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SEC Chair Gensler Facing Time Crunch to Reform Wall Street

Gary Gensler, the chair of the U.S. Securities and Exchange Commission, is facing pressure to reform Wall Street.
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Gary Gensler, the chair of the U.S. Securities and Exchange Commission, is facing a time crunch to reform the activities of Wall Street. 

He was tapped by President Joe Biden last year to replace Jay Clayton, but Gensler's time could be cut short. The mid-term elections occur in November and while the Democrats have thin majorities in the House and Senate, they face the possibility of losing them. Republicans could choose to make it harder for Gensler to make progress if they win either the House or Senate.

While Gensler started off his tenure with several goals to increase the federal government regulating Wall Street, he has been slow to make many moves. 

Gensler said on Jan. 19 during a speech to the Exchequer Club of Washington, D.C. that he is focusing on making the capital markets more efficient and to modernize the SEC's rules for technology. One goal is to lower the amount of money that investors pay for fees and on companies raising capital.

The SEC plans to propose a rule that would increase the amount of disclosure for private equity funds next week, Gensler said. Another goal of the SEC is to improve the U.S. government debt market and also increase the amount of disclosure concerning executive compensation.

No proposals have been created by the SEC to reform the stock market, a policy touted by Gensler. 

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The heavy volume of trading that occurred last January for companies that were used to a much smaller number of shares being bought and sold, so-called meme stocks such as GameStop GME, were later scrutinized by Congress in hearings and by the SEC.

The SEC employees who write disclosure rules for companies shifted their focus on the record number of initial public offerings and mergers by special-purpose acquisition companies or SPACs.

Gensler proposed a policy change for more disclosures from public companies about the impact of climate change to their business, but the SEC has not proposed a rule.

One factor that could impede any changes before November is that comments need to be sought from the public and a study on costs must be conducted beforehand due to a federal law. This process has taken several months in the past. The SEC is operated by a five-member panel of commissioners that has both Democrats and Republicans.

Republicans could create some roadblocks in 2023 by slashing the SEC's budget or asking Gensler to testify at Capitol Hill hearings more often. 

The risk that Gensler's agenda coud be derailed is "very big," Hal Scott, an emeritus law professor at Harvard Law School, told the Wall Street Journal.