April 16, 2021
The Senate confirmed Gary Gensler to be Chairman of the SEC by a 53-45 vote. Mr. Gensler is expected to pursue greater disclosure on issues such as diversity and climate risk and drive an aggressive regulatory and enforcement agenda.
The Senate approved Gensler for a term lasting until early June, though under SEC rules he would be able to serve through next year. Democrats plan to vote on another Gensler term that would allow him to stay in office into 2026. He previously served under President Obama as the head of the Commodity Futures Trading Commission following the 2008-09 financial crisis, where he gained a reputation for efficiency, moving initiatives through the rulemaking process with impressive speed.
Will Mr. Gensler continue the rapid pace set by Acting Chair Alison Herron Lee on climate change? In confirmation hearings, Mr. Gensler has indicated broad support for the ESG agenda without explicitly committing to specific actions. Congressional Republicans have already indicated concerns with the SEC becoming overly involved in environmental and social issues and are likely to push back sharply on requirements to disclose political spending and lobbying, workforce diversity metrics, and climate risks. Sen. Pat Toomey (R-PA), the ranking Republican on the Senate Banking Committee, voiced the concern that “[Mr. Gensler] will cause the SEC to use its regulatory powers to advance a liberal social agenda focused on issues such as global warming, political spending disclosures, racial inequality and diversity.” Most recently, the SEC issued a Risk Alert to the market indicating the Division of Examinations has notable concerns about what is being sold to investors as “ESG” investing.
Volatility in the market may grab Mr. Gensler’s immediate attention: Mr. Gensler will be called on to address investor safety concerns related to the GameStop stock price volatility and trading platform concerns. Additionally, the SEC is likely to launch investigations into the increased popularity (and potential risks) of SPACs, cryptocurrencies, and the implosion of the Archegos Capital Management investment fund and its impact on several of the largest international banks.
Outlook: Mr. Gensler’s nomination has been viewed as more aligned with the progressive wing of the Democratic Party, and it is likely he will be a major figure in the effort to address climate change through greater disclosure. Further, he is likely to exhibit the same tough approach to regulation and enforcement seen during his time at the CFTC.