With Democrats in control of all three major branches of government, and the SEC commissioners now with a 3-2 Democratic majority, Gensler is likely to face calls from progressives to act on several fronts, including ESG, the GameStop fallout, the Archegos fiasco, payment-for-order flow, fiduciary obligations, and especially regulations around securities in the crypto space, including a bitcoin ETF.
President Joe Biden has pledged swift action to tackle what he calls a “climate emergency.” Acting chair Allison Herren Lee has already indicated that the SEC will focus on greater transparency and how corporate actions may be affecting the climate.
Climate change, Herren Lee has argued, fits squarely in the SEC’s mandate of providing data for investor protection.
That mandate can be fairly broad: In a recent speech, she argued that even political spending disclosure can be linked to ESG issues.
The GameStop situation has led to numerous calls for investigations around gamification of trading, market manipulation, and whether it is feasible to move from the current two-day settlement period for stocks (T + 2) to one day.
In a recent call with reporters, Christopher Gilkerson, Charles Schwab’s senior vice president and general counsel, said any reform initiated by Gensler “would focus on rapidly moving to T+1 settlement, better surveillance on potential market manipulation through social media and better disclosure for short sellers. And probably a focus on gamification of investing.”
Pat Healy of Issuer Network, who advises companies on going public, said more transparency around short sales is a clear priority.
“The SEC should create a minimal level of short-sale disclosure,” he told me. “That would alert the market that a big fish is taking a position, which is the parallel disclosure that is done when investors take long positions. This is the only part of the market that has no disclosure requirements.”
The recent Archegos fiasco, where a trader was able to attain massive positions in several stocks using swaps, will also likely attract Gensler’s attention, particularly since he was previously chairman of the Commodities Futures Trading Commission, where he was involved in implementing rules governing the swaps market following the Great Recession in 2008-2009.
The Archegos debacle caused significant losses to investors in many large companies and fits squarely in the SEC’s historic mission.
During his March 2 appearance before the Senate Banking Committee, Gensler noted the SEC’s historic role in protecting investors, and he promised to continue the SEC’s goals of “strengthening transparency and accountability in our markets, so people can invest with confidence, and be protected from fraud and manipulation.”