On June 22, the House Financial Services Committee held a hearing entitled “Oversight of the SEC.” The sole witness in the hearing was Megan Barbero, General Counsel of the U.S. Securities and Exchange Commission (SEC).
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements and witness testimonies and a summary of the Q&A portion of the hearing.
Key Takeaways
The following is a summary of the main topics explored in today’s hearing. Each is discussed in further detail in the Discussion section below.
- Republicans in the Subcommittee criticized the SEC for its lack of responsiveness to Committee inquiries, saying that this problem has been unique to the time that SEC Chairman Gary Gensler has led the Commission. Republicans focused in particular on requests regarding the collapse of FTX and the Commission’s climate change disclosure rule proposal.
- Democrats in the Subcommittee said that Republicans were overreaching in their onerous requests to the SEC, and Republicans should not try to micromanage a regulator trying to protect individual investors.
SUMMARY
Opening Statements and Testimony
Subcommittee Chairman Bill Huizenga (R-MI)
Even after the landmark Supreme Court decision in West Virginia v EPA, some regulatory agencies continue to act well outside the bounds Congress instructed them to follow. The SEC has stonewalled Congress in all of its attempts to conduct oversight over the last six months. Under Chairman Gensler’s leadership, the SEC has been exceptionally slow to respond to administrative duties in comparison to previous Chairs.
Chairman Gensler has consistently missed all deadlines, blaming staff shortages, budget deficiencies, and bureaucratic obstacles. When it has responded, the SEC has either refused to address the questions actually being asked or provided only publicly available documents. Under Chairman Gensler, the SEC has prioritized rewriting the regulation of every one of our capital markets proposing numerous rules with far-reaching implications that will upend decades of precedent with little economic analysis.
Subcommittee Ranking Member Al Green (D-TX)
Republicans are overreaching and trying to micromanage the SEC. The same Republicans that cannot even pass a rule to bring bills to the floor are attempting to micromanage the SEC’s Chairman along with four other Commissioners and extensive staff. From recent collapses in both the banking and cryptocurrency space, we have seen that our constituents are best served by an active SEC.
Instead of empowering the SEC, Republicans are trying to micromanage the SEC’s ability to go after bad actors. These efforts are putting the SEC’s ability to regulate the likes of FTX and other actors that destroy investor dreams at risk. If Republicans had a sincere desire to properly manage, we would have invited Chairman Gensler here today.
Megan Barbero, General Counsel, SEC
The SEC is an independent federal agency, headed by a bipartisan five-member Commission, and charged with a three-part mission: protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation. Since I started at the SEC, I have been in awe of the dedicated staff that show up every day ready to serve the public. I am familiar with the Committee’s recent inquiries, and I want to assure you that my team, along with staff from the Commission’s Office of Legislative and Intergovernmental Affairs, is working diligently to respond to the Committee’s requests.
Discussion
Huizenga (R-MI): It seems that the SEC is deliberately trying to avoid Congressional requests for information. In the past, the SEC has given blanked authority to release documents without taking votes on every issue, but this Commission has not done that. Can you speak to Congressional requests for information regarding the collapse of FTX? Can you speak to requests for information on your climate rule? Barbero: The SEC began work on this issue when it was submitted in February. I think we have been responsive to this request. Committee requests have been broad, and we have done our best to answer all inquiries.
Green (D-TX): Why is climate information material to investment decisions? Barbero: Our goal is to provide investors with the information they need to make informed investing and voting decisions. This information changes over time as new risks arise. Many companies already provide information on climate related risk, but it is not currently comprehensive and comparable.
Garcia (D-TX): Can you speak to the SEC’s responsiveness to requests from this Committee? Have you ever seen this level of constant and obtrusive document requests from a Congressional Committee? Barbero: We have been responsive to these requests. We have collected huge amounts of documents and are working to produce anything relevant to Committee requests. We have done everything we can do to respect this Committee’s oversight priorities.
Williams (D-GA): Do overreaching document requests impact the SEC’s ability to pursue its true functions? Barbero: When we are prioritizing addressing Congressional requests, that is time that could be spent on rulemaking, enforcement, or other functions.
Rose (R-TN): The Commission allows for the release of non-public information to Freedom of Information Act (FOIA) requesters, correct? Barbero: This is done through a delegated authority. We are in the process of bringing documents to the Commissioner level to vote on releasing non-public documents.
Waters (D-CA): How will the SEC balance keeping sensitive FTX enforcement action information from the private while fulfilling its obligations to provide Congress with its information requests? Barbero: We are committed to providing this Committee with the information it needs while not prejudicing a criminal trial or our work in our enforcement capacity.
Meuser (R-PA): Why has the SEC been so slow to answer any of my requests? Why has the SEC been far slower than previous Commissions? Barbero: There has been a significant increase in the average number of days to as we have trying to respond to numerous requests.
Wagner (R-MO): What factors do you consider when deciding whether to submit Committee letters to SEC comment files instead of responding with substantive information? Barbero: In responding to the Committee’s request, we produced information that we could produce quickly. We then submit these letters to the comment file so know to consider this information when finalizing the rule.