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November 18, 2024

Chair Gensler Reflects on Legacy at the Commission

Last Wednesday, Chair Gensler was the keynote speaker at PLI’s 56th Annual Institute on Securities Regulation. His prepared remarks are available here, and the full session, including Q&A, are available for replay. On LinkedIn, SEC-alum and Edward Jones GC, Kier Gumbs, who introduced Chair Gensler, listed the 6 core topics Chair Gensler highlighted in his remarks:

– Treasury markets reform (e.g. centralized clearing)
– Equity markets reform (e.g. next day settlement – T+1; execution quality rules)
– Corporate governance (e.g., clawback rules, 10b5-1 trading plans)
– Market resiliency rulemakings
– Accounting and auditing rulemakings
– Crypto currency enforcement and offering approvals

Using comparisons to traffic laws and the rules of the NFL, Chair Gensler’s speech reads like a defense of securities regulation. With numerous historical references, he highlights the role regulation has played in the great success of the US capital markets — just like, he says, stop signs and traffic lights allowed American consumers to feel comfortable driving automobiles, which helped launch the American automotive industry a century ago, and rules and referees in football protect the players and build confidence in the integrity of the game for fans.

The securities laws—benefiting investors and issuers alike—help create trust in our capital markets. These laws help lower costs. They help lower risks.

The results are evident in the size, scale, and depth of our capital markets. At more than $120 trillion today, they are part of our comparative advantage as a nation, undergirding the dollar’s dominance and our role in the world. We are the capital markets of choice for issuers and investors around the globe. At more than 40 percent of the world’s capital markets, we punch above our weight class of just 24 percent of the world economy.

This didn’t just happen by chance.

Roosevelt and Congress understood in the 1930s that well-regulated markets build trust and create the environment for economic success.

Keir summed up this theme as “well-regulated markets improve economic outcomes.” But, Chair Gensler said, we can’t stop here. He went on to explain why the securities laws must continue to evolve.

As students of history and economics, we all know nothing stands still. Technology and business models constantly change. Other nations seek to challenge our place as the capital markets leader.

Thus, for those who have the privilege of service, our job is to continually update the rules of the road. That’s what we’ve been doing. We’ve worked to lower costs and risks in the capital markets, what economists would call promoting efficiency, resiliency, and integrity.

On crypto, Chair Gensler discussed similarities in the Commission’s approach under his leadership compared to the approach under Chair Jay Clayton. In his final Q&A, Chair Gensler noted that he would have liked to do more on AI, which is “rapidly changing the face of finance.” He said it will be for others in the future to figure out and there are going to be really interesting public policy issues and very important public policy debates that will play out in our courts and may play out ultimately in Congress as well.

Notwithstanding his AI goals, Chair Gensler’s pride in his public service is evident throughout the speech. On public service, he concludes by saying, “I would say it’s the greatest honor. To any of you who have not served, do it. Our nation benefits, but you will benefit personally.”

Meredith Ervine