Progressives have lobbied President Biden to appoint Gary Gensler as chairman of the Securities and Exchange Commission because of his record as a financial regulator from hell during the Obama era. But now even some House Democrats are asking the president to put the brakes on.
“We are writing to express concern about some of the Securities and Exchange Commission’s comment periods regarding complex regulations that may impede the public’s ability to provide effective and meaningful input,” Gensler wrote recently. They cite two proposed new rules that would expand SEC scrutiny of private markets.
A rule would impose strict disclosure requirements for fees, expenses and annual independent audits of private fund advisers that would be similar to those of public advisers. A second would require private funds to report more information to the SEC about investment losses, among other things, supposedly so the agency can monitor systemic financial risks.
Consuming a combined 600 pages in the Federal Register, the proposed rules represent a huge power grab for an agency whose goal is to protect mom-and-pop investors from fraud, not sophisticated investors from the risks they take. voluntarily. Chamber members warn that “these regulations will have complex and far-reaching effects on the industry and its stakeholders.”
Crafting the rules isn’t exactly beach reading and will require teams of lawyers and analysts to sort out their implications. Yet Mr. Gensler gave just 30 days for public comment. “This abbreviated period will likely hamper engagement by Congress, investors, and other market participants,” the House members wrote.
House members want Mr. Gensler to extend the public comment period to at least 90 days, which was standard for the very complicated rules of previous administrations. The Office of the Federal Register suggests that agencies can allow up to 180 days or more for “complex” rulemaking. Mr. Gensler’s driving regulations appear to be a trend.
Energy companies also this week asked Mr. Gensler to extend public comment by 60 days for a proposed 506-page climate disclosure rule, which would require companies to report their greenhouse gas emissions, including those of their suppliers and customers. “The SEC should give the public ample time to consider the full impacts of this sweeping rule designed to deny funding to energy sources that meet 80% of global demand today and in the future,” they write.
Under the Administrative Procedure Act, agencies must take public comments into account. If they disagree with the comments, they should explain why. A short public comment period will mean fewer detailed comments, allowing the agency to finalize proposals more quickly with few changes.
The SEC has undertaken more than 50 regulations that would almost affect investors and public companies in America, as well as many private companies. Mr. Gensler is rushing to finish as many as possible before next January, when Republicans look likely to take control of the House and could use their appropriations power to rein it in.
While congressional and corporate objections aren’t slowing Mr. Gensler, they could encourage a possible legal challenge. Judges might not look fondly at Mr. Gensler ignoring Congress’ warning about following proper regulatory procedure.
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