Tomorrow (May 18, 2022), SEC Chairman Gary Gensler will hike up to Capitol Hill to extoll the need for a slight budget increase for the SEC and its ~ 4800 employees.
Chair Gensler, along with the Chair of the FTC, will address the Subcommittee on Financial Services and General Government. part of the House Appropriations Committee, to review the cost of regulating the securities markets and enforcing the rules when firms or issuers go astray.
Calling the US markets the gold standard of global capital markets, Gensler states in his prepared remarks:
“We are blessed with the largest and most innovative capital markets in the world. The U.S. capital markets represent 38 percent of the globe’s capital markets. This exceeds even our impact on the world’s gross domestic product, where we hold a 24 percent share.”
He adds that:
“We are the destination of choice for companies seeking to raise money in both public and private markets. Private capital markets, such as venture capital, have brought new ideas to market quickly and flexibly.”
Maintaining the gold standard comes with a cost and the SEC is submitting a budget request for operations of $2.149 billion, an 8 percent increase over FY 2022. Gensler believes this is no time to “scrimp” on resources as the complexity of markets is growing – not receding.
Regarding enforcement actions, Gensler reports that the SEC filed about 700 total actions in 2021. On average, the SEC Division of Enforcement has 1,100 matters under inquiry and investigation (or 1700 “open matters”) during the year. For FY 2023, the Division of Enforcement (the largest Division) anticipates 1365 full-time employees an increase from 2021 of 1325 employees.
Regarding Fintech innovation and, more specifically crypto, Genslers states:
“… misconduct in emerging and new areas, from complex securities products to new financial technologies to crypto, requires new tools and expertise.
The additional staff will provide the Division with more capacity to investigate misconduct and accelerate enforcement actions. It also will strengthen our litigation support, bolster the capabilities of the Crypto Assets and Cyber Unit, and investigate the tens of thousands of tips, complaints, and referrals we receive from the public.”
Gensler shares that crypto markets have “mushroomed” claiming that in 2016 there were 644 tokens but that number has jumped by 10X in five years. Interestingly, in 2021, there were 45 filings referencing crypto in prospectuses, up from 6 filings two years earlier.
“The volatility in the crypto markets in recent weeks highlights the risks to the investing public.”
The Hearing will be live-streamed beginning at 10 AM ET tomorrow and is open to the public. Typically, many of the questions from Members of the Committee will veer from budget questions into other areas – perhaps crypto or Fintech related.