The Roast Of Gary Gensler and The SEC

Transcript

uh this is the first time that Gary gendler has been in the hot seat since last March of 2023 uh where we had our first hearing with the secc um come Henry who's going to kick this whole thing off without objection the chair is authorized to declare a recess the committee at any time the hearing today is entitled oversight of the Securities and Exchange Commission without objection all members will have five legislative days within which to submit extrange material to the chair for inclusion in the record um I'll now recognize myself for four minutes to give an opening statement I look forward to discussing a lot of issues here today that are important to the American people today's hearing is to conduct oversight of the Securities and Exchange Commission based on recent actions taken

by chair guinsler and uh the majority it's easy to forget the Securities Exchange Commission is independent led by a bipartisan commission it's not solely run by the chair or single agency head that's why it's so critical for Congress and the American people to hear the diverse viewpoints of the full commission which is why we have the full commission here today today all five Commissioners are testifying before our committee for the first time since uh 2019 a lot has changed since then in our markets the broader economy and at the SEC itself unfortunately not for the better uh under chair ginzler the SEC has become a rogue agency it routinely exploits its authority to the detriment of our Capital markets Innovation and

the American people Sher gendler recently said quote we at the SEC live within the laws as Congress passes them close quote unfortunately nothing could be furthered from the truth don't take my word for it a wide array of federal judges appointed by presidents from both parties have noted that the Lawless they've noted the Lawless nature of chair gendler's tenure by overturning rulemakings and enforcement actions and enforcement actions after enforcement actions it's overturned this includes the proxy advisory rule the private fund disclosure rule the stock buyback rule the debt box rule grayscale Ripple enforcement issues the list goes on and

on it's not just for the courts uh to um to opine here um and it's not just the courts who've taken issue with chair gendler's Reckless agenda more than 250 members of Congress from both parties have signed letters um dozens of letters in fact opposing actions taken by by the SEC chair ginzler has proposed a slew of major interconnected rules that exceed the sec's statutory Authority often with without uh with inadequate justification economic analysis and public engagement but what stands out in this massive rulemaking agenda is the fact that chair gender's failed to propose a single rule focused exclusively on

facilitating Capital formation a key pillar of the commission's statutory Mission this is in start contrast to our committee we've passed more than 20 bip Parson bills through the House of Representatives to strengthen public markets help small businesses Access Capital increase opportunities for all investors let me repeat bipartisan bills it appears only um at chair gendler's um SEC that Capital formation becomes a partisan uh priority and that's not the only area that SEC has ignored the bipartisan consensus the of the American people's elected representatives in May the house passed fit 21 to create clear

rules of the road and provide robust Consumer Protections in the digital digital asset ecosystem more than two-thirds of the house including 71 Democrats rejected share genzler's approach to digital assets by supporting Clarity and consumer protection with the passage of fit 21 yet true to form Sher gendler is doubled down on regulation by enforcement without the regulatory Clarity and consumer Protections in fit 21 the United States will continue to fall behind Europe in technological innovation and adoption this is unheard of in modern history that the United States would fall back behind Europe in the deployment of innovative

technology bipartisan opposition in Congress continue re uh contined rejection by the courts and notably the end of Chevron Defence should serve as a warning to chair gendler whether it's digital assets or climate policy the SEC cannot unilaterally expand its Authority with a record like that it's clear chair gin's Legacy will be defined by turning the once broud institution of the SEC into a rogue agency I yield back and the chair now recognizes the ranking member of the committee the general one from California for four minutes for the purposes of an opening statement good morning I'd like to welcome the chair of the Securities and Exchange Commission Gary guinsler along with commissioners

Pur Kena y Li ARA all to the committee today God that's such a sick shot I'd like to start by recognizing the good work the SEC has done under the leadership of chair Gensler despite repeated attacks against the agency from my Republican colleagues the SEC has lived up to its mission of protecting investors and ensuring our Capital markets Remain the Envy of the world in fact since chair gensler's tenure began in 2021 the agency has ensured a fair Marketplace for businesses and investors

by holding Bad actors accountable for example the SEC wrote 784 enforcement actions levied against five billion in fines nearly five billions in fines importantly recovered nearly 1 billion of harmed investors and the commission has also responded to the overwhelming number of investors fully 80% who have long been urging the commission to standardize climate risk disclosures and so I hope the secc will also Advance additional disclosures like human

capital and divers and inclusion metrics that are not just what investors want but good for business bottom line while the secc and the rest of the Biden Harris Administration has been doing its job unfortunately I can't say the same for all of the House Republicans the party of Maga has again taken us to the edge of a shutdown even though they know they'll need every single Democrat to keep the government open our nation is tired of the extreme Mig Republican party in Congress but I want to do something and I know you do too Mr chairman before the end of this year I want

