Securities and Exchange Commission (SEC) Chairman Gary Gensler’s lengthy to-do list for regulating U.S. financial markets has Wall Street anxiously awaiting his first moves.
The SEC’s top official took office this week amid a yearlong financial market frenzy and a flood of novel investment products with unknown implications for the broader investment industry.
The rise of popular online trading applications have drawn tens of thousands of new investors into the market with easy access to stocks, digital currencies, exchange traded funds and options.
A flood of federal stimulus and the increasingly viral nature of investing — epitomized by the GameStop short squeeze and a publicly traded New Jersey deli with less than $14,000 in annual sales — have also helped fuel speculation across a rapidly expanding marketplace.
“The market has been excessively accelerating at an unprecedented rate, and that aligns with an unprecedented surge in retail investing,” said Kurt Wolfe, a securities attorney at Troutman Pepper LLP.
“When you kind of have a coming together of weird products and Main Street investors, there’s often a regulatory clap back on the horizon.”
Gensler, a critic of overzealous financial risk-taking, helped expand oversight of the post-financial crisis futures market during the Obama administration when he was chairman of the Commodity Futures Trading Commission, making him an ideal choice for Democrats who want to see Washington play a bigger role on Wall Street.
But there’s also bipartisan concern about recent trading activity, like whether new platforms can handle wild swings in markets after many buckled during the GameStop frenzy and whether their sales methods, used to compensate for no-fee access, are running afoul of federal rules.
The SEC’s new Democratic majority is expected to clamp down on the rapid proliferation of new investment products and expand the depth of information required to be disclosed when selling them. Before Gensler was sworn in Saturday, the agency had already taken steps to cool off the rise of another product of the pandemic investment rush: special purpose acquisition companies, which solicit investors to fund the purchase of something with actual value.
Source: The Hill