Published on Apr 24th, 2023 |

SEC Chairman's Congressional Testimony | Key Takeaways

SEC Releases

Brief Introduction

On April 18thSEC Chairman, Gary Gensler, gave testimony to the House of Representatives Committee on Financial Services. His testimony covered many topics that directly impact the securities industry.

Additionally, his testimony attempted to explain and defend the SEC’s Agenda in reference to record levels of new rules and amendment proposals made with him as the Chairman.

We have highlighted 10 Key Topics from Gensler’s testimony below.

10 Key Topics Discussed

10 Key Topics Discussed

  1. The Role of the SEC
  2. Updating Rules and Meeting the Challenges of the Time
  3. Equity Markets
  4. Private Funds
  5. Integrity and Disclosures
  6. Artificial Intelligence and Predictive Data Analysis
  7. Climate Risk Disclosure
  8. Resiliency
  9. Money Market Funds and Open-End Funds
  10. Form PF

Key Takeaways from the 10 Key Topics

Key Takeaways from the 10 Key Topics

The Role of the SEC

  • When describing the “remarkable agency”, Gensler described their role as a “cop on the beat” that serves investors, issuers, and voters.
  • The SEC has filed almost 1,500 enforcement actions and conducted over 6,000 examinations in the past 2 years.

Updating Rules and Meeting the Challenges of the Time

  • The SEC sees rulemaking as its tool, using the legal authority given by Congress, to update regulations to protect the market from changing challenges.
  • Comment periods average more than 70 days after proposals are made, and many times the SEC continues to accept comments while making changes.

Equity Markets

  • The SEC needed to “freshen up” rules to promote efficiency and competition in equity markets.
  • The national market system hasn’t been updated since 2005.
  • Multiple proposals were made to promote efficiency.
    • Best execution standard for brokers when executing trades for investors.
    • Updates to Rule 605 related to order execution quality.
    • Harmonize minimum price increment where stocks can be quoted and transacted as well as lower these minimum increments across the markets.

Private Funds

  • Private Funds have surpassed the entire commercial banking system by $2 trillion.
  • Nearly all sectors of capital markets raise money from Private Funds.
  • Investors from the public sector, such as teachers and firefighters, depend on the integrity of Private Funds as much as the issuers using these Funds for startups and other entrepreneurial activities.
  • The SEC suggested new rules and proposals to provide enhanced Private Fund investor protection.
    • Fees, expenses, performance, and preferential treatments would all be part of the detailed reporting requirements.

Integrity and Disclosures

  • Rules that promote integrity and disclosure facilitate the best part of capital markets while protecting against the worst.
    • Increased restrictions on how insiders trade were adopted.
    • Cutting back on executive bonuses when based on poor financials.
    • Proposals for issuing disclosures related to stock buybacks and cybersecurity risks.
    • Proposals related to the proper naming of Funds and use of ESG terminology.

Artificial Intelligence and Predictive Data Analysis

  • The SEC requested comments from the public on how AI is being used in data analysis and product services.
  • The SEC is planning on proposing rules that address conflict of interests if AI are not being designed to focus on investor best interest vs adviser’s best interest.

Climate Risk Disclosure

  • Chairman claims that SEC is merit neutral when it comes to climate risk.
  • SEC is only concerned that companies disclosing climate risk, and advisers taking climate risk into consideration, are using proper disclosures that are “full, fair, and truthful” about “material risks”.
  • They are carefully considering the plethora of public comments they received about climate risk proposals.


  • The overall goal is to make the financial system resilient to reduce the damage to the American public when the financial system goes through crisis.
  • They proposed shortening the settlement cycle to promote efficiency and greater liquidity.
  • Ongoing projects exist related to clearinghouse governance, risk management, service providers, and recovery plans.

Money Market Funds and Open-End Funds

  • Money Market and Open-End Funds provide a critical part of capital formation.
  • The redemption of shares in high volume sometimes forces the selling of illiquid investments, which can have a broader negative impact on the financial system.
  • To promote resilience of the market, and protect the over $5 trillion placed in Funds, the SEC has addressed structural issues in Funds and enhanced liquidity risk-management.

Form PF

  • Form PF was developed 12 years ago with the authority given by Congress after the financial crisis of 2008.
  • Hedge Funds have the potential to create significant risk for financial stability through their use of leverage and counter party exposures.
  • Due to multiple changes in the market, changes to Form PF were proposed to enhance systemic risk reporting by Private Funds.

Vigilant's Conclusion

Vigilant’s Conclusion

Chairman Gensler’s testimony summarizes the goals and agenda of the SEC over the past two years. He emphasizes how the SEC wants to provide financial stability and integrity to the marketplace.

The overall theme of his testimony is that the securities market has drastically changed in the past 20 years and needs significant overhaul in regulation.

Considering the SEC’s hiring of new staff, increased commitment to onsite examinations, and goal to finalize the majority of proposals throughout 2023, Firms can expect ongoing changes to the regulatory environment that will require continued effort to maintain compliance. Please reach out to Vigilant if you have any questions about Compliance Support for your Firm.

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