us to strike a grand bargain on stable coins and other long overdue bills since 2022 we have been working for hours on end to reach an agreement and have each made concessions I strongly believe we can reach a deal that prioritizes strong protections for our nation's consumers and strong Federal oversight our bill can have several paths for stable coins to be created but like near nearly every other country that has a stable coin framework Central Bank the Federal Reserve played a dominant role

overseeing this Market and importantly Sab coins can only be truly stable if they're backed by safe and liquid Reserve like shortterm treasury bills and I'll be honest with less than three months left in the 118 Congress we're running out of time to best it I know we can get this done if we focus but let's make it happen in the meantime Democrats will continue to fight for more resources for the including by keeping the SEC and the rest of the government open so that the agency can support Capital formation open opportunities for small businesses

and protect investors I thank you again for your testimony and I'm pleased that the commission Commissioners are here I yield back the balance of my time and I've made a public statement to you about bipar ship let's see what you do with it God well I thank the ranking member and I thank um rank member for starting the conversation during her tenure as chair of this committee uh and got the committee rolling on digital asset and crypto policy that we were able to that resulted in bipartison legislation in this uh in this committee it's my hope

that the rank M will that we could come to terms on a stable Point legislation this time but we can also provide a little Clarity when it a bit interesting let me that is the bipar turn down this volume a little bit okay so that uh it always opens up with Patrick McKenry right and he always does a deliver a fantastic delivery of exactly everything we want theary on the hot SLE did this really cool shot of all five Commissioners that it's all five they're all in a row yeah so we now recognize the capital market right and Wagner it always starts out with Patrick McHenry as the chair

and always goes to magine Waters next and like the ju position on how partisan it is is just nuts dude it's just nuts because like Patrick mry is just delivering the best remarks that I can imagine and thenx Waters is like these magga Republicans like the SEC is doing great they're protecting investors they're they've recovered a billion dollars uh sorry we're I'm we're talking over this very much I know it's confusing simultaneously open so like sometimes we're going to hear people who are just talking about things that we just don't care about so we'll we'll find the opportunity to chat when weever rules overturn well let's let's let's L let's listen to what she's saying first and over again unnecessary costs being

imposed on retail investors and increased bureaucratic regimes for all Market participants it is clear that when it comes to the regulating our Capital markets your agenda at the SEC is to move fast and break things I yield back G lady yields back will now recognize the ranking member of the subcommittee on Capital markets Mr Sherman for one minute and I applaud you an oral presentation of the commission's written testimony before we hear the presentation now I want to offer the reminder to those watching that the statements in response to questions that

you're about uh you're about to hear and the commission is about to give are their views uh only saying not represents the views the SEC or their fellow Commissioners it's also important to is not a meeting of the commission for purposes of the sunshine and therefore nothing discussed here should be viewed as making a determination on an action before the commission the commission is not authorized to discuss ongoing litigation or enforcement actions uh and members will do uh their best to steer away from these questions that call um that would call for answers about ongoing cases but members have questions um so without objection the written testimony and the written

statement will be made a part of the record chair ginzler you now recognize for five minutes for oral there he goes Gensler opening comments all rightler thank you chairman McKenry good morning everybody ranking member wooders and members of the committee thank you for the opportunity to testify along with my fellow Commissioners uh it's good to be together you said the legal part but I guess our lawyers will tell me I need to say it too maybe but although all five of us are here it's not a meeting of the commission under the statute known as the sunshine act and as a result we plan to be mindful to avoid deliberating on business before the agency each of us will be providing our own views which do not represent those of the SEC or our fellow Commissioners although we may

offer our views which is a good give and take uh and share our concerns or general issues will avoid making any determination as a group um during the hearing about the course of action that the commission shorter will make in the future on a matter consistent with long running practices will not comment on pening litigation enforcement actions I think we we're reading from the same script chair that was funny earlier this year our 90th birthday in the aftermath of the 29 market crash and the fraud scams and other observed problems President Franklin Roosevelt came together with Congress to enact a series of laws in the 30s and Congress and Roosevelt understood how vital that our Capital

markets are to investors issuers and a dynamic and growing economy uh I can't speak for my fellow Commissioners but I think it's part of the success in these last 90 years in our economy to today the SEC oversees the capital markets and works to deter and prevent fraud and manipulation as well as help ensure that investors investment advisors carry out their duties to their clients and their and that companies and entrepreneurs can access Capital they need to succeed the SEC is a remarkable agency we serve investors building for a better future and issuers raising money to fund Innovation while overseeing the capital markets where they meet the essence of this is captured in our three-part

