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US Securities and Exchange Commission chair Gary Gensler has hit the financial sector with more new major rules and regulatory proposals than any predecessor since the response to the 2008 global financial crisis, a new tally shows.
Gensler’s SEC has put forward 47 proposals that substantially affect market participants and adopted 22 of them in the first 850 days of his leadership, ending August 15, the Committee on Capital Markets Regulation calculated.
That is the most of both since Mary Schapiro, who oversaw the agency’s initial response to the financial crisis after she became chair in January 2009 and put forward 59 proposals and 18 final rules.
The current SEC regime also stands out for the share of its proposals that were not mandated by congressional legislation. While 59 per cent of chair Mary Jo White’s 22 proposals from 2013 to 2015 were mandated by the 2010 Dodd-Frank financial reform act and other laws, just 17 per cent of Gensler’s proposals were, and several of those were left over from Dodd-Frank.
The capital markets group, made up of financial sector companies, academics and former regulators, has a history of being highly critical of regulation that it considers intrusive or damaging to US companies’ ability to win investment. Gensler’s proposals have come in for particular scorn but raised concerns about prior chairs’ work as well.
“Most of what Gensler has done is unnecessary . . . markets need to be regulated but they need to be regulated in the correct way,” said Hal Scott, the group’s president and an emeritus Harvard Law School professor.
The SEC said: “Chair Gensler is focused on ensuring that the markets work best for investors and issuers and not the other way around. All of the rules on the agency’s agenda advance the SEC’s mission.”
Among other measures, Gensler’s SEC has enacted changes to mutual fund pricing and cyber security disclosures and proposed new rules for asset custody and environmental, social and governance investing.
The committee research excluded final rules that were initially proposed by the previous chair, those focused specifically on the agency’s internal processes and joint rulemaking where the SEC was the junior partner with other US watchdogs. When those are included, Gensler’s predecessors finalised more rules than he did, but they still proposed fewer.
The August 15 end date for the committee’s analysis means the final rule count excludes a sweeping revamp of the private funds industry passed last week.
Financial reform groups argued that Gensler’s proposals are needed to respond to the rise of electronic trading, the rapid expansion of private markets and other market developments. A 1,500-page proposal to rewrite the rules on stock trading, for example, would be the biggest change to equity markets since 2005.
“It is totally reasonable for the SEC to modernise its regulatory framework in response to changes in business practices, markets and technology,” said Micah Hauptman, director of investor protection at the Consumer Federation of America.
But industry groups have said that many of the proposals will drive up costs, weaken returns and reduce competition among money managers. They also said the SEC had failed to consider the impact of doing so many changes at once.
“Too many of the regulations [Gensler] has proposed lack purpose, justification and realism,” said Eric Pan, chief executive of the Investment Company Institute, which represents fund managers. “They will likely hurt markets more than improve them. They illustrate that quantity cannot substitute for quality.”
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