April 13, 2021

Toomey Opposes Gary Gensler for SEC

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today on the Senate floor explained his decision to oppose the nomination of Gary Gensler to serve as Chairman of the Securities and Exchange Commission (SEC).

Ranking Member Toomey’s remarks, as prepared for delivery:

Mr. President, I rise today to discuss the nomination of Gary Gensler to serve as Chairman of the Securities and Exchange Commission.

The SEC’s mission is to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets. Our capital markets are the envy of the world and an engine for economic growth and job creation. These markets will be critical to our continuing economic recovery from the effects of the coronavirus.

This recovery will be stymied if regulators impose burdensome regulations, including backdoor “regulation by enforcement,” that hamper job growth, limit access to capital, and mandate managers of publicly-traded companies favor so-called “stakeholders” over the best interests of a company’s owners—its shareholders.

The SEC has historically administered federal securities laws on a bipartisan basis. However, some want the SEC to stray from this tradition and push the bounds of its regulatory powers to advance a liberal social agenda.

Unfortunately, as CFTC Chair, Mr. Gensler already demonstrated his willingness to push the legal bounds of that agency’s authority. One CFTC rule on position limits was overturned in court. Another rule on cross-border swaps was viewed by many, including international regulators, as exceeding the CFTC’s authority. This raises the question of whether he will also push the legal bounds of the SEC’s authority.

Mr. Gensler certainly has a great deal of knowledge about the securities markets. However, based on his record and statements during the nomination process, I’m concerned he will cause the SEC to use its regulatory powers to advance a liberal social agenda focused on issues such as global warming, political spending disclosures, and racial inequality and diversity.

Securities laws are not the appropriate vehicle to address these topics. That is why we have environmental, political spending, and civil rights laws, and other federal agencies to enforce them. If these laws are inadequate, Congress should address these problems. It’s not the role of the SEC—an independent financial regulator with no political accountability to the voters—to address them.

Nothing Mr. Gensler said at his hearing—or since—has alleviated my concerns. While Mr. Gensler did state that his regulatory approach would be grounded in the Supreme Court’s definition of materiality, he declined to explain what that means to him as a limiting principle. For example, I asked him if it’s a good idea for companies to be forced or pressured to comply with quotas for the race, gender and sexual orientation of their board members. In response, Mr. Gensler did not disavow forcing or pressuring companies to use quotas to achieve board diversity.

I also asked him if a company’s financially insignificant spending on energy or political advocacy is material information that must be disclosed to investors. In response, he essentially indicated that if a number of politically motivated activist investors want to know certain information, for example, information related to global warming or political spending, then its material information, even if it’s financially insignificant, and, therefore, the SEC could presumably mandate its disclosure. The bottom line is: As long as there are liberal activist investors who demand to know certain environmental, social, and corporate governance information, I have not been able to discern a situation where Mr. Gensler would not be willing to mandate disclosure of such information.

Further, Mr. Gensler’s answers to questions at his nomination hearing about recent stock market volatility suggest that he may be sympathetic to the paternalistic push by some on the Left to make retail investing more expensive and difficult.

The nomination process has not alleviated my concerns. Perhaps these concerns will prove to be misplaced. I certainly hope so, as Mr. Gensler is a smart and thoughtful person whom I personally like. But for all of these reasons, I cannot support his nomination.