The US rightly prizes its capital markets; their size, sophistication and deep liquidity are often envied elsewhere. Preserving their smooth running lays at the heart of concerns about the impact of the Securities and Exchange Commission’s (SEC’s) wide-ranging regulatory agenda, particularly at a time of broader economic uncertainty.
For critics of the SEC’s chair, Gary Gensler, his “aggressive” agenda risks undermining US capital markets, rather than enhancing them.
There is no disputing that Mr Gensler has overseen an unprecedented amount of rule-making activity during his 15 months in office. As of July 10, the SEC has proposed or finalised 26 substantive rule-makings since the start of his tenure.
For comparison, during Mary Schapiro’s tenure in the post-crisis, Dodd–Frank reform period, there were just 12.
These new rules are widespread and cover both novel and headline-grabbing areas, as well as reviewing foundational market concepts. And there is far more to come with several contentious areas pencilled for the coming months, so there is unlikely to be any let up in pace.
Mr Gensler suggests that reform is necessary to protect the status of the US capital markets. He is propelled by the need to drive efficiency and modernise rules in a changing landscape. And he has a point.
However, the manner in which he is executing his mandate is provoking the ire of many in the industry, with them feeling there is insufficient time to consider and provide meaningful feedback on the impact of all these proposals, not least as comment periods have often been set at just 30 days, down from the traditional 60 to 90 days. There is also a sense that the leadership is not stepping back to consider the overall impact of overlapping areas of reform.
For individual rule-makings, and at a broader level, criticisms that the SEC may be overstepping its authority (potentially fanned by the Supreme Court’s recent ruling in relation to the Environmental Protection Agency) are also increasing.
Unless some accommodation with industry is found, the SEC looks on course for multiple legal challenges, and all of the disruption that will come with that.
