This article is one in a series of midyear outlooks for 2022 by the InvestmentNews team.
The Securities and Exchange Commission has surged out of the gate and is galloping down the track in Gary Gensler’s first 14 months as chairman in both regulation and enforcement. The rest of this year will provide a better idea of how much of his agenda — and in what form — will get to the finish line.
One of Gensler’s favorite phrases is “I’ve asked staff to” look into some kind of regulatory challenge — such as payment for order flow, special purpose acquisition companies, online practices of financial advisers — and determine how the agency should respond.
The former chairman of the Commodity Futures Trading Commission came to the SEC with a reputation as an aggressive regulator. He’s fulfilled those expectations with an expansive agenda, which in the latest iteration released on June 22 contains 53 pending proposals.
The rulemaking process, even with comment periods that Gensler is limiting to about 60 days, can be grueling. It often takes a year for rules to come to fruition, and proposals usually undergo changes on the journey.
“We’re still in a wait-and-see period,” said Kurt Wolfe, counsel at Quinn Emanuel Urquhart & Sullivan. “The chair and commission are putting out proposed rulemakings that may be pushing the envelope or [be] unachievable in some circumstances. But they’ll get something done, even if it falls short of their ideal.”
Gensler and the Democratic majority on the five-person SEC are getting strong pushback from Republican Commissioner Hester Peirce, who has voted against even putting out for public comment proposals on climate-risk disclosure and environmental, social and governance investing oversight.
Peirce was sharply critical of Gensler’s updated agenda.
“When the Commission attempts rapidly to write and implement myriad rules, many of which are outside our longstanding mandate, it sets up conditions that could roil the markets,” she said in a June 22 statement.
The SEC also was energetic under Gensler’s predecessor in the Trump administration, Jay Clayton, but didn’t strike fear in the industry.
“There’s a perception that the rules coming out now are not good for Wall Street,” Wolfe said. “They’re going to increase compliance costs.”
Under Gensler, SEC enforcement staff also has become more assertive, said Jim Lundy, a partner at Foley & Lardner.
“They seem more emboldened to litigate, if necessary,” said Lundy, a former SEC senior trial counsel.
The agency recently took its first enforcement action under Regulation Best Interest, the broker-dealer standard of conduct.
“There will be others to follow,” Lundy said. Reg BI is a principles-based rule, so he anticipates “aggressive and creative cases.”
In both rulemaking and enforcement, the SEC will continue to be active for the rest of the year.
More articles in this series:
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Employee accounts, crypto trials and job cuts frame a pivotal year for the Swiss lender.
New name draws on founder's family history as consolidation reshapes the broker-dealer landscape.
Deal brings tech-focused planning expertise, expanded Pacific Northwest presence to national RIA platform.
Five low-cost index ETFs to anchor Trump Accounts as advisors weigh options against 529 and UTMA plans for clients
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
