As midterm elections draw near, financial industry officials say even a modest GOP victory could result in increased congressional scrutiny of SEC Chairman Gary Gensler and his agency's policies.

Polls suggest that Republicans should be able to regain control of the House and quite possibly the Senate. If either scenario materializes, it will pose a challenge to Gensler's initiatives regarding ESG, advisor regulation and other issues likely to come under attack in congressional hearings.

“There is abundant concern and skepticism on Capitol Hill regarding Chair Gensler’s ambitious rulemaking agenda, with much of it focused on the inadequate time for thoughtful comment and response on the SEC’s proposals," said Neil Simon, vice president for government relations at the Investment Adviser Association. "We expect that he’ll be called to testify more frequently in a Republican-controlled Congress and that he could face a more adversarial reception."

At least one analyst sees the GOP taking both the House and the Senate.

“All 435 House seats are being contested. Republicans need a net gain of six seats to win the majority," said Brian Gardner, chief Washington policy analyst at Stifel. "A president’s party historically loses 27 seats on average in a midterm election during the president’s first term, so history plus polling data suggest that Republicans are well positioned to win control of the House."

In the Senate, 32 seats are being contested and Republicans need a net gain of one seat to take control of the Senate, while Democrats can retain the majority if they maintain the current 50-50 split.

“Our forecast: Republicans gain three Senate seats,” Gardner said.

Even if that happens, President Biden will still retain veto power, which will mean continuing legislative gridlock, Gardner and others said.

But that doesn’t mean there won’t be investigations and oversight hearings, Simon said.

Richard P. Galena, counsel at Miller and Chevalier and a former special assistant to the U.S. Attorney’s Office in Maryland, also believes that Gensler will be in the hotseat.

“In terms of what a Republican Congress could mean for regulatory enforcement, I think we’re going to see increased scrutiny at the SEC and, in particular, of Chairperson Gary Gensler. Earlier this week, House Republicans gave us a preview of what this could look like when they sent a letter Gensler in an attempt to highlight inconsistencies within the SEC regarding the use of off-channel communications platforms such as WhatsApp,” said Galena, who specializes in SEC said.

Robin Traxler, senior vice president for policy and deputy general counsel at the Financial Services Institute, said if Republicans gain the majority in the Congress, “we could see an increased push for less regulation through hearings. That would leave progressives with less of a voice, so they may try to achieve their policy priorities through the agencies due to legislative gridlock and opposition.”

First « 1 2 » Next