Progressives lobbied President Biden to appoint Gary Gensler as chairman of the Securities and Exchange Commission because of his record as a hell-for-leather financial regulator during the Obama days. But now even some House Democrats are asking the president to press the brake.
“We are writing to express concern about some of the Securities and Exchange Commission’s comment periods for complex rule formulations that could hamper the public’s ability to provide effective and meaningful input,” 47 members of the House of Representatives, including 28 Democrats, Mr. Gensler wrote recently. They cite two new proposed rules that will extend SEC control over private markets.
One rule would impose strict disclosure requirements on private fund advisers for fees, expenses and annual independent audits similar to those applicable to public advisers. Another would require private funds to report more information to the SEC on investment losses, among other things, allegedly so that the agency can monitor systemic financial risks.
Consuming a total of 600 pages in the federal registry, the draft rules represent a huge grab for an agency whose purpose is to protect mother-and-pop investors from fraud – not sophisticated investors from risks they like to take. Representatives of the representatives warn that “these rules will have complex and far-reaching effects on the industry and its stakeholders.”
The rules are not exactly beach reading and will require teams of lawyers and analysts to sort through their implications. Still, Mr. Gensler only gave 30 days for public comment. “This shortened period is likely to hinder the commitment of Congress, investors and other market participants,” the House of Representatives wrote.
The members of the House of Representatives want Mr Gensler to extend the public comment period to at least 90 days, which was the norm for very complicated rules under previous administrations. The Office of the Federal Registry suggests that agencies can provide up to 180 or more days for “complex” rules. Mr. Gensler’s drive-by regulation seems to be a pattern.
Energy companies this week also asked Mr Gensler to extend the 60-day public commentary on a proposed 506-page climate information rule that would require companies to report their greenhouse gas emissions, including those from their suppliers and customers. “The SEC should give the public ample time to consider the full implications of this far-reaching rule designed to deny funding to those energy sources that meet 80% of global demand now and well into the future,” they write.
According to the Public Administration Act, the 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, which will allow the agency to complete the proposals more quickly with a few changes.
The SEC has made more than 50 rules that would affect nearly all investors and public companies in America, and many private ones as well. Sir. Gensler hurries to complete as many of them as he can, by January next year, when Republicans appear to be taking control of Parliament and being able to use their appropriation powers to rein him in.
While congressional and business objections may not slow down Mr Gensler, they may encourage a possible legal challenge. Judges may not be happy to see Mr Gensler ignore the Congress’ warning to follow the proper regulatory procedure.
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