Securities and Exchange Commission Chair Gary Gensler discussed his agenda for the remainder of his term in an interview published last week in AdvisorHub.
Gensler was sworn in in April 2021 for a five-year term as head of the SEC, and has said he plans to stay on in his post should President Biden be re-elected in November.
Gensler spoke with a panel of Bloomberg editors and reporters about some of the issues facing the financial industry and his priorities as Wall Street’s top regulator.
He said that of the 55 or 60 proposals that were put forth after assuming the leadership of the SEC, 35 of them have been finalized, though generally with modifications from their original form. Work is continuing on new plans, he said.
“On the equity markets, there were the four separate proposals from December 2022, and the direction of travel on those is forward. We’re working on each of those,” said Gensler. “And there was one about volume-based discounts in that market. So on those five, I feel very good about the staff work. There are some rules around investment advisers, broker-dealers and something called systems compliance and integrity. And even customer notification if somebody gets into your brokerage account or gets your private information. That suite of rules, again, the direction of travel is forward and it looks good.”
Gensler also noted the commission’s ongoing efforts to finalize a rule requiring public companies to disclose climate-related information, and rules requiring broker-dealers and investment advisers to take certain steps to address conflicts of interest associated with artificial intelligence and predictive data analytics.
He said there is no pressing timetable for completion of these proposals. Gensler added that in retrospect, he did not feel the SEC had been too ambitious in its rules proposals.
“Knowing everything we know, we would probably have laid out a similar agenda,” he said. “Part of it is there’s five SEC commissioners, and it’s coming to a consensus as to priorities. So I think these are real needs, of driving efficiency and competition and resiliency in the market, and I feel pretty optimistic. Does it mean that we adopt every rule that we propose? No, because sometimes we learn from commenters and we moderate and we change or we re-propose something, so the clock does run out. But I’d rather finalize that which is ready, instead of finalizing against the clock.”
On other matters, Gensler was asked about the growth in private credit, and emphasized the benefits of credit intermediation in the bank and non-bank sector. Regarding risks to financial stability, he cited concerns over where the banking sector and non-banking sector come together.
“It’s in the prime brokerage, where banks are basically lending to the non-bank sector, particularly in this secured funding market called repos, and in the reverse repo market. Something like three-quarters of that market is done at zero or near-zero margin,” Gensler said.
He also addressed the risks involved in cryptocurrencies, given the lack of regulatory compliance in the industry.
“It’s a whole field built on a predicate of sidestepping the law when they choose to, and then relying on the laws when it’s to their advantage,” he said. “When they’re in bankruptcy court, they’re certainly right there in court, relying on the laws, suing each other sometimes.”
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