Gary Gensler, President Joe Biden’s choice to lead the Securities and Exchange Commission, received Senate confirmation Wednesday to oversee the agency.
His ascent to the role draws attention to the agency’s purview over retail companies — as a civil law enforcement agency, the SEC has the authority to pursue cases, bring civil fines, and bar players from the market for violations, and it frequently collaborates with the U.S. Department of Justice on criminal investigations.
Notably, in the Neiman Marcus bankruptcy last year, the SEC brought fraud charges against former hedge fund leader Dan Kamensky, over his conversations involving a settlement in the bankruptcy case. The episode demonstrated the kind of oversight that the agency exercises over financial transactions, including those that take place in the context of bankruptcies, which often involve deal-making and bidding under high pressure circumstances.
Gensler is expected to lead an agency that will scrutinize corporate conduct and disclosures, taking into account the ongoing economic challenges as the COVID-19 pandemic persists, experts said.
“I think an SEC under chair Gensler will investigate and take very seriously allegations of either incomplete or inaccurate disclosures,” said Matthew Kulkin, co-chair of Steptoe Johnson LLP’s financial services group, and a former division director at the Commodity Futures Trading Commission.
“On the other side of that dynamic, Mr. Gensler is taking over the SEC at a time when the economy is trying to grow and restart, and American capital markets are incredibly important for companies to be able to raise money, hire employees, add jobs and grow their business,” Kulkin added. “You’ll see him work closely with the rest of the Biden administration to take steps in the first few months to make sure that companies have access to competitive, transparent, fair capital markets, to raise the money that they need.”
One of Gensler’s first tasks helming the agency will be to fill the senior staff ranks that have been depleted in recent months amid turnover toward the end of former President Donald Trump’s administration. Gensler will oversee the process of filling vacancies left by senior staff and associate directors, as he crafts an agenda for the agency that also faces growing pressure to expand its oversight of corporations.
The agency is typically known for the financial disclosures it requires of public companies, but it also has the ability to seek broader disclosures in other areas, including what companies are doing about climate change, supply chain oversight, and hiring and leadership issues, experts noted.
The SEC previously reformed its climate change disclosure requirements about a decade ago, and is expected to review those policies, said Thomas Gorman, a partner at Dorsey & Whitney LLP who represents companies in government investigations, and who was previously a senior counsel at the SEC.
“Traditionally, people try to pigeonhole the SEC into ‘This is business, and business only, so tell us what your widgets do and tell us how much money you make,’” said Gorman. “But the filings that you make with the SEC and the things that you put in them…are supposed to be giving investors a view of what it would be like if they were sitting at the desk of the CEO, and looking at the company and deciding what it’s going to do,” he said.
“If you’re going to do that, most companies are going to have to say something about ESG, about standards for hiring, and about climate impact on their business,” he said, referring to the Environmental, Social, and Governance standards that corporations have increasingly used to present their sustainability message.