Mission protect investors on one hand maintain the markets in the middle Fair orderly and efficient and facilitate Capital form so Capital formation meets issue investors and the markets in the middle today we oversee over aund trillion dollar US capital markets and they're the deepest most liquid in the world to put this in context the assets of the entire banking system are just 23 and a half trillion so our Capital markets are more than four almost five times that's you did that Gary that was alling approxim 40% of the world's Capital markets the US capital markets outpace are rough 24% of our economy so we're kind of punch above our weight class everyday investors benefit from the US capital markets their investment

portfolios fund home purchases college education retirements approximately 58% of us households own Scots directly or indirectly American households representing nearly 121 million individual investors own registered he's just filling time what the accomplishments of the SEC are right today registered investment advisers advise 57 million or maybe David it's us entrepreneurs I think it was Gary Gensler Congress bilon flat funded as many agencies across government are uh while we are appropriated we do fund ourselves uh with fees on stock and

other transactions that were deficit neutral oh fees on crypto say that 2020 three the SEC staff raided us amongst the best places to work in the federal government we rank third among midsized agencies thank see our Open Door reviews the opportunity to testify our written testimony was joint among the five of us didn't have as many adjectives or superlatives but it did describe exactly sort of what we've done in the last 12 months uh particularly the rules that we had adopted proposed or being implemented so I thank you and I yield back chman yields back and uh that is a representation of the opening statements for the five Commissioners uh

we appreciate uh you yielding additional time back and uh for the rest of the Commissioners deferring um so we can get into questions um I'll now recognize myself for five minutes uh chair ginzler in March the Agriculture and financial services committee sent you a letter about the regulatory treatment for ether uh the token of the ethereum blockchain God bless is using different terms to describe digital assets this includes crypto tokens crypto security tokens crypto assets crypto asset Securities digital asset Securities digital asset and digital asset series that are investment contracts does the SEC diff differentiate between crypto tokens and

tokenized securities the um whe whether any one uh offer or sale of an asset is a security depends on the facts and circumstances terms of the language or nomenclature it's it's less about the terms it's more about the economics and it really goes down to Supreme Court test which is the law called the hoe test whether an investment contract is being offered and sold to the public uh and that public is looking to others in a common

Enterprise U this is this has been his strategy for forever the Supreme cour we're just following the rules of Supreme Court how we test how we test it's not my problem different term and words have meaning and the fact that you've used multiple different words to explain what seems to be the same phenomenon I think really raises questions about Clarity well the the the laws are clear and it's written by the Supreme Court but also the laws arear by is a lack of clarity that's what I'm trying to ask you about you have no the direct question is about the different terms and rather than answering that question you answered a separate

question kudos to you uh let's let's get into this question do you think that one reason why multiple terms are being used uh here for crypto is that there's no Clarity or consensus identifying which tokens may or may not be offered pursuant to an investment contract I think that's absolutely true we've taken a legally imprecise view to mass the regulatory lack of clarity so let's go this question of investment contract SEC defined uh crypto asset Securities as an investment contract represented by the underlying crypto asset yet talked away in a footnote in on an an amended complaint the SEC clarified a security

is determined by the quote uh contracts expectations and understanding centered on the sales and distribution uh of a digital asset and not that the digital asset itself is a security uh is the SEC using inconsistent standards here I mean is is that what's happening I think what's happening is that we're trying to be ambiguous because the legal Precision carries with it real implication and this is why people have been coming to us and saying we need Clarity is the token itself a security or is it part of an investment contract is it being sold together with an investment contract if it is what is that investment contract

and how long does it track along with the token by using imprecise language we've been able to sort of suggest that the token itself is a security aart from that investment contract which has implications for secondary sales it has implications for who can list it and I think this is absolutely uh we we've fallen down on our duty as a regulator not to be precise and so tucking into a footnote that yes we we admit that now actually the token itself is not a security that's something that we should have admitted long ago and then started wrestling with the difficult questions dude look at the smile on her face give her a mic to drop please for the agency or is this something the agency

can do itself you know we certainly have authority where we can provide guidance we can use our exemptive Authority it's always helpful to have Congress weigh in but there certainly are some guidelines we could provide in this area that we have chosen not to provide definition would help well I always welcome the input of Congress oh damn fantastic everybody's writing everyone everyone is smiling so so let's continue with that this question you've High highlighted publicly uh commissioner Pur concerns that SEC is devoting a disproportionate amount of time on the digital asset e ecosystem and diverting limited staff resources away from other Mission critical work Capital formation how much

work has been put into Capital formation in the last four years for your agency nothing on the positive side I would say we've done things that are negative to Capital formation oh my God rank member Miss waters for five minutes thank you very much Mr under the bus last Congress our nation's capital markets saw huge price swings in so-called mean stocks like GameStop as chairwoman I convened three hearings including one with the CEOs from Robin Hood Citadel and hedge funds we also heard from you I later released a committee report detailing how gamification payment for order flow and

weak oversight contributed to investors being fleeced following our hearings our committee Advanced several pieces of legislation to fix those problems including my bill to finalize Short Selling rules and provide more clarity around hedge fund positions you picked up where Congress left off and implemented some of these bills through rulemaking can you talk about the reforms you passed as well as what additional Market structure and Market Integrity reforms like the did the SEC work on how would these reforms increase competition and reduce conflicts of

