Tag: Gensler

McHenry clashes with SEC’s Gensler over crypto crackdown

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Gensler has long argued that much of the lightly regulated $1 trillion market violates U.S. securities rules because many of the products consist of unregistered securities.
Gensler, an ally of top progressives like Senate Banking Chair Sherrod Brown (D-Ohio) and Sen. Elizabeth Warren (D-Mass.), has been on a collision course with McHenry since the GOP took control of the House in January. The veteran regulator’s turbocharged rulemaking agenda includes planned overhauls of the private equity industry and stock market trading, along with a sweeping climate disclosure proposal that Republicans have battered with claims of government overreach.
But much of the fireworks during Tuesday’s marathon five-and-a-half-hour hearing were over crypto.
McHenry — along with other Republicans like Reps. French Hill of Arkansas and Bill Huizenga of Michigan — attacked Gensler over his approach to regulation. They said he was too focused on enforcement and not enough on providing clarity for the industry. They also blasted the SEC chair for stonewalling their efforts to investigate his response to the FTX failure, with McHenry calling the agency’s responses “unacceptable.”
“If you continue to thwart this institution by ignoring our requests and providing incomplete responses, we will be left with no choice but to pursue all avenues to compel the information or documents we need,” McHenry said.
In one contentious exchange, McHenry challenged Gensler to explain whether Ether — the second-largest crypto token after Bitcoin — is a security, while hinting at a potential turf war between the SEC and another regulator, the Commodity Futures Trading Commission. CFTC Chair Rostin Behnam, whose agency oversees derivatives products, has said that Ether falls under the CFTC’s jurisdiction.
“Do you think it serves the market for an object to be viewed by the commodities regulators as a commodity and the securities regulator to be viewed as a security? Do you think that provides safety and soundness for the products?” McHenry asked Gensler, who led the CFTC during the Obama administration. “I think ‘no’ should be a very simple answer for you here.”
But Gensler declined, citing a longstanding precedent for SEC officials to not comment on specific cases. Instead, he offered a high-level response explaining the SEC’s test for determining whether an asset is a security.

The SEC chair called on exchanges, brokers and issuers to comply with the same rules that Wall Street follows.
“It’s not a matter of a lack of clarity,” he said. “This is a field that in the main is built up around non-compliance.”
Democrats, led by ranking member Maxine Waters (D-Calif.), defended Gensler’s crypto strategy — as well as most of the SEC’s agenda. Waters said his approach to crypto marked a “stark difference” from that of previous SEC officials. And Rep. Jim Himes of Connecticut criticized Republicans for taking issue with the SEC for doing “too much, too quickly” just weeks after blasting bank regulators for doing “too little” and moving “too slowly” following the collapse of Silicon Valley Bank.
The hearing offered Republicans a rare opportunity to harangue Gensler to his face rather than through public letters and official statements.
Gensler was often quick to defend the SEC’s work, but the frustration was palpable. Several lawmakers, including House Whip Tom Emmer (R-Minn.) and Rep. Warren Davidson of Ohio, voiced displeasure with Gensler’s refusal to answer yes or no questions about his agenda.
Rep. Alex Mooney (R-W.V.) bashed as “radical” Gensler’s high-profile bid to require public companies to disclose climate risks.
Rep. Andy Barr (R-Ky.) said the SEC’s attempt to force private equity firms to make new disclosures to their investors would strip competition from the private funds market and harm investors. And Rep. Ann Wagner (R-Mo.), who chairs the committee’s panel on capital markets, said the planned overhaul of U.S. stock trading risks making “equity markets more costly, less efficient and overall worse” for individual investors.
Even some Democrats had questions.
Rep. Ritchie Torres of New York wondered aloud whether the SEC’s plans to update stock trading rules are “fixing what ain’t broken.”
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( With inputs from : www.politico.com )

