The Senate voted Wednesday to confirm Gary Gensler as chairman of the Securities and Exchange Commission, paving the way for what could be an ambitious financial regulatory agenda under President Joe Biden.
The vote was 53-45.
Gensler, who began his career as a banker at Goldman Sachs /zigman2/quotes/209237603/composite GS -1.47% , is one of the few Wall Street veterans to win the adoration of the left wing of the Democratic Party after he proved willing to take on the financial services industry as chairman of the Commodity Futures Trading Commission, where he helped craft the Dodd-Frank reform legislation and aggressively implemented new rules regulating the derivatives market.
He will inherit the leadership of an SEC that appears poised to implement a host of new regulations that could require public companies to disclose risks due to climate change, policies on workforce management and other data related environmental, social and governance issues.
The SEC has already called on the public for input in crafting new disclosure requirements on these topics under Acting Chairwoman Allison Herran Lee, who has been leading the agency since Donald Trump appointee Jay Clayton stepped down in December.
Republicans largely opposed Gensler’s nomination, arguing that his willingness to lead the SEC in regulating company disclosure on ESG issues will result in the agency overstepping the authority.
“I’m concerned he will cause the SEC to use its regulatory powers to advance a liberal social agenda focused on issues such as global warming, political spending disclosures, and racial inequality and diversity,” said Sen. Pat Toomey of Pennsylvania, the ranking Republican on the Senate Banking Committee, in a statement Tuesday. “Securities laws are not the appropriate vehicle to address these topics.”
Recent events in frothy financial markets may hamper the SEC’s ability to focus solely on progressive priorities, with the fallout from the GameStop short squeeze , the failure of hedge fund Archegos Capital Management and the explosion of private companies going public through special purpose acquisition companies demanding the agency’s attention.
The GameStop /zigman2/quotes/203755179/composite GME -3.23% saga has led congressional Democrats to ask the SEC to reexamine the practice of payment for order flow, whereby stock brokers are paid to direct customer orders to market makers, as well as features in trading apps that critics say exemplify the use of so-called gamification techniques to encourage harmful overuse of those apps by retail investors.
The blowup of Archegos, meanwhile, could encourage Gensler to propose new rules for institutional investors that require the disclosure of short positions in stocks as well as derivative positions that mimic stock ownership.
“The surge in the popularity of Special Purpose Acquisition Companies has already attracted the SEC’s attention and the SEC’s interest in SPACs is likely to grow during Mr. Gensler’s term,” Brian Gardner, chief Washington policy strategist at Stifel, wrote in a Wednesday note to clients. “We expect the SEC will consider changes in SPAC disclosures that more clearly spell out investors’ rights and will push SPACs to align the interests of founders with the interests of investors.”
Amid the ongoing rise in prices for popular cryptocurrencies like bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.82% and ethereum /zigman2/quotes/108573964/realtime ETHUSD +1.73% , along with Wednesday’s initial public offering of crypto exchange company Coinbase Global Inc. /zigman2/quotes/225893452/composite COIN -2.30% , the SEC will also be focused on regulating the new industry, with many crypto enthusiasts hopeful that the Gensler will lead the agency to approve new crypto exchange-traded funds.
Democrats nevertheless remain hopeful that Gensler’s tenure will lead to the implementation of favored reforms.
“Mr. Gensler is an experienced public servant with a strong record of holding Wall Street accountable,” said Democratic Sen. Sherrod Brown of Ohio, chairman of the upper chamber’s banking panel, in a Tuesday statement. “And he will lead the SEC at a time when it’s become more and more obvious to most people that the stock market is detached from the reality of working families’ lives.”
MarketWatch’s Victor Reklaitis contributed to this report.