After the midterms, what’s next for the SEC?

While the midterm elections are behind us, there’s one agency that might still be in the spotlight for some time—the SEC.

The Securities and Exchange Commission has created quite the maelstrom in 2022, releasing a long-awaited ESG proposal, fining Kim Kardashian for failing to disclose a crypto ad sponsorship, and even giving corporate reporting managers a collective compliance headache.

When SEC chair Gary Gensler testified before Congress in September, neither the Democrats nor the Republicans appeared all that thrilled, but their wants were vastly different, John Gimigliano, principal-in-charge of federal tax legislative and regulatory services at KPMG, told CFO Brew.

“The divide couldn’t have been more clear,” Gimigliano told CFO Brew. “Democrats were asking for more disclosure, more transparency, and Republicans had said, ‘We don’t think you have the authority to do that,’” when it comes to proposals around ESG concerns, for example.

Control of Congress was still very much up in the air this morning, as Democrats fought back a “red wave” of GOP candidates. But if Republicans do end up with more control in Washington, some of the SEC’s proposals would likely be scrutinized more closely, Gimigliano told CFO Brew.

Some employees at the SEC have also expressed frustration with Gensler’s management. According to a September blog post on the SEC Union website, workers believe the SEC is at a crossroads, and criticized Gensler’s approach. “Given Chair Gensler’s reputation as a hard-charging securities regulator, it is ironic that his human-capital policies will likely make the SEC less and less attractive as a place to work,” the post reads. Politico reported last month that employees were feeling strained as the agency tries to “overhaul Wall Street.”

The investor community has also grown annoyed with Gensler’s direction of the agency. The regulated investment funds group, Investment Company Institute, has written that it’s concerned about the ESG disclosure being “too complex” and risking “sowing confusion,” was “disappointed” with the recent share disclosure rule in proxy voting and that the commission reversed course on an ETF and mutual funds shareholder report.

And, Gensler’s upcoming plans also likely hinge on which political party has a majority. In the testimony to Congress, the commissioner floated the idea of considering whether to enforce a mandatory tax disclosure paid by companies in every jurisdiction they operate in around the world, often lumped in as an ESG concern.

It’s not the first time that the commission has picked up this issue, Gimigliano told CFO Brew, but considering that it has previously renewed interest only to let it go again, it would be odd to pick it back up yet again, unless there’s a plan for moving forward. NGOs have been asking the commission to require such disclosures in the name of tax transparency, but a Republican-controlled House/Congress would likely question whether that can be done, Gimigliano said.

During Gensler’s September testimony before Congress, Senator Sherrod Brown, Democrat of Ohio and the chair of the Senate Committee on Banking, Housing, and Urban Affairs, said Republicans on the committee have “bellyached” about Gensler’s “ambitious agenda” and said that Wall Street was complaining.

Brown told Gensler that the complaints demonstrate to him that the commissioner is “doing [his] job.” But a Republican-controlled Congress might disagree, and look into curbing some of the commission’s recent work, putting the SEC in the spotlight for 2023. We can only hope they spare his YouTube channel, at least to develop his promising post-SEC career as an influencer.—KT