Trader Talk

SEC chair Gensler says agency will enforce rules ‘aggressively’ against bad actors

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, July 30, 2013.
Andrew Harrer | Bloomberg | Getty Images

Securities and Exchange Commission Chair Gary Gensler said he would be aggressively pursuing bad financial actors who were “playing with working families’ savings.”

Gensler made his remarks at a Financial Industry Regulatory Authority conference with Robert Cook, president and CEO of FINRA. FINRA is the agency that regulates broker-dealers and exchanges.

As he did in his recent Congressional testimony, Gensler emphasized that enforcement would be a key part of protecting the public.

“At the SEC, we are focused on going after misconduct wherever we find it in the financial system. That means holding individuals and companies accountable, without fear or favor, across the approximately $100 trillion capital markets we oversee,” he said.

“We need to do whatever we can to ensure that bad actors aren’t playing with working families’ savings and that the rules are enforced aggressively and consistently,” he told Cook.

Gensler’s priorities: gamification of trading, market structure, enhancing transparency

Gensler said he would be focusing on three issues in particular: first, reaching out to the public on the marketing being used to sell securities, particularly “gamification” of trading, in which brokerage companies introduce gaming elements in trading activities. ”How should we freshen up our rule set, how should we think about our responsibilities to the investing public?” he asked.

Second, a focus on market structure issues, particularly “payment for order flow,” in which brokers pay market makers for routing orders to them. This became an issue during the recent hearings on GameStop, Reddit, and Robinhood. The issue is, “How do we ensure that our market stays the best in the world — fair, orderly and efficient?” he said.

Third, Gensler said the SEC would concentrate on “transparency-enhancing initiatives” around short selling, stock lending, and securities-based swap rules.

More disclosure on climate change, diversity

He also said the SEC would push forward into environmental, social and governance (ESG) issues, asking for more information from companies about their policies on climate and diversity. “The heart of our securities law is disclosure…in the 2020s that means freshening up our disclosure rule set around climate change, human capital, and other initiatives,” he said. 

Crypto exchanges need more regulation

Gensler said Congress may want to weigh in on regulation of crypto exchanges, noting that for bitcoin exchanges “there is no authority to register and write rules to protect the investing public. The investing public would benefit from more regulation” around crypto exchanges.

Gensler warns the financial community to “step back from the line”

In what has become a persistent theme, Gensler urged the roughly 1,700 professionals listening in to be motivated by an interest in protecting the investing public.

“So, if you’re asking a lawyer, accountant, or adviser if something is over the line, maybe it is time to step back from the line,” Gensler said. “Remember that going right up to the edge of a rule or searching for some ambiguity in the text or a footnote may not be consistent with the law and its purpose.”

Gensler told a Congressional subcommittee recently that he would be looking into the recent issues surrounding GameStop, Reddit, and Robinhood and would likely be issuing a report sometime this summer.

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