As the House Financial Services Committee prepares to grill all five members of the Securities and Exchange Commission, including Chairman Gary Gensler, on Tuesday, FOX Business has received an exclusive preview of what might go down from Commissioner Mark Uyeda, one of two Republicans on the Democratic-majority agency that serves as Wall Street's top cop.
The House Financial Services Committee oversees the SEC and typically holds an oversight hearing once a year with the chair. This year, ahead of a new changing of the guard in the White House and possibly Congress, the committee wants to hear from the whole commission. This will be the first time all five commissioners have testified together since 2019. Gensler will testify alone in front of the Senate Banking Committee on Wednesday.
If Trump takes back the White House in November, he may choose to appoint Uyeda or fellow Republican Commissioner Hester Peirce as chair, Washington insiders have speculated.
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Uyeda, who is currently serving his second of a five-year term at the SEC following his appointment by President Biden in 2022, has been a vocal critic of the way the agency has operated under Gensler, the progressive Democrat appointed by Biden to the post in 2021. Republican critics like Uyeda and those who serve as majority members on the House Financial Services Committee say Gensler has been using his position to impose a progressive regulatory agenda on Wall Street.
"The commission must return to being a constructive regulator," Uyeda said. "We blasted out 50-plus rule proposals with little thought as to how they work together."
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Those proposed rules included climate disclosures for public companies, allegedly unnecessary disclosures surrounding private fund management, and heaping on new rules governing private placements that critics say might deter capital formation.
"To meet this ambitious agenda, we cut corners on rulemaking – like 30-day comment periods – and have charged ahead recklessly," Uyeda said. "Part of this effort has included convoluted interpretations of our limited statutory authority given by Congress. Now, the courts are calling us to task for these shortcomings."
Uyeda believes those will be among some of the criticisms lobbed at Gensler during the hearing he will appear at on Tuesday.
In addition to grilling Gensler and company on climate disclosures, Uyeda expects House Republicans, who as the majority will control the hearing agenda, to question Gensler and the Democrats on the SEC’s tough regulatory stance toward the cryptocurrency industry, its proposal for a so-called consolidated audit trail (CAT), a database that tracks investors' sensitive data, the overregulation of private funds and more.
Conservatives oppose increased government surveillance and regulatory overreach and see it as more of the same. Some have expressed privacy concerns associated with the agency having access to traders’ sensitive personal data. Industry participants would also be responsible for contributing to the funding of the CAT, with broker-dealers paying fees based on their trading volumes.
"The commission needs to end its war on crypto and cease empowering special interest ESG activists to dominate C-suites and corporate boards," Uyeda said. "We should take a hard look at policies that permit a small number of proxy advisers and asset managers to effectively control public companies. The commission must empower entrepreneurs to build businesses, create jobs and innovate by focusing on capital formation."
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The SEC has faced mounting legal challenges to some of its rules over the last year, including its highly controversial climate disclosure proposal, which would require companies to report climate-related risks and disclose the impact of their carbon footprints. Critics say the agency is not a climate regulator and is overstepping its mandate. It’s also faced legal pushback to its approach to regulating the $2 trillion cryptocurrency industry and the private funds market.
Uyeda has been particularly critical of the commission’s approach on cryptocurrency, telling FOX Business that the agency has failed to provide comprehensive rules of the road for crypto firms to abide by or provide a practical pathway for companies to comply with existing rules.
"We have not provided the rules of the road for crypto, other than to declare that nearly all are securities, nor have we provided a practical pathway to comply with our rules. Instead, we have wasted time and money on crypto enforcement actions that provide limited guidance at best," he said. "At the same time, we are using enforcement resources on crypto, the commission is falling short in protecting seniors from relationship and affinity scams, which can be devastating when their retirement investments are stolen."
The SEC is designed to be an independent regulatory agency but has faced increasing accusations of politicization in recent years. The five-member commission is composed of members from both major political parties, appointed by the president. Depending on when terms end, that usually results in three from the president's party and two from the opposing party. The uneven makeup has led to divisions over rulemaking, as Democrats traditionally favor stricter regulations and Republicans advocate for a lighter regulatory touch to promote market flexibility.
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Uyeda and Hester Peirce, a fellow Republican, frequently dissent from some of the more controversial decisions that come from their more progressive Democratic counterparts Gensler, Caroline Crenshaw and Jaime Lizárraga.
Uyeda says the right approach to capital markets regulation moving forward should not be the Gensler approach of regulatory overreach. Instead, the SEC should empower Americans to make independent financial decisions and build individual wealth, enable U.S. companies to be competitive globally and restore public accountability in the rule-making process.
"Regulations should be efficient, effective, and appropriately tailored. Facilitating robust capital markets will also help prevent the need for taxpayer bailouts. These are some commonsense goals that President Trump adopted during his first term through an executive order outlining his core principles on regulating the U.S. financial system," Uyeda said.
He describes his time as a policy adviser for the Treasury during the Trump administration, getting a firsthand look at regulatory agencies working together without jurisdictional turf wars.
"We saw significant economic growth that helped provide a cushion when coronavirus struck. The strategy worked, and our country benefited as a result. That coordinated approach has been missing in the current administration."
