SEC commissioner previews Capitol Hill grilling of Chair Gary Gensler

As the House Financial Services Committee prepares to grill all five members of the Securities and Exchange Commission, including Chairman Gary Gensler, on Tuesday, FOX Business has received an exclusive preview of what might go down from Commissioner Mark Uyeda, one of two Republicans on the Democratic-majority agency that serves as Wall Street's top cop.

The House Financial Services Committee oversees the SEC and typically holds an oversight hearing once a year with the chair. This year, ahead of a new changing of the guard in the White House and possibly Congress, the committee wants to hear from the whole commission. This will be the first time all five commissioners have testified together since 2019. Gensler will testify alone in front of the Senate Banking Committee on Wednesday.

If Trump takes back the White House in November, he may choose to appoint Uyeda or fellow Republican Commissioner Hester Peirce as chair, Washington insiders have speculated.

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Uyeda, who is currently serving his second of a five-year term at the SEC following his appointment by President Biden in 2022, has been a vocal critic of the way the agency has operated under Gensler, the progressive Democrat appointed by Biden in 2021. Republican critics like Uyeda and those who serve as majority members on the House Financial Services Committee say Gensler has been using his position to impose a progressive regulatory agenda on Wall Street.

"The commission must return to being a constructive regulator," Uyeda said. "We blasted out 50-plus rule proposals with little thought as to how they work together."

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Those proposed rules included climate disclosures for public companies, allegedly unnecessary disclosures surrounding private fund management, and heaping on new rules governing private placements that critics say might deter capital formation.

"To meet this ambitious agenda, we cut corners on rulemaking – like 30-day comment periods – and have charged ahead recklessly," Uyeda said. "Part of this effort has included convoluted interpretations of our limited statutory authority given by Congress. Now, the courts are calling us to task for these shortcomings."

Uyeda believes these will be among some of the criticisms lawmakers will lob at Gensler and the commission during the hearing on Tuesday.

In addition to questions on climate disclosures, Uyeda expects House Republicans, who as the majority will largely set the hearing agenda, to grill Gensler and the Democrats on the SEC’s tough regulatory stance toward the cryptocurrency industry, its proposal for a so-called consolidated audit trail (CAT), a database that tracks investors' sensitive data, the overregulation of private funds and more.

"The Consolidated Audit Trail is a system that one would expect to find in a surveillance state, not the land of freedom and liberty," Uyeda remarked.

Conservatives generally oppose increased government surveillance and regulatory overreach and see it as more of the same. Some have expressed privacy concerns associated with the SEC having unfettered access to traders’ sensitive personal data through the CAT. Industry participants would also be responsible for contributing to the funding of the database, with broker-dealers paying fees based on their trading volumes.

"The commission needs to end its war on crypto and cease empowering special interest ESG activists to dominate C-suites and corporate boards," Uyeda said. "We should take a hard look at policies that permit a small number of proxy advisers and asset managers to effectively control public companies. The commission must empower entrepreneurs to build businesses, create jobs and innovate by focusing on capital formation."

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The SEC has faced mounting legal challenges to some of its rules over the last year, including its highly controversial climate disclosure proposal, which would require companies to report climate-related risks and disclose the impact of their carbon footprints. Critics say the agency is not a climate regulator and is overstepping its mandate. As a result of legal action, the SEC stayed the implementation of its climate rules pending a judicial review by an appeals court.

The commission has also faced legal pushback over its approach to regulating the $2 trillion cryptocurrency industry. Uyeda has been particularly critical of the agency's handling of digital assets, telling FOX Business that the regulator has failed to provide comprehensive rules of the road for crypto firms to abide by, harming innovation as a result. 

"We have not provided the rules of the road for crypto, other than to declare that nearly all are securities, nor have we provided a practical pathway to comply with our rules. Instead, we have wasted time and money on crypto enforcement actions that provide limited guidance at best," he said. "At the same time, we are using enforcement resources on crypto, the commission is falling short in protecting seniors from relationship and affinity scams, which can be devastating when their retirement investments are stolen."

"Presuming that everyone in the market is a potential scammer and fraudster unless proven innocent is the wrong course of action — and not the American way," he added.

The SEC is designed to be an independent regulatory agency but has faced increasing accusations of politicization in recent years. The five-member commission is composed of members from both major political parties, appointed by the president. Depending on when terms end, that usually results in three from the president's party and two from the opposing party. The uneven makeup has led to divisions over rulemaking, as Democrats traditionally favor stricter regulations and Republicans advocate for a lighter regulatory touch. 

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Uyeda and Hester Peirce, a fellow Republican, frequently dissent from some of the more controversial decisions that come from their more progressive Democratic counterparts Gensler, Caroline Crenshaw and Jaime Lizárraga.

Uyeda says the right approach to capital markets regulation moving forward should not be the Gensler approach of regulatory overreach. Instead, the SEC should empower Americans to make independent financial decisions and build individual wealth, enable U.S. companies to be competitive globally and restore public accountability in the rule-making process.

"Regulations should be efficient, effective, and appropriately tailored. Facilitating robust capital markets will also help prevent the need for taxpayer bailouts. These are some commonsense goals that President Trump adopted during his first term through an executive order outlining his core principles on regulating the U.S. financial system," Uyeda said.

He describes serving as a policy adviser for the Treasury Department during the Trump administration, getting what he said was a firsthand look at financial regulators working together without jurisdictional turf wars.

"We saw significant economic growth that helped provide a cushion when coronavirus struck. The strategy worked, and our country benefited as a result. That coordinated approach has been missing in the current administration."