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In his new job as Wall Street’s best cop, Gary Gensler often thinks of one of his grandfather’s favorite aphorisms.
Ellis Tilles would say, ‘The numbers don’t lie, but liars can certainly understand,’ Gensler told NPR in a recent interview, noting that her grandfather immigrated to the United States from Lithuania at the age of. 17 years.
The chairman of the United States Securities and Exchange Commission first heard this adage as a child, growing up in Baltimore.
And although he doesn’t know his grandfather well, this saying has become something of a guiding principle as it commits to adopting a stricter and more muscular approach to supervision at a critical time for the markets.
During the pandemic, millions of amateur investors began trading stocks for the first time, thanks to apps like Robinhood.
They’ve banded together on social media Reddit to push up the price of “meme stocks,” including GameStop. And they have embraced cryptocurrencies and trendy investments like PSPCs, which have become a popular way for private companies to bypass traditional initial public offerings.
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This worries Gensler, who says these amateur investors may not be adequately protected.
“The core market or the principle of our capital markets is that investors should get full and fair information,” Gensler said. “And two, that they are protected against fraud and manipulation.”
Under his leadership, the agency launched a number of high-profile investigations, including one into a planned PSPC deal involving the social media company of former President Trump.
And Gensler made his way through a long agenda. On Wednesday, the SEC unveiled several proposals, including potential restrictions on how executives can trade shares of their own companies and an incentive for improved reporting on company buyouts.
There’s a lot more to come, largely related to forcing Wall Street to disclose more information or improving protections for average investors.
The scale of the SEC’s program stunned some longtime Wall Street watchers.
“I am amazed, as someone who has been watching the SEC for half a century now, that the program is so strong and that there is so much energy behind it,” said James Cox, who teaches corporate law and of Securities at Duke University. .
“I think Gary Gensler not only works seven days a week, but I think he works 26 hours a day,” he says.
“My name is Gary Gensler”
Gensler brings years of experience as a regulator to its current role.
Unlike many of his predecessors, Gensler was not a lawyer by training. After starting his career at Goldman Sachs, where he rose through the ranks to become a partner, Gensler worked in the Treasury Department and then, as chairman of another regulator, the Commodity Futures Trading Commission.
He led this agency at another pivotal moment, following the global financial crisis of 2008. Gensler spent most of his time at the CFTC implementing the new rules and regulations required by the sprawling Dodd- Law. Frank who imposed tighter restrictions on Wall Street activities.
Gensler is credited with having mastered the so-called OTC derivatives market, which is valued in the hundreds of billions of dollars. These types of contracts, traded by non-stock brokers, contributed to the 2008 collapse.
And Gensler has kept the pulse of markets and finance throughout his life.
In 2018, Gensler joined the MIT Sloan School of Management, where he taught a course called “Blockchain and Money”, on the technology behind Bitcoin and other cryptocurrencies.
“My name is Gary Gensler,” he said, introducing himself to his students at his first lecture. “I have spent my life in the world of finance, money and public policy.”
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Stricter rules ahead for cryptocurrencies
Of all the evidence on Gensler’s record, the planned regulatory approach to cryptocurrencies tends to attract perhaps the most interest.
Gensler’s course on Blockchain has become popular with crypto curious who want to learn more about how digital currencies work.
But it also defines the way Gensler approaches work.
Cryptocurrencies have exploded in popularity since the start of the pandemic last year and today tens of millions of investors are buying all kinds of virtual money, including those like Dogecoin which started out as jokes.
“Markets and technology are constantly changing,” Gensler told members of the Senate Banking Committee at his appointment hearing. “Our rules have to change with them.”
In the NPR interview, Gensler said crypto investors deserve “similar protection as you would expect on the New York Stock Exchange, Nasdaq or other trading venues.”
Gensler asked his staff to consider how the SEC might regulate digital currencies and the exchanges on which they trade. In speeches and testimony to Congress, he argued that many cryptocurrencies are in fact securities and, therefore, fall under the authority of the agency.
Wall Street fears overtaking
Gensler’s aggressive approach to regulation is causing some investors to fear that the United States is falling behind its competitors or that new rules stifle innovation.
It’s a challenge that all regulators face, according to Edmund Shing, chief investment officer at BNP Paribas Wealth Management.
“Protecting consumers is generally a good thing, and regulations put in place to protect consumers are never a bad thing,” he says. “The question is whether governments are going beyond themselves then.”
Gensler has heard this concern before and when asked how he strikes the right balance, Gensler invokes the favorite cliché of all regulators.
“It’s kind of like that point in Goldilocks,” he says. “That the porridge is neither too hot nor too cold.”
And as he tries to get this recipe just with new rules, Gensler says he will continue to keep his grandfather’s aphorism in mind.
“I just want to take each day to see what we can do for the American public – for young investors, for working families, for retirees along the way,” he told NPR. “And then it will hopefully improve the markets for ordinary people a little bit.”