SEC Chair Gary Gensler Talks Up His Tenure
Commentary by Steven Lofchie
SEC Chair Gary Gensler touted new and adopted "common-sense rules of the road" in areas such as Treasury and equity market structure, corporate governance and cryptocurrency oversight.
Speaking at PLI's Annual Institute on Securities Regulation, Mr. Gensler said that securities laws create trust in US capital markets. He noted that the US capital markets are valued at more than $120 trillion, and the US accounts for over 40 percent of the world's capital markets, despite making up only 24 percent of the world economy.
Mr. Gensler underscored the following reforms as essential to maintaining US capital markets' global leadership in "promoting efficiency, resiliency, and integrity":
- Treasury Clearing. Mr. Gensler said that adopting the central clearing mandate would lower the cost and risk of these markets.
- Equity Market Structure. Mr. Gensler highlighted the successful transition to a T+1 settlement cycle in May 2024 (see related coverage) as well as the updated rules on equity trading that reduced the minimum quotation increment to half a penny (see related coverage).
- Corporate Governance and Disclosure. Mr. Gensler touted new requirements for (i) when corporate insiders can sell their shares (see related coverage); (ii) when executives have to give back compensation based on erroneously reported financials (see related coverage); (iii) disclosure of executive pay versus performance (see related coverage); and (iv) more timely disclosure by those who are seeking control and buy more than a five percent stake in a company (see related coverage).
- PCAOB Inspections and Auditing Standards. Mr. Gensler praised agreements with Chinese authorities, allowing PCAOB inspections of auditors based in China and Hong Kong.
On crypto, Mr. Gensler said that when he arrived in 2021, the SEC had already taken around 80 enforcement actions in the crypto market. He said the SEC continued these efforts, with crypto enforcement representing 5-7 percent of total cases annually. He said the SEC's primary focus has been on the other 10,000 digital assets, many of which courts have ruled as securities. He reported that this market segment—excluding bitcoin, ether and stablecoins—is valued around $600 billion, less than 20 percent of the crypto market and a small fraction of global capital markets. Mr. Gensler emphasized two points: (i) those offering or selling securities to the public must register and disclose information, and (ii) intermediaries like exchanges and broker-dealers must register and comply with regulations on conflicts and disclosures.
Mr. Gensler also noted that prior to his term, bitcoin ETF applications were routinely disapproved or withdrawn. During his term, he said, the first bitcoin futures ETF was approved (in 2021) and ETFs for physical bitcoin and ether were authorized (in 2024).
Commentary
To read Chair Gensler's remarks, one might think he had spent his tenure at the SEC promoting crypto assets or that he had overcome terrible resistance to allow the clearing of Bitcoin ETFs. Not mentioned is the fact that the SEC's continuing refusal to allow the listing of ETFs on ether was overthrown by the courts as arbitrary and capricious. Also not mentioned is the SEC's complete failure to think through a workable regulatory scheme for cryptocurrencies.
As to the Chair's claim that the new clearing mandate will reduce costs and risks in the US Treasury market, note today's report (quite excellent by the way) produced by SIFMA and EY on the Treasury Clearing mandate. If there is anything in that report that demonstrates that the clearing mandate will result in either a reduction of costs or a decrease in risks, it is not evident.
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