Trillions of dollars in assets need more sunlight and may require tighter rules, a problem highlighted by this year’s disruptions in financial markets, Securities and Exchange Commission Chair Gary Gensler said Wednesday.
Gensler, speaking in a Bloomberg Television interview, said he’s directed the agency’s staff to review how to toughen a slew of regulations that touch everything from meme stocks to blank-check companies. He made clear that the SEC could also do more to keep tabs on large asset managers — an issue underscored by the March collapse of Archegos Capital Management.
“Investors want to know there’s somebody looking after them,” Gensler said. “I’ve asked staff to think across our whole market.”
In particular, Gensler said the SEC is examining disclosure requirements for equity-based swaps. Such derivatives were at the center of Archegos’s implosion, as Bill Hwang’s family office had bet billions of dollars on stocks without disclosing his positions to other traders.
Gensler said the agency may need to tweak rules so that people are aware when firms build large stakes. Gensler also signaled he’s concerned that family offices face laxer rules than other fund managers, as the firms avoid many disclosure requirements because they don’t accept money from outside investors.
He also said investors want companies to share more about the dangers that environmental changes pose to operations and about the makeup of their workforces. “There’s trillions of dollars of assets under management now calling for greater and consistent disclosure around climate risk,” Gensler said. “What I’ve also asked staff is to take up disclosures around human capital.”
The SEC is wrestling with a deluge of retail trading in special purpose acquisition companies and meme stocks like GameStop Corp. that have reshaped the market. The SEC chief said he wants to make sure that mom and pop investors don’t lose out to larger, more sophisticated players, especially when they are putting their money in SPACs.
“It’s really making sure that the sponsor who is behind that is fully disclosing their take on it,” he said. “These are very expensive dilutive products.”
Gensler also said he wants the SEC to review how quickly firms must disclose large holdings in publicly traded companies. At issue are 13D filings that firms must make once their stake in a single corporation exceeds 5% — alerting other investors that they may be pursuing a hostile takeover or breakup of the company. Under current rules, fund managers have 10 days to report crossing the ownership threshold.
“We’ve been given authority to shorten that,” Gensler said. “Well, technology says we can shorten that. Shouldn’t the whole market know if someone has tripped that 5% wire?”
© Copyright 2021 Bloomberg News. All rights reserved.