April 18, 2023
SEC’s Gensler rejects crypto’s threat to move overseas

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Now, as Europe moves ahead with rules for digital assets and U.S. lawmakers remain locked in a stalemate over the need for new regulations, crypto giants are threatening to move their businesses across the Atlantic.
Gensler brushed off concerns about the plight of the U.S. industry as he faces a barrage of criticism from digital asset executives and their allies in Congress over how he’s regulating the space. House Republicans are ramping up oversight of his crypto enforcement actions and plan to scrutinize his every move, but he’s also under pressure from progressives like Sen. Elizabeth Warren to continue clamping down.
Yet Gensler said the flurry of litigation and enforcement actions hasn’t done much to convince firms to follow the law.
He said crypto businesses have eschewed what typically happens when agencies come down on bad behavior in financial markets. Rather than coming into compliance with U.S. securities, “this is a field that seems to belie that in some circumstances,” he said.
“The path to compliance is clear. It’s [that] the firms, in some regard, have generally been operating outside of those parameters,” he said.
Gensler, a Democrat who led the Commodity Futures Trading Commission during the Obama administration, has long claimed that securities laws already apply to digital asset businesses and that the agency does not need new broad authority from Congress.
Top firms like Coinbase and Ripple have resisted those claims and have lobbied lawmakers and regulators to create new rules for their industry — an effort set to soon pay off in Europe with the Markets in Crypto-Assets law, or MiCA.
Gensler is skeptical of the European law’s effectiveness.

“Do you know that MiCA doesn’t even cover Bitcoin?” he said, before adding that while the SEC often consults and talks with its international counterparties, he has “to focus on how to best help the American public.”
U.S. lawmakers, meanwhile, are still debating how to regulate the market’s exchanges and brokerages.
Crypto lobbyists have framed Gensler’s push to force their industry to comply with 90-year-old securities laws as a war against financial innovation. Whatever changes brought by crypto markets will pale compared to what could come as brokerages and financial data aggregators move to incorporate artificial intelligence into their offerings, Gensler said.
“The much more transformative technology right now of our times is predictive data analytics and everything underlying artificial intelligence,” he said, adding that he looked forward to working with lawmakers on how those tools could be regulated.
Zachary Warmbrodt contributed to this report.
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( With inputs from : www.politico.com )

March 8, 2023
Warren, Whitehouse lead Democrats in pressing Gensler for strong climate rule

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The lawmakers say investors are demanding the information — and that Wall Street’s top regulator needs to “issue a strong climate risk disclosure rule as quickly as possible.” They called the idea of preemptively curtailing the rule’s Scope 3 and financial reporting components to head off legal risks “deeply misguided.”
“The proposed rules are necessary and overdue,” they wrote to Gensler on Sunday, adding that if the SEC waters down the plans the agency “would be failing its duty to protect investors.”
Among the others who signed the letter are Sens. Martin Heinrich of New Mexico, Jeff Merkley of Oregon, Tina Smith of Minnesota and Cory Booker of New Jersey. Democratic Reps. Jerry Nadler of New York, Katie Porter of California and Chuy García of Illinois also signed on, as did Sen. Bernie Sanders of Vermont, an independent.
Asked for comment, an SEC spokesperson said in an email that Gensler “responds to Members of Congress directly rather than through the media.”
Now nearly a year old, the SEC’s proposal has ignited a firestorm in corporate America and among GOP lawmakers. But the Democratic concerns from Capitol Hill about the rule’s future are an early sign of the pushback that the SEC will have to face from the left if the agency elects to ease up.
The final rule will need to be approved by three of the SEC’s five commissioners, including Gensler.
Driving the proposal is the SEC’s hope of providing investors with a glimpse — through standardized data and disclosures — into how companies are tackling climate change.
The threat of litigation has hung over the SEC for months, as industry groups like the National Association of Manufacturers and several state attorneys general have warned that they may look to challenge the rule in court and on the grounds that the SEC overstepped its authority with the rule — especially in looking to include Scope 3 emissions.

Democrats see Scope 3 as pivotal to the final rule’s success.
“Not requiring Scope 3 emissions disclosures would enable [fossil fuel companies] and other companies with similar types of emissions patterns to hide the vast majority of their exposure to climate risk from regulators and investors,” the lawmakers wrote. “For many companies and sectors, a greenhouse gas inventory that omits Scope 3 would be materially misleading to investors.”
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( With inputs from : www.politico.com )

March 6, 2023