Wall Street is pissed that Biden’s SEC has regulatory teeth where other presidents have failed

Another part of the progressive agenda on which Biden is delivering where other Democratic administrations have failed is on better regulation of the rapacious money vampires of Wall Street.

The Wall Street Journal’s Paul Kiernan wrote the story:

Wall Street is attempting to derail Securities and Exchange Commission Chairman Gary Gensler’s agenda by challenging economic assumptions underpinning dozens of policy proposals.

Brokerages, hedge funds, private-equity firms, mutual funds, high-frequency trading firms and public companies have argued in comment letters filed this year that the costs of many of the proposals would outstrip the benefits, and that the SEC’s studies of the issues are flawed.

Mr. Gensler is pursuing what lawyers and former regulators say is the SEC’s most aggressive agenda in decades, an effort that could upend established and lucrative business models. It includes requiring public companies to disclose information related to climate change, bringing more transparency to private-equity and hedge funds, imposing stricter rules for investment products advertised as environmentally or socially responsible, and overhauling the way stock trades are executed.

For each rule it proposes, the SEC is required to produce studies of the likely economic impacts. Courts have blocked SEC rules in the past after litigants pointed out shortcomings in those analyses.

The SEC estimated that compliance costs would range from $50,000 to $500,000 per fund. It said the rule would ensure that fund names more accurately reflect their investment focus, making it harder for funds with misleading names to charge the higher fees that so-called ESG managers command.

The stage is now set for a contest between the financial industry and the SEC’s expanded team of economists, who must refute the industry’s challenges for a proposal to become a rule. The outcome will determine the fate of Mr. Gensler’s far-reaching agenda.

The WSJ article goes on to note:

The SEC put a greater emphasis on its economic analyses after a 2011 court loss in which judges tossed out a rule that would have given investors more power to oust corporate directors. The court said the SEC didn’t adequately analyze the costs to U.S. companies of fighting in contested board elections and failed to back up its claim that the rule would improve shareholder value and board performance.

Since then, the SEC’s division of economic and risk analysis has grown to 163 employees from 64, giving it one of the largest teams of government economists in Washington, according to officials.

Current and former SEC officials say the most important thing for commenters to do during the proposal stage is to substantiate their views with hard data, which the commission must take into account before completing a rule.

“Frankly, it’s up to these commenters to not just whine about it, but to actually put some numbers behind it,” said Kathleen Hanley, the SEC’s deputy chief economist from 2011 to 2013.

At least two former top SEC economists have been hired by the industry to challenge the SEC’s analyses.

You can read the rest of the WSJ article here.

Leave a Reply