It’s safe to say that the pace of things at the Securities and Exchange Commission remains frenetic. After a first year which would have exhausted many an SEC chair, and most especially his immediate predecessor, the possibly regulatorily-enhanced Gary Gensler has not slowed down. He and his cohorts have taken aim at both shareholder activists and entrenched corporate leadership, threatened a bedrock of Wall Street trading and the foundation of much of the accounting industry, and moved to put a stop to these SPAC shenanigans and payment for order flow—the latter by simply tearing out and replacing the markets’ entire convoluted plumbing system. And he’s gone disclosure-mad, insisting that companies ‘fess up on matters ESG, the hedge funds and private equity firms shed a bit of their precious privacy, and most recently finally put the finishing touches on a very simple rule that Congress mandated a dozen years ago.
The new rule puts into practice a provision required by the 2010 Dodd-Frank Act to discourage financial fraud and better align executive compensation with corporate results…. Under the rule, U.S. public companies must provide a new table in their annual proxy filings that contains executive compensation and financial performance measures covering a period of up to five years.
The change by the Democratic-majority SEC eliminates the Wall Street regulator’s ability to deny awards to tipsters who might otherwise be eligible for a payout from another agency.
The vote reverses a change made to the whistleblower program in 2020, when the SEC was led by Chairman Jay Clayton, a political independent nominated by President Trump.
On Friday, the SEC also voted for a second amendment clarifying that the commission has the authority to consider the dollar amount of a potential award, but only for the purpose of increasing a payout
None of this, nor any of Gensler’s other ambitious plans, makes Wall Street very happy. And it (and its lawyers) are counting on the sheer breadth and depth of Gensler’s rulemaking, along with its haste, to undermine them in the courts when Wall Street inevitably sues the SEC to undo all that Gensler’s done. For the SEC is required to exhaustively study the economic impact of the rules it imposes, and given all of the many, many rules it is imposing, how can it possibly be doing that?
Well, whatever Gensler’s taking, he’s apparently put into the water at SEC HQ.
[The SEC’s chief economist] has churned out 2,037 pages of economic analysis since Mr. Gensler was sworn in, 52% more than it had published at a similar stage under Mr. Gensler’s predecessor, Jay Clayton.
“We thought we were doing quite a bit, but he has outdone us,” said S.P. Kothari, who led the SEC’s economic-analysis division in 2019 and 2020, of Mr. Gensler. “I don’t envy the chief economist’s job currently….”
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.
Which, anecdotally anyway, they’re apparently not doing.
The SEC estimated that compliance costs [for its new mutual-fund ESG rule] would range from $50,000 to $500,000 per fund…. In an Aug. 16 comment letter, the mutual-fund industry’s lobbying group, the Investment Company Institute, said the SEC’s economic analysis for the rule has “significant shortcomings” and is “drastically understated….”
The ICI didn’t provide an alternative estimate of the rule’s likely cost.
You guys: You’re gonna have to do better than that to get one over on Gary Gensler.
Wall Street Rails Against Costs of Chairman Gary Gensler’s Regulatory Agenda at SEC [WSJ]
SEC Modifies Whistleblower Program to Reverse Trump-Era Change [WSJ]
SEC Requires Disclosures on Executive Pay Versus Company Performance [WSJ]
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