interest um I thank you very much I'd highlight uh four things that we've done uh just last week actually we unanimously uh adopted roles that had been put out to notice and comment about the market structure itself promoting greater competition in that market uh and in that's case relaxing a restriction in the market that now markets could quote en tighter increments called half a penny rather than a full Penny increment and lowering the fees in the market but earlier we also uh proposed adopted and implemented shortening the settlement cycle so now in America if you sell your securities on a Monday you get your cash

on Tuesday you used to have to wait till Wednesday and It or Not That Matters to a lot of people to get that earlier uh we also um Pur congress's mandate out of the Dodd Frank act we adopted a rule on some disclosure around Short Selling and we also adopted some rules with regard to uh disclosure to clients about the execution quality the quality in the markets they get when they sell security so those are the four it um that we've done and I think it does promote greater competition to uh allow people to quote stocks in tighter

increments and I do think it also helps Capital formation if the markets are more efficient it helps both sides of the market I I think that it helps Capital formation why we talking about M stocks David I don't think there's like an either or a dichotomy I think most of what we do has helped Capital formation well thank you very much I can recall um during the time that involed in this issue particularly um you know take looking at the relationship between Robin Hood and Citadel for example and calls that we received about war of the house Investments and just closing down no one's Liz Warren man is that cured or is that

common the uh the closing down where investors couldn't actually by additional Securities happened because of the relationship with the Clearing Houses and I think this shortening of the settlement cycle was a a big plus to to that and helped uh limit the chance that could happen again um so I do think that that was a direct result of the hearings that you had what was that in February of uh 2021 well thank you very much I've gotten a lot of calls wanting to know what did we do they didn't seem to know uh much about the bills that we passed and I suppose that the general public

does not know what you did and we need to make sure that we she's just layups some shape or form look at what you did to help memet the mem problem and wasn't you know how did that align with your your your goals and Mission around Capital formation Gary's like that absolutely aligned that's exactly what we did I'm so happy ask such a layup Mr chairman uh chairman ginsor Commissioners we're glad you're with us this morning uh chairman over two-thirds of the members of this committee have rejected the commission's approach to regulating digital assets back on track Think bipartisan members collaborated and voted to pass our fit forp purpose fit 21 legislation

with overwhelming bipartisan support in the House of Representatives including 71 Democrats all all the Commissioners I think need to recognize that our ongoing legislative work to establish a market structure for digital assets while we've been doing that mightily here over the last two years the commission has time and time again chosen to bring numerous enforcement actions in an attempt to claim authority over secondary markets and front run Congress further the commission arguments in regard to several high-profile federal court cases in regard to digital asset oversight have been rejected and in some instances your actions called arbitrary and capricious so

commissioner first this regulation by enforcement approach is it really Superior to having Congress give you statutory Direction it's a very bad approach to trying to regulate an industry if you're trying to protect investors if you're trying to shepher the the commission's resources well it's very inefficient um and at the end of the day it leaves everyone wondering where the lines of our Authority are um that we have lots of areas where our Authority is very clear and we could spend our enforcement resources there and we could spend our regulatory resources trying to provide clarity about what doesn't fit within

our jurisdiction um and then we could leave the rest to to Congress commissioner I only wanta you only speaker Pelosi and you may have noted that the former speaker voted to pass fit 21 this past summer do you support the this legislation draft and efforts in Congress to establish a regulatory framework for digital Assets in the United States Congressman um I defer to Congress on its judgment as to whether a new framework for I don't know much you think sir do you think that the existing framework of that the commission's following is the right way to go or do you think there's a gap that could be filled by a statute in Congress

I think we're following the framework that's in place in response to violations of the law that we see in the market uh so um I think it's something that we're doing that in pursu pursuit of our mission uh and in light of the fraud that occurs in that market and we all want people to go after go after fraud this is about people who are trying to do the right thing and they find that an imp possible task with this SEC commissioner UA the commission has failed to use its discretion the chairman noted in his opening statement under section 36 of the exchange act to provide some regulatory Clarity in the

digital asset ecosystem uh what could they have done pick pick an instance where you think that um a working example where the commission could have used exemptive relief in in solving some of these challenges either the ETP challenges the special broker dealer challenges or the how test itself to have just dealt with this at the commission using exemptive relief well thank you um there the commission has a wide range of existing tools that we could use to address the lack of clarity whether it has to do with the status as a security or whether it pertains to broker dealers or exchanges or custodians of these

types of digital assets um to my knowledge uh I am the only commissioner uh in the history of the agency who's actually stood before a panel of judges and oral argument and articulated the hoe test after having filed a written brief with that Court one of the things so the how test is an investment of money in a common Enterprise with the expectation of profits from the efforts of others that's from the Supreme Court numerous other circuit courts have elaborated what exactly that means the commission for instance I'll give you one example could have articulated specifically in the context of crypto and digital assets how will you apply this test as whether

or not it's an investment contract therefore a security we've done that before for instance to explain what fiduciary duty means under the federal investor sorry investment advisor act we have chosen not to go down that path and right now I've been with the commission for 20 years or for I'm sorry 18 years have been Securities regulator for 20 years we are now entering into our second decade of thinking about this issue it first popped up on my uh thank you commissioner my time has expired I yeld back Mr chman back now recognize the general woman from New York uh Dr Velasquez thank you Mr chairman chair Ganer as you know section 956 of the dot

