Securities and Exchange Commission Chairman Gary Gensler unveiled an ambitious list of proposed reforms Friday including guidelines for "woke" corporate disclosures and rules to curtail the "gamification" of Wall Street as he embarks on his tenure as Wall Street’s top cop.
The SEC’s "Agency Rule List" released today includes 49 rulings that are in three stages – pre, mid or final – of being looked at by the full commission. The lengthy laundry list reflects Gensler’s publicly stated priorities for regulating both Wall Street and corporate America.
Perhaps the most interesting – but not so surprising given Gensler’s progressive views – is that the rulings are in the form of non-traditional disclosures which would be appealing to left-wing politicians such as Sen. Elizabeth Warren, D-Mass.
Two such proposed rules involve mandating corporate disclosures on issues such as climate change and corporate board diversity.
The list also includes a ruling that would possibly curtail what Gensler has called the ‘gamification’ of trading by discount brokers who offer incentives that Gensler said he believes entice first-time retail investors to essentially gamble their money in the stock market.
Given the frenzy around the so-called meme stocks that have been trading wildly this year, there is genuine concern from a regulatory standpoint that small investors could lose all of their money. This could happen if the shares of stocks such as GameStop and AMC – both of which have risen more than 1000% this year alone – start to reflect more normal valuations.
|AMC||AMC ENTERTAINMENT HOLDINGS INC||36.99||-0.25||-0.67%|
The agenda also addresses possible improprieties done by short-sellers who make money when stocks fall. Some investors believe short-sellers improperly manipulate shares of companies lower in order to make a profit.
In order to pass a ruling, the full five-member SEC must have a majority approval with Gensler as the deciding vote. Given his progressive leanings, many of the proposed rulings including diversity and environmental changes could get approved along party lines.
An SEC spokesman had no immediate comment.
The climate change and diversity disclosures will likely receive pushback from key Senate Republicans such as Sen. Pat Toomey of Pennsylvania. The soon-to-retire Toomey believes it’s outside of the SEC’s purview to demand that companies support issues that are political in nature and aren’t directly beneficial to shareholders.
The "securities laws are not the appropriate vehicle to regulate the climate, nor to correct racial injustice, nor to intimidate companies regarding political spending," Toomey said during Gensler’s confirmation hearing in March. Toomey serves on the Senate’s Banking Committee which provides oversight of the SEC.
The diversity proposal, which the website calls the "Corporate Board Diversity" ruling, involves the commission proposing a new rule that would "enhance registrant disclosures about the diversity of board members and nominees."
The climate change proposal is comprised of making rule amendments in order to ramp up companies’ disclosures regarding their climate change-related risks. The gamification proposal calls for companies to consider behavioral prompts, predictive analytics and differential marketing.
Platforms, specifically Robinhood the user-friendly trading platform loved by millennials, is known for its slick design and easy-to-use features that entice customers into spending money on stock trading. The app has been known to offer cash bonuses to first-time traders and give away free stocks. Critics, including Gensler, believe these features encourage investors to trade more which fosters a gambling mentality. The ‘gamification’ ruling is relatively new and still in the early or ‘pre-rule stage’, according to the website.
"We created Robinhood in response to the growing wealth divide so millions of people previously left behind could access the U.S. stock market," remarked a spokesman for Robinhood. "The people who have been systemically left out of wealth generation are now revolutionizing the way we invest. We celebrate that transformation."
Meanwhile, the short sale disclosure proposal would call for the Commission to establish rules for further disclosure of short selling information such as the name of the issuer, the title, class and aggregate amount of the number of short sales of each security. Some security experts say more disclosure would help eliminate short-selling improprieties such as naked short selling where a trader is allowed to keep a short position indefinitely which, in many cases, goes against SEC regulations.