Securities and Exchange Commission Chair Gary Gensler announced he will depart the post on January 20 as the administration of President-elect Donald Trump and a Republican-majority Congress take over leadership.
Gensler was appointed by President Joe Biden, with the consent of the Senate, on April 17, 2021. During his first term, Trump appointed Wall Street attorney Jay Clayton to the post; Clayton has been announced as Trump’s pick to be U.S. attorney for the Southern District of New York.
During his tenure, Gensler became known for instituting a robust rulemaking and enforcement regime. His areas of focus included fiduciary conduct; off-channel communications; regulation best interest; environment, social and governance regulation; and close scrutiny of both cryptocurrency investing and adviser use of artificial intelligence.
Gensler also saw several high-profile market circumstances, taking over in the aftermath of the GameStop market surge and presiding over the reaction to the crash of Sam Bankman-Fried’s cryptocurrency firm, FTX.
Although all SEC commissioners, including the chair, are appointed to five-year terms and may not be fired by the president, SEC chairs have typically resigned shortly after the presidency changes parties. That timeline has accelerated in recent years, as three of the last four changes of administration, going back to 1993, have seen the SEC’s chair resign on January 20. The fourth—Clayton—resigned in December 2020.
The chair received pushback from industry organizations and companies throughout his tenure, at times arguing the regulator was overreaching its mandate and at others that regulations were unnecessarily crimping the financial industry.
Earlier this week, the Investment Company institute urged the SEC to pause its current compliance deadlines for recent rules and to suspend any pending proposals. The organization representing investment firms and asset managers argued that instituting any regulations ahead of the new administration and Congress would only complicate things ahead of likely changes.
The SEC disagreed in a response, noting that “we have different clients than the ICI,” referring to American investors and issurers.
In the announcement of Gensler’s departure, the SEC called out work done in the U.S. Treasury markets to “lower cost and risk,” as well as the $55 trillion U.S. equity market.
“The agency unanimously made updates to the National Market System so that stocks can be traded more efficiently with narrower spreads and lower fees,” the SEC wrote. “Improvements also include shortening the settlement cycle to one day, which is good for investors and lowers risk in the market. Further, the agency unanimously adopted rules to update information regarding brokers’ execution quality.”
The regulator also noted that its Divisions of Enforcement and Examinations, which comprise half the organization, filed more than 2,700 enforcement actions, which resulted in about $21 billion in penalties and disgorgement orders. It also recouped $2.7 billion for harmed investors between fiscal years 2021 and 2024.
“The staff and the Commission are deeply mission-driven, focused on protecting investors, facilitating capital formation, and ensuring that the markets work for investors and issuers alike,” Gensler wrote in a statement. “The staff comprises true public servants. It has been an honor of a lifetime to serve with them on behalf of everyday Americans and ensure that our capital markets remain the best in the world.”
What could this mean for the future of the SEC? Expect fewer rulemaking initiatives, said Jay Dubow, a partner in Troutman Pepper and a former branch chief in the SEC’s Division of Enforcement, in a statement. Dubow also said he expects the SEC to be friendlier to the crypto market under its next chair.
Including acting chairs, Gensler was the 33rd chair of the SEC, established in 1934.