2026.
Volatility in the market and other structural shifts may grab Mr. Gensler’s immediate attention. He will be called on to address volatility and investor safety risks related to the GameStop stock price and related trading platform concerns. Additionally, the SEC is likely to launch investigations into the increased popularity (and potential risks) of SPACs, cryptocurrencies, and the implosion of the Archegos Capital Management investment fund and its impact on several of the largest international banks. In particular, the Archegos collapse may push Mr. Gensler to prioritize unfinished rulemaking under Dodd-Frank, including Section 956 that covers the amount of risk-taking that financial services companies are permitted to incentivize through compensation.
Will Mr. Gensler continue the rapid pace set by
Acting Chairwoman Allison Lee on climate related disclosure? In confirmation hearings, he has indicated broad support for this agenda without explicitly committing to specific actions. Congressional Republicans have already indicated concerns with the SEC becoming overly involved in ESG issues and are likely to push back sharply on requirements to disclose political spending and lobbying, workforce diversity metrics, and climate risks. Pat Toomey, the ranking Republican on the Senate Banking Committee, voiced the concern that “[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, racial inequality and diversity.” Most recently, the SEC issued a
Risk Alert to the market indicating the Division of Examinations has notable concerns about what is being sold to investors as “ESG” investing.
Mr. Gensler’s nomination has been viewed as more aligned with the progressive wing of the Democratic Party and it is likely he will represent a major figure in the effort to address climate change. Further, he is likely to exhibit the same tough approach to regulation and enforcement seen during his time at the CFTC. While there, he also gained a reputation for efficiency, moving initiatives through the rules-writing process with impressive speed.
