Biden’s SEC selects Senate panel over calls to address GameStop insanity

Republicans, however, criticized his aggressive stance toward banks and other powerful interests while serving as chairman of the Commodity Futures Trading Commission from 2009 to 2014.

He testified during a nomination hearing before the Senate Banking Committee with Rohit Chopra, Mr Biden’s choice to head the Bureau of Financial Consumer Protection.

The SEC is investigating the GameStop episode and considering whether more transparency about the use of short selling is needed, a common way to bet that the price of a stock will fall. Mr. Gensler did not address the situation in evidence prepared at the banking committee.

He is also likely to get questions about a proposal pending before the SEC by Nasdaq Inc.

to require thousands of companies listed on the stock exchange to include women, racial minorities and LGBT individuals on their boards.

Republicans in the banking committee urged the SEC to deny the proposal, saying it interferes with board members’ duty to govern companies in the best interests of their shareholders.

Democrats, for their part, say the SEC should require financial disclosure from listed companies to include more information on diversity and workers’ pay. They also call for more comprehensive reporting on the risks posed by climate change, or the government’s efforts to limit it. And Mr. Gensler faces calls to further tighten a 2019 rule, which does not require brokers to put their clients’ interests above their own.

Following the departure of Chairman Jay Clayton at the end of 2020, the SEC was divided equally between two Republican and two Democratic commissioners. This limits his ability to follow the kinds of rules that progressive people would like to see.

The GameStop episode was subjected to a hearing before the Financial Services Committee last month. It has expressed concern about the integrity of the US stock market and the rules that apply to it. The SEC and other authorities are investigating whether the saga calls for policy changes or has been fueled by criminal misconduct such as market manipulation.

House lawmakers have taken different views on the implications of the trade frenzy. Democrats have focused on the question of whether the simplified trading programs and commission-free business models of companies like Robinhood Markets Inc. help or harm individual investors. Several Republicans praised the model for reducing retail transaction costs and called for less regulation of Wall Street.

Legislators from both parties met on the question of whether short selling should include regulation. During the frenzy, retail investors used social media to encourage each other to take advantage of hedge fund losses that prices would fall.

Critics of the SEC have said in recent years that they focus too much on helping companies raise capital and not enough on investor protection. Some have also called for the commission to refocus its enforcement efforts on large banks and hedge funds.

Under Mr. Clayton emphasized enforcement misconduct that harms less sophisticated investors, including cryptocurrency scams and Ponzi schemes.

Democrats can also target private equity firms and hedge funds, lightly regulated investment firms that are outside the limit for small investors. The businesses raised 69% of the capital raised in 2019, while regulated public markets, according to SEC estimates, account for 31%.

Gensler, a former Goldman Sachs CEO, is known in Washington as an aggressive regulator who has taken powerful financial interests while serving as head of the Commodity Futures Trading Commission.

At the CFTC, he overcame the opposition to write rules governing the markets for hundreds of trillions of dollars in derivatives. Some of the complicated financial instruments are blamed for the 2008-09 financial crisis.

“When the SEC does its job – when there are clear rules and a policeman is on hand to enforce them – our economy grows and our country moves forward,” he said. Gensler said Tuesday.

“But if we keep our eyes off the ball – if we do not eradicate transgressions, or we really adapt to new technologies or new financial instruments, things can go very wrong. And when that happens, people get hurt. ”

Write to Paul Kiernan by [email protected]