Frank Act asked you and five other agencies with promulgating a rule to ban executive pay that incentivizes inappropriate risk taking at financial institutions even though the law gave the agencies an April 2011 deadline to promulgate a rule from New York strongly crypto and I have tce about this issue four out of the six agencies have moved forward with a new proposal earlier this year but the SEC and the federal Reser Reserve have not why did the SEC not move forward

with the four agencies earlier this year this not a crypto question thank you I take the uh mandates of Congress very seriously when I got into the job there were still about 10 this from The Dodd Frank act including section yeah you're gonna ignore this all right so so Maxine Waters is just you know passing layout just softballs just softballs like she's making it so partisan everyone else is trying to make this about the sec's regulation of the the digital asset industry and then she is just making it like but these Maga Republicans like she's just making it so goddamn partisan and and then passing layups like the the question is like tell me how good you were Gary at

regulating meme stocks in the chaos he's like well thank you for saying that actually we did a fantastic job and this is how impr I'm so glad you asked the body language between those two it's like clearly kind of like connecting there that that said the juxed position between McKenry and Hester purse every time you throw Hester purse the microphone in a question she just outclasses everybody else on that panel it's so concise and well and well thought through that like zero zero floundering just straight to the [ __ ] point you contrast that with Gary gendler he speaks like a politician yeah well the meaning of the thing has

been Supreme Court Howe test right by the way I liked where Mark uh I I can't pronounce his last name I yeah uh I liked how where he was going where he was where he was going yeah he got cut off unfortunately he was attempting to um Jiu-Jitsu Gary gensler's hoe test like because Gary gensler's keeps repeating this thing Supreme Court has already decided it's the test we've deferred to the supreme Supreme Court saying I've actually gone through the lens it's been 10 years at this thing I've gone through the lens of filtering some of these digital assets through the howi test and I can tell you that many of them don't apply he didn't get a chance to fully state that because um yeah I mean he I I hope he has a second chance at that I do too yeah where are

we now who's who's economic analysis like also by a show of hands is there anyone who thinks this rule should not be implemented it's the same thing it's the same thing it's a different R okay and then so let's talk about the other Commissioners I love that panel I love that panel you like the the other commission Commissioners yeah we got we got all of them right well so Mark and uh Hester are like crypto those are those are our guys they traditionally descent and then Gary Gensler and the other two I I sort of assume at least with respect to um your crypto issues the other two Commissioners basically just go along with the Gary tagline this is sort of what I'm seeing so far when

when uh commissioner uh I don't know his last name let me just check this but like Jamie was is his first name when he was offered a response it was very much like Gary gendler tone kind of like waffling you know weak it was weak yeah I did it kind of didn't go in either direction but I just wasn't impressed yeah it was more of just like I I support everything that the SEC does and I don't support anything that's against the SEC it was like that kind of stuff which was kind of just like whatever their assets the SEC has approved several of these products do you see any evidence that the savings realized by the asset issuers is being passed onto

the consumer and like also again like this isn't about crypto uh Maxine Waters just doesn't know anything about money and finance like she's on the financial house hearing committee there doesn't know like it's just embarrassing she I talking about like trying trying to ask about like order flow with like the Robin Hood and GameStop lady that's a like a three years old issue and like you're also not getting the details right like she's just like talking about like the talking points that riled up uh the people uh of Robin Hood who are getting fleeced but like that was four years ago did we solve any of that I

mean yeah part of gensler's answer was like now now there's some settlement happening on on Sunday like cool we always had that in crypto Gary who's this guy who's uh representative Lucas i' like to begin by focusing on proposed rule 10 B-1 regarding Security based swaps positions not giner we've discussed this proposal before and I appreciate your willingness to engage in this R and to meet with stakeholders I know you're familiar with the bipartisan feedback concerning Market liquidity chairman would you first briefly touch on if the commission is still taking the bipartisan feedback into consideration and I'd also appreciate it if commissioner Pur would

offer Insight on that as well but first you commissioner um yes and your feedback was very helpful because you helped write this provision in the original bill and I I remember it because we worked together on some of that legislation um so while a comment period closed months ago if feedback comes in just like this discussion here we continue to consult and consider that uh in this this is about whether uh in Securities based swaps there's some reporting or transparency for the larger positions to the agency and secondly whether there's any public reporting of that and there was a lot of comments in the comment

file to maybe maybe look to just have the reporting to the agency and not have it public I turn this down for a second D that record so I don't I don't think that was a crypto question right no it wasn't so this is I kind want to hear what has go out with something really Broad and and very honorous and and lacking the data um to form the basis for it and then we we get comment back saying hey this is unworkable it's going to have really adverse unintended consequences and we pull back and so we're thinking about it now and I don't know where we'll come out but I will say if we get it wrong then we we really risk roiling the markets and so I I hope we will take that consideration into account the SEC I just love everything

