SEC Chair Gary Gensler defended his agency’s agenda, doubled down on his criticism of the cryptocurrency industry and explained why he’s in favor of reissuing the commission’s artificial intelligence conflict-of-interest proposal in a lively discussion May 23 at the Investment Company Institute’s 2024 Leadership Summit in Washington.
The topic that garnered the most back-and-forth between Gensler and ICI President and CEO Eric J. Pan concerned the SEC’s money market fund rule that was finalized in July. That rule includes an amendment that requires institutional prime and institutional tax-exempt money market funds to impose mandatory liquidity fees when a fund experiences daily net redemptions that exceed 5% of net assets.
While the liquidity fee was mentioned in the rule’s proposal, there was no description as to what that fee looked like or how such a fee would operate, Pan said. “And as result we did not feel like it was part of the core proposal, nor was there adequate information in the proposal for us to provide meaningful comment,” he added. “It has proven to be a tremendously complex, complicated mechanism and it would’ve benefited from an opportunity for people to tell the SEC there may have been a better way of doing this fee if this is what the commission wanted.”
Gensler said the rule was needed to bolster money market funds in times of stress and that the entire capital market will be better off once the liquidity requirement takes effect in October.
“I’m very proud of the work we did so I’m standing by that, Eric,” Gensler said.
On crypto, Gensler didn’t directly respond to a question about the May 22 vote in the House in which lawmakers approved a bill that gives the Commodity Futures Trading Commission new oversight of the digital commodities market and designates the SEC as the regulator for the digital securities market.
Gensler issued a statement May 22 saying the bill “would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
When asked why he has concerns on crypto, Gensler said, “It comes down to the rampant noncompliance with U.S. law. It comes down to the frauds and scams. This is a field where some of the leading lights of the field are either now in jail, or awaiting jail, or awaiting extradition.”
In a huddle with reporters afterward, Gensler wouldn’t comment on the whether the SEC will approve a spot ether exchange-traded fund, though experts expect it to happen soon.
On spot bitcoin ETFs, which the SEC approved in January and have since received major investor interest, Gensler said investors “have gotten the benefit of disclosures by the individual exchange-traded products and well-regulated exchanges like NYSE, Nasdaq and Cboe on which these products trade.”
And on the SEC’s proposal to require investment advisers and broker-dealers "eliminate or neutralize" conflicts of interest in all types of investor interactions and uses of technology, Gensler said he’s asked staff to review reproposing the concept based on public comments.
A large swath of trade groups, including ICI, have called on the SEC to withdraw the proposal because it’s too broad and would raise costs for advisers and investors.
“I’ve asked staff to consider, given the comments that we’ve gotten, are there any pieces that they recommend that we modify and seek further public comment, or also are there any pieces that stand alone maybe we would adopt?” Gensler said to reporters.
