Who is Gary Gensler? What New SEC Leadership Could Mean for Investment Advisers

January 21, 2021

WHAT HAPPENED?

President Biden recently named Gary Gensler, the Obama-era head of the Commodity Futures Trading Commission (CFTC), as his pick to be the new chairman of the Securities and Exchange Commission. Having a reputation as a strong regulator and academic in the field of financial technology, Gensler is expected to be a much different leader than former chairman, Jay Clayton, who stepped down from the SEC at the end of 2020.

Gensler’s background as a regulator provides insight into what direction he might take the SEC:

WHAT TO KNOW ABOUT GARY GENSLER:

• Early in his career, Gensler was a partner at Goldman Sachs where he spent 18 years, leaving his position to work under the Clinton administration.
• Gensler has a lengthy background as a career public servant, including holding positions within the U.S. Department of the Treasury, serving as an advisor to Paul Sarbanes while he was chairman of the Senate Banking Committee, and several years serving as head of the CFTC under President Obama.
• Gensler is often identified by his track record of initiating regulatory reforms in the financial system, especially after the 2008 financial crisis. Some of his notable regulatory achievements include spearheading the investigation into widespread manipulation of LIBOR numbers among large banks and his work drafting the Dodd-Frank Act.
• In recent years, Gensler has taught courses on economics, blockchain technology, and digital currencies at the MIT Sloan School of Management.
• If confirmed as chairman, Gensler is expected to put emphasis on the quickly evolving compliance risks associated with online banking, cryptocurrencies, and the projected future use of blockchain technology across the financial industry. Gensler also will likely expand on Clayton’s initiatives to add regulatory protections for retail investors.

Alongside Gensler, President Biden announced the nomination of Rohit Chopra to lead the Consumer Financial Protection Bureau (CFPB). Like Gensler, Chopra also has a reputation as an aggressive regulator and will likely pivot away from any relaxed policies or guidance issued in recent years.

The financial industry is waiting to see who Gensler chooses as the Director of Enforcement for the SEC, a position that will have a significant impact on the direction of the agency’s regulatory priorities in the coming years.

WHAT DOES THIS MEAN FOR ME?

A Gensler-run SEC will likely be defined by a greater emphasis on financial technology, cryptocurrencies, and related issues, paired with a more forceful approach to regulations overall. Your firm can prepare in advance for these changes by having complete, current compliance policies and procedures in place, fully documenting your compliance program, and staying up to date with changing rules and regulations.

If you are not already a Fairview client, you should consider revamping your compliance program.  Fairview can help you get on track. Our team of compliance experts helps manage over $300 billion in assets for registered investment advisers all over the U.S. Contact us today to find out what Fairview can do to assist your firm.