[ad_1]
(Bloomberg) – The joke in Washington is that Gary Gensler could inspire his own version of the game, “Drink Every Time …”
Bloomberg’s Most Read
The rules: Suddenly drop every time the head of the US Securities and Exchange Commission says he’s “asked staff” to consider new regulations.
Gensler “asked the staff” about the crypto-drink surveillance. For online brokers, drink. For green investment funds – drink. In two recent congressional hearings Gensler used the phrase no less than 30 times, enough, one lobbyist joked, to cause alcohol poisoning.
But for Wall Street, Gensler’s plans are hardly a laughing matter. It features one of the most ambitious agendas in the SEC’s 87-year history – some 49 proposals, many of which are already attracting opposition from hedge funds, exchanges, online brokers and state-owned companies. He has been equally aggressive in matters of agency law enforcement, which can bring down stock prices, result in fines and trigger embarrassing publicity.
Gensler, a former Goldman Sachs Group Inc. executive whose previous Washington experience included a fierce battle with the big banks to monitor the vast derivatives market, says he believes the SEC can move forward on many issues at once . In an interview, he added that he sometimes thinks of Martin Luther King Jr.’s famous speech on “the fierce urgency of the present moment” when it comes to the regulator’s agenda.
The breakneck pace has some SEC veterans, and even Gensler’s backers, concerned that he is so overwhelmed that he ultimately fails to accomplish a lot. They wonder if it is dragging the commission into a quagmire of politics, lawsuits and even a rebellion by unionized workers at the regulator. Many wonder: how will Gensler fare?
“You have to think that this will be quite a challenge for the staff of the SEC,” said Frank Kelly, a former head of the agency who now heads Fulcrum Macro Advisors, a Washington policy research firm.
Many priorities
A few Democrats and outside advisers have urged Gensler, 63, to reduce his scope to a more manageable load. The policies he advocates, they argue, can take years and have prompted powerful business interests to begin discussing strategies to sue the SEC.
For his part, Gensler insists he has no priorities because everything is at the top of the list. “Don’t ask me about my three daughters, who I spend the most time with,” he said.
There is a lot of action within the agency. Gensler has set up around 50 teams involving around 200 people to draft rule proposals. Each has staff from the General Counsel’s office as well as economists to carefully weigh costs and benefits, a key requirement of federal law. He closely monitors progress; groups were invited to send regular updates to the president’s office on progress.
Gensler is also facing political pressure. The Biden administration and Congressional Democrats – two constituencies he doesn’t want to disappoint – are keenly interested in particular policies, especially a pending SEC rule that would tackle climate change through disclosures of more robust business.
Other priorities for lawmakers include controlling Special Purpose Acquisition Companies, or SPACs, responding to this year’s implosion of the Archegos Capital Management family office, and containing the uncontrolled growth of cryptocurrencies.
Wild trade
One area that vexes Wall Street is Gensler’s pledge to overhaul the plumbing of the stock market in response to this year’s stock meme mania. The illegal trade has sparked multiple congressional hearings and put companies, including Robinhood Markets Inc. and Citadel Securities, on the prowl as new regulations could hurt their lucrative businesses.
Executives who met with SEC officials were privately warned that the market structure rules being worked out could be extreme, according to people familiar with the matter.
The warning from inside the agency should come as no surprise. Interviews with more than two dozen people who served in government with Gensler or clashed with him when he headed the Commodity Futures Trading Commission under the Obama administration say he will not reduce his ambitions or back down. a fight.
Most of those willing to discuss Gensler have asked for anonymity frankly. Some said they admired him, while others struggled to mention his name without adding an epithet. But all said they would never bet against him.
They painted a portrait of a relentless and skillful bureaucratic manipulator who cares little about making enemies or exhausting staff. These qualities, people noted, explain how Gensler became one of Goldman Sachs’ youngest partners and how he was able to force Wall Street out of the shadows of swaps after the 2008 financial crisis while running the CFTC. .
“If someone underestimates their ability to get things done, they do it at their own risk,” said Micah Green, a lobbyist for the law firm Steptoe & Johnson.
Yet much of Gensler’s agenda is intimidating. Finding a solution to the social media-induced flare-ups of GameStop Corp., AMC Entertainment Holdings Inc., and other meme actions, for example, involves dealing with several complex issues. Anyone’s forgery could have unintended consequences for millions of investors.
Take “gamification,” the video game as prompts that critics say encourage excessive trading by clients of Robinhood and other app-based brokerages. The SEC is examining whether such nudges amount to investment advice, which would trigger a series of additional regulations. However, the securities rules developed decades ago to control human brokers may not be effective in helping investors addicted to buying and selling stocks on their smartphones.
Read more: Robinhood, Meme Stocks and Investing as a Game
A related issue is the so-called payment order flow, in which trading companies pay brokerage houses to fulfill their clients’ buy orders. Major online brokers are relying on this practice to offer clients commission-free transactions, but Gensler has suggested that this could be banned.
Eliminating payments would outright curtail the business models of the e-commerce companies that control a large part of U.S. stock transactions, including Citadel Securities and Virtu Financial Inc. They are already vigorously opposed to such a move, as are Robinhood, Charles Schwab Corp. and other brokers.
Other policy changes Gensler is considering having their own enemy roster. Hedge funds, for example, fear that they will have to reveal much more about their investment strategies, including short positions.
Spiky crypto
Crypto firms are bristling with Gensler’s claim that they peddle securities, which would trigger SEC oversight for the unregulated industry. Last month, Brian Armstrong, CEO of Coinbase Global Inc., launched a rant on Twitter, accusing the SEC of “bullying tactics” after the agency threatened to sue if the company rolled out a product that would allow customers to earn interest on their nominal deposits.
Several white-collar defense attorneys who worked at the SEC said they did not recall a similar situation and called it an inappropriate use of the agency’s enforcement powers. Yet for a regulator perpetually overwhelmed by the industry, the strategy has worked. Coinbase has put the product on the shelves.
As Gensler fights outside forces, it also faces internal challenges.
When he was running the CFTC, Gensler pushed people to implement trading rules after the crisis, and they formed a union after he left. The SEC is already unionized and in what could be a harbinger of labor unrest, workers recently filed a grievance against Gensler for failing to extend a Covid-related benefit that allows employees to care for children during office hours.
Gensler’s progress could also be hampered by the SEC’s laborious rule-making process. It typically takes months for SEC lawyers to draft regulations, which are voted on by the agency’s five commissioners. Further, any misstep opens up a legal challenge, and several of Gensler’s predecessors have seen major policies overturned.
‘Hard work’
Gensler “has a very difficult job and I think on a practical level his legacy will likely be written in the courts,” said Joseph Grundfest, a former SEC commissioner who is now a law professor at Stanford University.
Nonetheless, it is indisputable that Gensler has a successful record. The Dodd-Frank Act required the CFTC to pass more than 60 rules and he completed most of them by the time he resigned in 2014.
Read more: Gensler’s aggressive tenure at the head of the CFTC
Workers at the futures regulator recall that he personally took charge of the assignment, giving teams tight deadlines. Gensler frequently went to meetings unannounced in his socks for status updates. The leaders who were slowing things down have been removed.
A common tactic used by Gensler was to push CFTC staff to take the toughest stance possible first, thereby setting the terms for negotiating with financial firms. The rules that emerged may not have been as strict as he wanted them to be, but they still got him a victory on Wall Street.
Bloomberg Businessweek Most Read
© 2021 Bloomberg LP
[ad_2]
Source link