SEC’s Gary Gensler on his agenda: ‘If the courts adjust, we adjust’

Gary Gensler is determined to keep advancing his rulemaking agenda as the US Securities and Exchange Commission adjusts to legal setbacks and braces for US Supreme Court decisions that could fundamentally alter how the agency is run.

Since his appointment as SEC chair in 2021, Gensler has pursued ambitious reforms across financial markets ranging from US Treasury bonds to climate disclosures. But some pillars of his agenda have been stymied by legal challenges as judges accused the SEC of regulatory over-reach.

“If the courts adjust, we adjust,” Gensler told the Financial Times. When “courts had a different view . . . I dust myself off and move forward”, he added.

“I’m also a guy that grew up in markets . . . You still try to move forward in a down market,” he said, citing the 18 years he spent at Goldman Sachs before joining the public sector.

While the SEC chair’s term officially runs to 2026, he would likely lose his job if presumptive Republican nominee Donald Trump beats Democrat President Joe Biden in November’s US elections. Trump and Biden are neck and neck in national polls.

Gensler, who was appointed by Biden, said he expected to adopt between 45 and 50 rules in total even if his five-year term was cut short.

But he stressed he was “not doing this against a clock” and that rules were pursued “when the economics and the law align”. He said he was also willing to start over and repropose them “where appropriate”.

Under Gensler, the SEC has adopted dozens of new rules, but courts have challenged some cornerstones of his agenda.

A US appeals court this month tossed out far-reaching measures that would have required more disclosures from private equity groups and hedge funds, saying the SEC had overstepped its authority. The agency was “still reviewing [this] internally”, Gensler said.

Earlier this year, the SEC paused a long-anticipated rule that for the first time would have required company disclosures on climate risks, while it defends the measure against a string of lawsuits from trade associations, US states and climate advocacy groups. The matter is before the US Court of Appeals for the Eighth Circuit.

The SEC is also braced for two opinions on the power of federal agencies that the Supreme Court could hand down as early as this week. The high court is set to rule on the constitutionality of the SEC’s in-house courts and on whether to overturn a legal doctrine known as the “Chevron deference”, under which courts generally defer to agencies’ interpretation of rules and laws written by Congress.

Industry critics often argue the SEC has adopted too many rules too quickly. But Gensler pushed back against these claims, noting that predecessors including Mary Schapiro finalised more measures. It was a “false narrative”, Gensler said, while conceding that the rules he had pursued “might be more consequential”.

The SEC has also adjusted its approach to the cryptocurrency sector. A 2023 defeat in a lawsuit brought by crypto fund sponsor Grayscale Investments forced the agency to U-turn on spot bitcoin exchange traded funds and approve them after resisting for nearly a decade.

After the SEC’s January approval of the first bitcoin ETFs — which now collectively hold more than $50bn — “there’s about to be a second”, Gensler told the FT, referring to the pending approval this summer of ETFs that invest directly in ether, the native token of the ethereum blockchain and the world’s second-largest digital asset.

But Gensler said he remained concerned about the thousands of other extant cryptocurrency tokens, arguing that “the public is not getting their due disclosure about these projects, even their disclosure about the insiders and the conflicts insiders have”.

He said the SEC remained “ready to work with those who want to register” but reiterated his view that the crypto industry was rife with dangers for investors. “It’s a field that’s got a lot of scam and fraud, and I think it’s not just a coincidence,” he said.

Gensler said he was keen to push forward on several reforms to stock trading, particularly on reducing the spread between buy and sell prices — known as tick sizes — as well as the fees brokers pay to access prices quoted on exchanges. Both proposals would update existing rules and were part of a broader, highly contentious package the regulator first proposed in December 2022.

“I’m still very supportive of loosening this because I think the penny is too wide in the current markets and in essence it disadvantage[s] everyday investors,” Gensler said of the SEC’s proposals on tick sizes.