that she said wait wait he might ask something crypto which plays a vital role for financial markets in the US economy market par participants are have expressed the need to extend those timelines for implementation to be successful chairman guinsler has there been consideration giving to adjusting this timeline yeah it's not crypto we work very closely with all right so this is uh the person asking representative Frank Lucas right here so he is Oklahoma's thirdd congressional district on stand with crypto he is a strongly support so he's an a he a Republican so he voted for fit voted for Sab you know C cbdc anti that kind of thing but he's not asking crypto questions right now

right yeah I always kind of forget that there's like another Financial Market out there that it's not about I don't even know what this question's about it's just you know something that matters I'm sure to some other Market but yeah not to crypto yeah right yeah because like people have problems with the SEC about their you know enforcement actions regulations whatever in the normal Market I forget that like people also have problems with the SEC like outside of crypto we're not the only industry that hates the SEC Elon Musk have you seen Elon Musk feed that's a guy that hates the SEC yeah that's for sure yeah t again industry and other Regulators to make sure we're getting this right I've called for setting up a task force to really throw ourselves

into the implementation process and then that will put us in a place to know whether we need to extend timelines as many of my colleagues have discussed during the past several years the volume and scope of the SEC rulemakings have been of concern two examples the custody Rule and the predictive data analytics rule both presented major challenges to the market and both seem to require major revisions to address the unintended consequences uh commissioner UA could you discuss how the commission could better catch these unintended consequences before reaching the proposal stage custody question is all crypto one common tool which we have not used in recent times is to hold

roundtables and other fact finding uh type activities that would lay a better predicate before we issue an actual proposal that is one of the challenges I think and concerns I've had about our current proposals is they are so Broad and so wide we have the proposal itself but many times we'll have dozens if not scores of permutations and combinations on that when you have multiple Ru makings all at the same time on on different subjects that affect the same uh entities it's really hard for them to give us thoughtful feedback on that so this is one where uh it's a bit like uh I think they're saying in in construction measure twice cut once uh we should think about doing the same

thing with proposals thank you commissioner UDA yeld back Mr chairman gentleman Yi's back we'll now recognize a gentleman from Missouri Mr caver for five minutes thank you Mr chairman um Mr chairman well all the uh guest here today um he was not ready some of you may have may been told come up I don't think he's I don't think he likes us paranoia is bad uh and that we need to avoid that that you know there just stuff going on in our heads but uh I learned when I was a kid the bad stuff does happen that you that you thought about and um oh never mind so therefore I reject any attempt

uh to convince me that I should not be paranoid about AI about AI is a major concern and I don't know if any of you saw that movie called uh iroot are we stting a a 2000 Will Smith movie with our financial agencies you decided I Robot if you if you look at the M if you look at it now you're gonna find out that all those robots were white and uh I was thinking well SM should have gotten a couple of black and brown robots but the [ __ ] is he going on that's my

paranoia um what that's not where I thought going with that you have been somewhat concerned Mr chairman um and I I agree I think I agree with what you were trying to say in in an article that uh if we are not intentional uh with Ru making uh we could set ourselves up where powerful AI systems could dominate human decision-making what should we be doing as it relates to AI I love how we've already covered this topics on our podcast like two years ago I think it's

one of the most transformative Technologies of our times but I share your view that uh it presents challenges uh I think of another great movie it was a romantic comedy not I Robot but her and you might remember Scarlett Johansson is the voice of the the virtual assistant you girlfriend like that movie Walking Phoenix and um the robots are trying they're trying to tell us something I'm yeah yeah well at some went off but it was 8,316 love interests that she had that all had broken hearts uh it's a it's a good movie but the point is we could end up with the same thing we have three

large Cloud providers 75% of the financial industry relies on two of those Cloud providers those Cloud providers ERS are the dominant players in artificial intelligence or growing growing to be the dominant and we could see 75% of the banks and broker dealers and financial sort of relying on a couple of uh you know Scarlet Johansson you know virtual assistant so to speak and I think that a future chair of a Banking Committee house Financial Services committee sorry could be overseeing a hearing saying what happened why did we have the financial crisis of 2030 or

2035 or something I think that's a risk what to do about it it's hard because it's across so many different Financial actors how do you sort of maintain diversity this is diversity of computers diversity of competition amongst those algorithms um it's how about crypto Gary decentralized AI Gary it's a challenge it's real diversity I'm interested in any of um our other um speakers or guests uh if you have any uh views on artificial intelligence that may be of some value Gary's for those of us who are in

