President Biden’s nominee to serve as chairman of the Securities and Exchange Commission heard calls from senators to address a wide range of public policy initiatives before the SEC.
Gary Gensler appeared March 2 before the Senate Banking, Housing and Urban Affairs Committee for his nomination hearing, where he fielded questions ranging from market integrity, corporate diversity, proxy voting standards, and climate change and political spending disclosures. Gensler did not, however, get a direct question on whether he would seek to revisit the Commission’s Regulation Best Interest. 
Gensler, who was nominated Jan. 18 by Biden, currently serves as a Professor of the Practice of Global Economics and Management at the MIT Sloan School of Management, where he conducts research and teaches on blockchain technology, digital currencies, financial technology and public policy. He also was chairman of the U.S. Commodity Futures Trading Commission (CFTC) from 2009 to 2014.
“If confirmed as SEC chair, I will work with my fellow commissioners, the SEC’s exceptional staff, and the members of Congress to ensure our markets remain the world’s best,” Gensler said in his opening statement. “That means strengthening transparency and accountability in our markets, so people can invest with confidence, and be protected from fraud and manipulation. It means promoting efficiency and competition, so our markets operate with lower costs to companies and higher returns to investors. … And above all, it means making sure our markets serve the needs of working families.”
Climate Risk Disclosure
One area that has been a hot topic of late is the debate over climate-related disclosure in public company filings. Responding to Committee Chairman Sherrod Brown (D-OH), who noted that Acting Chair Allison Herren Lee had recently called for a review of the SEC’s earlier guidance, Gensler confirmed that he would seek additional guidance. “I think that increasingly investors really want to see, with tens of trillions of dollars of assets behind it, want to see climate risk disclosures. I think issuers would benefit from such guidance, so I think, through good economic analysis, working with the staff, putting out to the public to get the public feedback on this, this is something that the Commission, if I’m confirmed, I would work on,” Gensler stated.
Sen. Elizabeth Warren (D-MA) also raised the issue of public disclosures about climate-related risks, along with addressing “predatory” private equity practices and force arbitration clauses in relation to the Robinhood lawsuits following the GameStop trading halt. Warren pressed Gensler to use the Commission’s existing authority, contending that the SEC has the power to require disclosures that will be helpful to the investors, such as climate risk disclosures and private equity practices.
Warren further pointed to section 921 of the Dodd Frank Act, giving the SEC the authority to prohibit the use of forced arbitration by broker dealers. In response, Gensler emphasized that he would look to not only those authorities, but all authorities that help protect investors and promote capital formation and efficient markets.
Financial Transaction Taxes
When asked by Sen. Thom Tillis (R-NC) about his views on proposals to implement a financial transaction tax and whether such a tax is a good idea or would have negative impacts like those demonstrated in other jurisdictions, Gensler said that it’s not something he’s studied closely to prepare for the hearing. He added that the U.S. does currently have a modest FTT to support the SEC that collects about $1.8 billion and has survived at that level. The nominee indicated that he would look into the issue when pressed further by Tillis on the impact of such a tax.
Cryptocurrencies
Responding to a question about the regulation of cryptocurrencies and creating a more forward-thinking regulatory environment, Gensler said he believes Bitcoin and other cryptocurrencies have brought new thinking to payments and financial inclusion, but they’ve also raised new issues of investor protection that still need to be addressed. The nominee emphasized that he would work to both promote the new innovation and technology, but work to “stay true to our core values of investor protection and capital formation.”
Proxy Voting
Asked by the Committee’s ranking Republican, Sen. Pat Toomey (R-PA), whether he plans to revisit the recently finalized rules addressing proxy voting advisory firms, Gensler indicated that he wants to get a better understanding of the guidance. “If confirmed, I would want to work with the staff and economists and fellow Commissioners to understand those rules better to see whether, for instance, in the proxy advisory area, has it addressed the potential conflicts of interest in the least amount of costs, and see if it’s positive and achieving the mission of the agency,” he stated.
Responding to a question about conflicts of interest and lack of competition in the market for proxy advisory services, Gensler said he believes that proxy advisors bring some efficiency, and for example, helps a lot of pension funds, but that he would look to see if there are things that have yet to be addressed.
All in all, Gensler did not appear to hit any major stumbling blocks during the hearing after being pressed on a wide array of issues. If he is confirmed by the Senate, he would serve out the remainder of former Chairman Jay Clayton’s term, which expires June 5, 2021, and be reappointed to a new term expiring June 5, 2026.
CFPB Nominee
Along with Gensler, the Committee also heard from Rohit Chopra, who has been nominated to be Director of the Consumer Financial Protection Bureau. Chopra similarly faced a wide array of questions from committee members, ranging from student loan practices, mortgage servicing and predatory lending to the independence of the CFPB.
Chopra has served as a Federal Trade Commissioner since May 2018, and after the passage of the Dodd-Frank Act, joined the Treasury Department to launch the CFPB, where he then served as Assistant Director.
“Congress has entrusted the Consumer Financial Protection Bureau with carefully monitoring markets to spot risks, ensuring compliance with existing law, educating consumers, and promoting competition,” Chopra said in his opening statement. “This not only helps to protect Americans from fraud and other unlawful conduct, it also ensures that law-abiding businesses, regardless of size, can compete.” Chopra further pledged to be a good partner and approach the agency’s mission with an “open mind and attuned to market realities” if confirmed.
