Witnesses at HFS Oversight Hearing Critique SEC Regulatory Approach

Witnesses at a House Financial Services Oversight Subcommittee hearing titled "SEC Overreach: Examining the Need for Reform" reviewed the agency's approach to rulemaking.

The Majority Staff Memorandum described the SEC's "rapid push to propose and finalize numerous new rules, insufficient comment periods, neglecting bipartisan congressional concerns, and finalizing new rules that exceed the SEC’s statutory authority." Capital Markets Subcommittee Chair Ann Wagner (R-MO) charged that Chair Gensler’s "frenetic, partisan rulemaking agenda at the SEC has threatened the health of U.S. capital markets and highlights the need for targeted institutional reform." House Financial Services Committee Ranking Member Maxine Waters (D-CA) maintained that the SEC should be fully funded to remain "an effective and relevant regulator."

• Cato Institute Director of Financial Regulation Studies, Center for Monetary and Financial Alternatives, Jennifer Schulp argued that the SEC has "fal[len] short" of its three-part mission (protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation). Ms. Schulp said the SEC would benefit from reforms aimed at (i) increasing the accountability and transparency of the agency, (ii) ensuring adequate input and analysis to improve agency rulemaking and (iii) holding the agency to high standards in the exercise of its functions.
• Center for American Progress Senior Director, Alexandra Thornton argued that the SEC's economic analyses have become longer and more complex. She highlighted recent SEC rulemakings, including the climate disclosure rule and the rule to update disclosures by trading centers related to execution of equities orders. Ms. Thornton said the result of such analysis is "paralysis." She called for a review of the SEC's internal procedures for adopting interpretive guidance, no-action letters and exemptive orders to ensure they are public and detailed. Further, Ms. Thornton expressed concerns about the growth of private markets and the expansion of exemptions from federal securities laws.