The SEC’s long-standing trouble with China Inc. is just one example of its inefficiency. Apart from a lack of resources, the chairman is swamped. He has more than 20 direct reports who deal with everything from enforcement to economic and risk analyses. If investigating Chinese companies proved elusive for the agency, how can it regulate crypto, a much murkier world where the issues go beyond accounting fraud? The agency’s main weapon is to bring civil charges.
Gensler has a reputation for being a tough regulator. But it’s worth remembering that the SEC chairman needs to appease powerful politicians, mainly because of the makeup of the commission. All decisions are made by majority vote of a five-person bipartisan group—two Republicans, two Democrats, and the chairman, who is in theory a political independent, appointed by the U.S. president.
As such, the SEC’s enforcement, as well as its budgets, vary from administration to administration. Or even within a presidential term. Five years ago, Warren called on President Barack Obama to replace his SEC appointee Mary Jo White for her refusal to develop a political spending disclosure rule. White stayed on till Obama left the oval office.
In the meantime, despite Gensler’s posturing, the world is moving on. Bitcoin has recovered from Gensler’s not-so-gentle remarks and reclaimed the $50,000 level this week. And despite the Chinese government’s broad, brutal crackdown on big tech, retail investors continue to buy on the dip—or, depending on your point of view, catch the falling knife—in U.S.-listed ETFs such as KraneShares CSI China Internet Fund in July and August. It’s tough to regulate away day traders’ love for roller coaster rides. The SEC is lots of bark and very little bite.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.