President-elect Biden is reportedly set to select Gary Gensler to head the Securities and Exchange Commission. Gensler is a current MIT professor who previously served as the 11th chairman of the Commodity Futures Trading Commission under President Barack Obama. CEI’s Richard Morrison and John Berlau urged the nominee, if confirmed, to focus on core functions of the Commission and look for opportunities to lift outdated regulations.
Statement of CEI Research Fellow Richard Morrison:
“I urge Mr. Gensler to focus on the Commission’s core mission of protecting investors and facilitating capital formation, not on divisive initiatives like forcing companies to report on whether they’ve supported a laundry list of political causes.
“Former Chairman Jay Clayton noted a ‘growing drumbeat’ for the Commission to impose reporting standards on environmental, social, and governance (ESG) topics; but that would be a mistake. Many private sector data providers and non-governmental organizations already have robust frameworks for rating and comparing the ESG bona fides of firms. Management consultancy Opimas estimates the market for ESG-themed data and analysis alone will hit $1 billion in 2021. Competition to provide value to investors, the public, the news media, and to firms themselves is what will sharpen and improve these efforts – a valuable process that an SEC takeover would destroy.
“Critics have faulted the Commission for not imposing uniformity on ESG disclosures, but here, as in other facets of American life, diversity is a strength. Deciding what qualifies as a ‘social’ goal for corporations and what side of a particular issue should be considered the morally acceptable one is inherently beyond the scope and ability of any particular government agency, or, indeed, of government itself. Punishing serious corporate misbehavior is the duty of the courts. Balancing the competing interests of a firm’s stakeholders is the responsibility of its directors and, ultimately, the firm’s owners – the shareholders themselves.
“The SEC has a broad portfolio of vital and specific duties. Pushing those duties aside to wade into controversial causes that have not been explicitly authorized by Congress would be a serious mistake. I wish Chairman-designate Gensler the best of luck navigating the challenging terrain ahead.”
Statement of CEI Senior Fellow John Berlau:
“Gary Gensler has been a prominent participant in the securities market both in the private sector and in government service. Both these experiences are a plus, as they give him extensive knowledge to carry out the SEC’s threefold mission of protecting investors from fraud, maintaining fair and efficient capital markets, and promoting capital formation.
“In the past, Gensler has lavished praise on the Dodd-Frank financial overhaul of 2010, while not often noting the law’s harms to Main Street banks, credit unions, and small entrepreneurs. Since members of Congress of both parties have recognized some of Dodd-Frank’s negative effects and passed bipartisan legislation to pare it back — most notably the Jumpstart Our Business Startups Act signed by President Obama in 2012 and the Economic Growth, Regulatory Relief, and Consumer Protection Act signed by President Trump in 2018 — the Senate should question him extensively on whether he would refrain from pushing excessive red tape.
“I will likely disagree with much of the agenda he would pursue at the SEC. But my hope is that should he be confirmed, Gensler would work with the SEC commissioners of both parties to lift some outdated regulatory barriers to allow financial technology (Fintech) to greatly broaden access to capital for entrepreneurs, and financial inclusion for middle-class savers and investors.”