House Republican Leaders Criticize SEC's Failure to Produce Records
Commentary by Steven Lofchie
House Financial Services Committee Chair Patrick McHenry (R-NC) and Subcommittee Chair Bill Huizenga (R-MI) characterized as "unacceptable" the SEC's failure to satisfy Congressional requests for information on (i) the charges against Sam Bankman-Fried of FTX, (ii) proposed regulations on climate change and (iii) digital asset entities that have sought to register with the SEC.
In a letter addressed to SEC Chair Gary Gensler, the legislators said that the SEC has, with limited exception, provided only publicly available documents. The legislators referenced SEC staff responses that the requests for information are "overly burdensome" and subsequently asked that Congress prioritize its demands. In what the legislators called an "extraordinary accommodation," they prioritized sections of their requests for information on the proposed climate rule and digital asset registration.
The legislators made clear that they still expect to receive the charges recommendation memorandum as to Sam Bankman-Fried and all supporting evidence regarding the charges by May 19, 2023. If the SEC does not provide the information, the legislators said that testimony will then be scheduled to examine the SEC’s "failure to comply with congressional requests."
Commentary
While this would seem to be the SEC setting a bad example on all three scores, the refusal to produce records as to proposed climate change regulations is the most troublesome. If adopted, the regulations would impact every SEC-registered issuer and would be materially expensive to implement. Accordingly, it is hard to imagine any justification for being less than fully transparent with Congress on the proposed regulations.