Congress I mean he tried he did the whole pivot I think skepticism is always warranted but I think we also need to look at the promise of the new technology in ways that it can help us as a regulator to regulate better and can help the industry to better serve um more people at a lower cost and so we need to balance the skepticism with the optim the cost of Congressman as a member of the military and that's not the not look at it just necessarily in the isolated world of financial uh background or the military side I think we need to learn from each other across the government and Implement something on a on a holistic basis to allow

technology to grow and and to be useful and really transform possibly as as CH Gensler said uh the world as we know it but also learn where we need to put uh holistic Protections in place and how we can sort of learn from it and adopt appropriately thank you the gentleman from Texas Mr sessions is now recognized for five minutes skep Mr chairman thank you very much Mr chairman I'd like to take a minute and to thank you for your service to the United States Congress this committee quite like when we come back next time and if we hold another meeting you'll be a retiring member of Congress but during your period of time that you've been here I've enjoyed not only your confidence and your friendship but your service I want to personally he

talking thank you for that thank you Mr chairman Patrick you and I have uh had an opportunity to deal with each other a couple times and you know my comments that I have made to you about the rights of people who are on the other side that you regulate today I'd like to just take a few minutes and tell you the things that I think are important for the entire commission here cool one of them is that I believe that you need more fairness and balance I think the SEC does not have fairness nor balance I think that the SEC is Eng engaged in selective

enforcement I think they're engaged in selective enforcement perhaps of one or two or five people in a Marketplace that were not really guilty of anything but simply were someone that you wanted to make an example of I think that you can come up here and hear members say how proud they are of you for having $5 billion dollar worth of fins that you have put off of people who have theoretically done something wrong that diminishes Share value shareholder value too when you find a company it takes away shareholder value and that's one of the

things that your Commissioners have talked about today that their mission is to ensure shareholder value and to protect people Mr chairman I believe that you should uh engage as well as all the Commissioners and making sure that you do not make examples of a few select people Mr chairman I believe you should look at the mission statement that the SEC has perhaps on a daily basis and make sure that your staff and you live up to that I believe that if you get in trouble if you didn't intend to get in trouble you ought to be able to get out

of trouble you ought to be able to work your way through regulatory morest instead of waiting for the average of 140 days or whatever it might be for you to respond back to a person Mr chairman I believe that the marketplace is complex I believe that things happen that none of us have any real control over including bankruptcies or other matters it's when you collude to do something or you have Insider information or you uh fail to do your job properly due diligence or whatever but I can give you examples where the SEC is causing individual agents in the

marketplace who also lost money in certain assets and the SEC came after them and had them spend $500,000 of legal counsel to defend thems against something they nor they alone were engaged in but it was selective enforcement and I have seen this across this Biden administration at the Department of Justice at the SCC and other places and I believe that there is some uh demand put on you or something that you're doing to cause actions that are

neither Fair nor balanced I've got a minute left sir would you like to engage wow just a verbal lash and now you respond very proud of the agency and the the hardworking folks of the agency the 1300 folks in enforc all the other lawyers economists and and my fellow Commissioners that support that effort uh they follow the facts in the law where they take them uh we do uh bring as noted 700 or so enforcement actions a year many of them settled actions uh we look to missing the point uh people who cooperate with the agency and really

recognize that cooperation with the agency to try to as you say get things right uh I by the way would concur with you markets are complex and life is complex and people do uh often make genuine just human mistakes um but our enforcement division uh I couldn't be proud forward to testing that theory and I want to thank each of you for your service not just to the SEC but the American people and I will challenge you properly and professionally on this issue Mr chairman I yield back my time just aad talk s Mr Foster is now recognized for five minutes thank you Mr chairman to our Witnesses um price

Discovery is critically important to the success of our Capital markets and it's uh really foundational to invest confidence I however with the rise of day trading and trading apps social media Buzz seems to have as much an effect sometimes on Equity pricing as economic fundamentals this concern gets Amplified when the social media is swamped by inauthentic AI generated bot accounts that seem that the social media platform seem unwilling or incapable of identifying and removing um it is obvious that uh manipulative misinformation can have long-lasting impacts on company's reputations and their ability to raise capital and perhaps uh Abus of Short

Selling is the most obvious U you example where this could happen chair Ganser do you think that revisiting Short Selling regulations is necessary to prevent the sort of manipulations that can happen on social media or other false claims injected into fake media sites um various kinds of inauthentic misinformation speech um let me start with artificial intelligence and then go to the short selling if I might but I fraud is fraud and whomever deploys a model uh has a responsibility to make sure that they're not using that model to defraud the public manipulate the markets as you say um but I think it will be uh an interesting challenge over

time whether this committee or Judiciary committees across government will have to sort of address this concept of uh the state of mind and what's the lawyers call center is the model thinking the human that deploys them I believe has certain responsibilities but that may play out in Congress as well I think in terms of Short Selling it is an important part of the markets this is a very important part of price discovery that uh we in our Capital markets somebody can express a view uh that a stock will go up and somebody can express a view that it's going to go down what's critical is that people were not trying to um make false claims lie to the public manipulate markets and so

