The Senate voted to confirm Gary Gensler as the new chairman of the Securities and Exchange Commission on a 53-45 vote Wednesday.
The former Commodity Futures Trading Commission chairman will take the helm of the agency as it faces regulatory litmus tests over the enforcement of fiduciary obligations and investor rights, a surge in bitcoin ETF applications, likely ESG investing regulations, no-cost brokerage scandals and a call for stricter money market regulation.
While it is unlikely that Gensler will seek to replace Regulation BI, the SEC’s long-awaited retail advice rule, he is likely to push for tough enforcement to reduce conflicts of interests retail investors can face when working with broker-dealers—something that the Biden administration and leading Democrats have called for.
Gensler is no shrinking violet when it comes to enforcement. He brought $1.7 billion in enforcement actions against Wall Street after the 2008-2009 market meltdown when he was head of the CFTC.
Finra President and CEO Robert Cook congratulated Gensler and said in a statement that “he brings to the commission an outstanding record of public service, deep expertise in the functioning of our capital markets, and consistent advocacy for the interests of investors. We look forward to working with Chairman Gensler to advance our shared mission of protecting investors and ensuring market integrity.”
Gensler and Cook will no doubt be working together soon. The new SEC chairman said during his confirmation hearing that he believes investors should not be bound by mandatory arbitration clauses, but should be able to take broker-dealers and investment professionals to court to settle disputes.
“While arbitration has its place, I think it’s so important investors, or in that case customers, have an avenue to redress their claims in the courts,” Gensler said.
Cook told Sen. Elizabeth Warren in a February letter that the Supreme Court has held that predispute arbitration agreements are enforceable for claims brought under the Exchange Act. But he also noted that subsequently, in the Dodd-Frank financial reform legislation that followed the 2008 fiscal crisis, “Congress provided the SEC (not Finra) with authority to prohibit or place limitations on the use of such agreements. The SEC has not exercised that authority."
As a result of Gensler’s tough enforcement record, consumer and pro-fiduciary groups are celebrating his nomination. “Everyone in the country should applaud the elevation of Gary Gensler to chair the Securities and Exchange Commission,” Knut Rostad, president and founder of the Institute for the Fiduciary Standard, told Financial Advisor Magazine.
“Chairman Gensler’s investor protection bona-fides are well established,” Rostad added. “Retail investors will be watching for how the new SEC addresses the regulation of advice. Repairing the major the wounds inflicted on the Investment Advisers Act of 1940 and restoring the legal and commonsense distinctions between brokerage sales and fiduciary advice should be high priorities. The Institute for the Fiduciary Standard is prepared to assist in any way possible.”
As he takes over as top securities cop, Gensler is facing no fewer than eight pending applications to create the U.S.’s first bitcoin ETF, after billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. joined the list on Monday.
Novogratz is racing with Fidelity Investments and others for first-to-market advantage as sentiment grows that the SEC may soften on the idea of a bitcoin ETF after rejecting applications since 2013. The first North American bitcoin ETF in Canada has already hit $1 billion in assets, raising hopes that the agency will follow Canada’s lead.