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SEC Chairman Gary Gensler

Regulation and Compliance > Federal Regulation > SEC

House GOP Seeks to Remove SEC Chair Gensler, Restructure Commission

By Maydeen Merino

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Two House Republicans introduced legislation this week aimed at removing U.S. Securities and Exchange Commission Chair Gary Gensler and restructuring the agency to ensure equal representation of Republicans and Democrats.

The proposed SEC Stabilization Act would restructure the commission to include a sixth member, create an executive director position to oversee the agency’s daily operations and increase the commissioners’ terms from five to six years.

But GOP Reps. Warren Davidson of Ohio and Tom Emmer of Minnesota said a goal of their legislation is also the removal of Gensler, whom they said has engaged in “a long series of abuses.”

“U.S. capital markets must be protected from a tyrannical chairman, including the current one,” Davidson said in a press release. “That’s why I’m introducing legislation to fix the ongoing abuse of power and ensure protection that is in the best interest of the market for years to come. It’s time for real reform and to fire Gary Gensler as chair of the SEC.”

Davidson added during a social media news conference Tuesday that Gensler has engaged in a “whole period of activism” and has “put inappropriately short public comment periods because, yes, he doesn’t care what anyone thinks.”

“He doesn’t even care what the impact on the market is,” Davidson added during the Twitter space conversation. “He’s got an agenda, and he’s very anxious to implement it.”

Davidson and Emmer serve on the Republican-led House Financial Services Committee.

The SEC declined to comment Tuesday on the proposed legislation and the lawmakers’ comments.

Jim Cox, a Duke University professor specializing in corporate and security law, said he is surprised at how long it took lawmakers to push legislation to remove Gensler.

“If you were looking for somebody who’s a hero in today’s regulatory culture, it would be Gary Gensler, the chairman of the SEC,” Cox said.

The addition of a sixth commissioner “would automatically make it actually more political,” he added.

The SEC is receiving scrutiny because it is trying to “carry out its mandate of protecting investors and facilitating the allocation of capital,” Cox said. “Some oxen are going to be gored, and that’s what’s happening here.”

Markets “don’t like it when somebody comes in and says, ‘Oh, we’re going to start regulating you so the public is going to be better off, and we’re going to facilitate the lower cost of raising capital more expeditiously,” Cox added.

The legislation was introduced amid recent aggressive actions by the SEC in the crypto space with its lawsuits against cryptocurrency exchange platforms Coinbase and Binance.

Davidson voiced concern with Gensler’s enforcement on the digital currency front amid debate over whether crypto should be treated as securities or commodities.

“When you look at what Gary Gensler is doing, he’s doing selective enforcement on the one hand,” Davidson said. “On the other, he’s hyper-aggressive in rulemaking proposals. … He’s willfully withholding clarity, so there is a burden for Congress to correct that.”

Gensler has previously stated that digital assets are securities and that the digital industry must comply with SEC rules already in existence. The crypto industry claims those rules need clarification on which tokens are securities regulated by the SEC or other agencies.

Gensler’s view was endorsed by Cox.

“Everybody’s known for some time that bitcoin was a security,” Cox said.

“It met the [security] definition embraced by the Supreme Court in 1946 (in SEC v. W.J. Howey),” Cox said. “That definition has been applied to all kinds of financial products for decades.”

He added, “There are literally hundreds, if not thousands, of cases interpreting what is the meaning of a security. And so to say that we don’t know what it means, it’s just sheer nonsense.”

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