Gensler Testifies During House Financial Services Hearing

At the end of September, Securities and Exchange Commission (SEC) Chair, Gary Gensler, testified in front of the full House Financial Services Committee as part of the Committee’s focus on oversight of the agency. In his written testimony, Chair Gensler noted that “[f]ocusing on the efficiency, integrity, and resiliency of markets helps lower costs. It enhances access and promotes financial stability. It encourages competition while at the same time lowering the fragility of the system.” While speaking about the money market fund proposal, Chair Gensler stated that after receiving numerous public comments, the Commission adopted liquidity fees instead of the swing pricing requirement that was originally proposed, adding that “[l]iquidity fees, compared with swing pricing, offer many of the same benefits and fewer of the operational burdens.

The hearing focused on a wide range of topics including, the pace and scope of the SEC’s rulemaking agenda, digital assets, private funds, capital formation, artificial intelligence, ESG disclosures, diversity disclosure for corporate boards, and legal challenges to the SEC’s rulemaking and actions. The Committee, as part of its oversight role, can request documents and information regarding the Commission’s regulatory and rulemaking activities. Chairman Patrick McHenry (R-NC) and other members of the Committee accused Chair Gensler of not responding, or not responding completely, to multiple requests for information and written records. In his opening remarks, Chairman McHenry stated “let me be clear, I do not want to be the first Chairman of the Financial Services Committee to issue a subpoena to the SEC. And you should not want to be the first SEC Chair to receive a congressional subpoena.” He added, “while your time in this role may be temporary, the repercussions of your actions may be permanent for the agency.” Several members mentioned the harm the proposed rule on swing pricing for open-end funds would have to the mutual fund industry. Additionally, Representative Josh Gottheimer (D-NJ) highlighted the impact that the SEC’s rulemaking agenda would have on smaller funds. He added that some of these changes will be easier for the larger asset managers and complexes to implement while making it difficult for smaller complexes to keep up.

Prior to the hearing, Committee Republicans sent a letter to Chair Gensler demanding that the SEC halt the finalization and/or implementation of interrelated rulemakings until their cumulative impacts are evaluated, and the public and market participants are given sufficient time to respond and comply with those new regulations.

Click here to read Chair Gensler’s full written testimony.
Click here to read Chairman Patrick McHenry’s opening remarks.
Click here to read the letter Committee Republicans sent to Chair Gensler.
Click here to watch an archived video of the Committee hearing.