SEC’s Gary Gensler eyes crypto and climate change with confirmation official

Gensler's Wall Street resume have primed him for modern-day market issues say experts

The Senate confirmed Gary Gensler, President Biden’s pick, as Chairman of the Securities and Exchange Commission on Wednesday. 

As he prepares to take his post, Gensler is expected to prioritize climate change and cryptocurrencies among other issues. 

Coincidentally his confirmation came on the same day Coinbase, now the largest publically traded cryptocurrency company celebrated its direct listing on the Nasdaq which was greeted with heavy demand ending with a first-day gain of 31%.  

COINBASE CRUSHES NASDAQ DEBUT

Ticker Security Last Change Change %
COIN COINBASE GLOBAL 274.14 -9.47 -3.34%

Gensler, who most recently served as a professor at the Massachusetts Institute of Technology (MIT) is seen as having a greater understanding of the asset class compared to prior SEC chairs. 

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As for climate change, Gensler has expressed support for using the SEC to mandate greater disclosure requirements promoting ESG – which stands for environmental, social and governance— a shareholder activism movement to push publicly traded firms to advocate for social change. 

"There are tens of trillions of investor dollars that are going to be looking for more information about climate risk," Gensler told the Senate Banking, Housing and Urban Affairs Committee.

Gensler noted several times that he would limit disclosure requirements to "material" matters to investors, but said, "It’s the investor community that gets to decide what is material."

However, the agency that oversees publicly traded companies will likely face pushback, West Virginia Attorney General Patrick Morrisey warned in a March 25 letter

"This is federal overreach and political activism at its worst," Morrisey wrote. "West Virginia citizens will not support efforts to allow ‘mission creep’ in all of the federal agencies simply to advance a president’s political agenda. When you mandate statements unrelated to protecting against fraud, for example, you ignore what is already accessible in the public marketplace on sensitive topics, and needlessly transform securities enforcement into political activism."

Morrisey continued. "If the commission proceeds down this pathway, states and other interested stakeholders will not hesitate to go to court to oppose a federal regulation compelling speech in violation of the First Amendment."

Acting Chairwoman Allison Herren Lee already established the SEC Division of Enforcement’s Climate and ESG Task Force to "detect climate and ESG-related misconduct" and is expected to stay on as a commissioner. 

ESG advocates are likely to try to stretch the definition of material as far as possible, said Richard Morrison, a research fellow at the Competitive Enterprise Institute, a free-market think tank. But, he said Gensler could be more moderate than Lee.

"Gensler seems receptive to the ideas, but doesn’t seem to have the fire-in-the-belly motivation and energy as Lee," Morrison told FOX Business. "I’m concerned he will stray from the SEC’s tradition of bipartisanship by using the agency’s regulatory powers to advance a liberal social agenda on issues such as climate change, political spending, and racial inequality," the committee’s ranking member, Sen. Pat Toomey, R-Pa., said ahead of his vote against Gensler's nomination. "The securities laws are not the appropriate vehicle to address social and cultural issues."

Moreover, the ESG agenda overlaps with other agencies, he said. 

"For the environmental regulation, you have the EPA. You have the Council on Environmental Quality," Morrison said. "For workplace discrimination, you have the Equal Employment Opportunity Commission and the Department of Justice’s Civil Rights Division. Even if the federal government should be doing all these things, it’s not clear the SEC should be involved."

Both the AFL-CIO and the U.S. Chamber of Commerce gave a boost to the nomination of Gensler, previously best known for serving as President Barack Obama’s chairman of the Commodity Futures Trading Commission (CFTC) from 2009 to 2014. 

The AFL-CIO noted Gensler’s prominent role in two of the most significant financial regulation bills in the last two decades.

"While other regulators delayed, the CFTC under Mr. Gensler’s leadership completed most of its required rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act," said the letter from William Samuel, director of government affairs for the AFL-CIO. "And earlier in his career as a senior advisor to Senator Paul Sarbanes, Mr. Gensler helped draft the Sarbanes-Oxley Act to address the corporate accounting scandals of the Enron and WorldCom era."

Meanwhile, the confirmation hearing seemed to show Gensler "demonstrated a strong understanding of ‘materiality' for disclosure," wrote Neil Bradley, executive vice president of the U.S. Chamber of Commerce wrote in a letter to committee members. 

 "His experience will be critical to ensuring businesses, especially small and emerging growth companies, are able to access needed capital so that they can grow and help enable a robust economic recovery," Bradley wrote.