the issue is the anonymous AI generated trash that's appearing on social media and and our inability apparently to stop it and that's very different than an opinion letter in the Wall Street Journal where everyone knows who's involved it's a very different and and I can only speak for myself but I contend that that individual who deploys the model has certain obligations to ensure that that model is not making false claims Gary wants to regulate AI models they are um well separately I've heard concerns from industry participants about uh influencers bloggers celebrities and others that are use their Celebrity Status to promote Investments without disclosing that they

are in fact being paid to do so and what's worse is when the person that's paying the promoter may have a position in the company that they intend to liquidate alongside the promotion which is you know really a classic pump and dump scheme I do been some high-profile examples recently in the crypto space but I understand there may be issues in just the over over the- counter markets as well where smaller companies raise Capital um can you say something about that um Congress actually spoke of this in our original statute and thought that when you were uh advertising or promoting a stock or security that you had additional obligations so put in place rules a law against if you C if you're touting you have to say who paid

you and did you get paid uh you can't just say hashtag add you have to say something more uh and that was congress's Will and we have uh from time to time found celebrities have forgotten that important uh law and uh We've brought in or never learned it um yeah support that's fine I'm okay with that I I would say I think the laws are strong I mean it's always gaps in resources and we get uh on on average a year 40 to 50,000 tips complaints and referrals that's uh what 4,000 a month or so and uh we we have to prioritize those tips and

complaints and referrals okay and let's see I've got about half a minute here um just you know I didn't support the the fit 21 act and one of the things that confused me about it is that it it uh defines a 20% threshold for uh for ownership to be enough decentralized to become a um you a tradable equity and so this um and and the problem is at the same time it allowed Anonymous self-hosted wallets so how would the SEC identify who owns 20% gentlemen's time expired we'll ask chair respond record uh the gentleman from m uh the chair of the oversight subcommittee Mr heising is now

recognized for five I'm disappointed thank you Mr chairman I'm going take one quick second and I first want to say thank you to you uh for your leadership um your confidence and not just me but your leadership team uh as we tackled some very tough issues and um more importantly your friendship um and of course I'd appreciate 15 seconds back on the clock but uh it is uh it is an important note to uh to to say thank you um I'm going to start here first of all thank you all all for being here I think this is an important uh step it's been quite a while since we've seen all of you here at one time um commissioner uh Pur I you've noted that in keeping with the materiality standard informing SEC

rul making on disclosures uh information quote information is material uh if there is a substantial likelihood that an objective reasonable investor by the way that was that's language that th Good Marshall used in the 1976 court case establishing uh materiality um would consider the information important to an investment or voting decision all reasonable investors value Financial returns but they may diverge in which non-economic considerations are important could could you explain the difference between that um that how why the commission has diverged from this traditional well-established materiality standard and we've started hearing quote uh

decision useful language unpack that a little bit please I think the reason to depart from materiality standard and instead Embrace this more ambiguous decision useful standard is so that we can listen to the voices of non-investors people who have non-investment interests in companies and seeing companies do things and so you open it up to this wide range of stakeholders who has any any you know list of of non-essential non-economic interests in a company do you have concerns with that absolutely I mean our job is to get information to investors to help them make decisions not to a random group of stakeholders and it seems the courts have had concerns with that as well all right um chair guinsler

um we've seen there be an uptick in the industry pressure at the court level against the SEC um but we've also seen the SEC uh embark on a rulemaking agenda that some have called Frenzy and rushed uh in testimony before the committee the chair noted the number of finalized rules is less than a number of my predecessors in a comparable time frame essentially uh that uh your your your rulemaking Onslaught is on par with past chairs again to uh to both Miss Pur and Mr U although the chair might technically be correct

on that isn't it true that the breadth of this Ru making is indeed historic that you've seen and what would how would you respond to those comments about it's just been businesses as usual historically anti- crypto yeah the breadth of the subject matter covered the number of rules and the complexity of the rules and as commissioner UA mentioned the number of different Alternatives being offered in those rules me means that it's a very difficult lift for the public to respond Mr UA quickly yeah it's you can't compare just top line numbers you have to look at the substance and these are very very complex and WID wide ranging R proposals under the current uh chairmanship okay

I'm G to try and get through uh two more things here and chair guinsler I'm going to turn to you I'm increasingly concerned the SEC is moving away from that acting as an independent commission as it's intended to be um obviously I believe the overreach via the climate disclosure Rule now seems to be extending to companies seeking accessing US Stock Exchange the ability of G activist groups to unduly unduly influence what is supposed to be an impartial assessment of a company creates a dangerous president last week the house passed uh my bipartisan piece of legislation that uh pushes back on some of these groups who frankly have hijacked our Capital markets process please yes or no as I want to hit one more will you commit to ensuring the SEC

will not allow ESG agendas to drive whether a company that has accurately and fully disclosed its business operations in Risk can be publicly listed in the US um uh I don't think it's a confusing question it's are you going to allow ESG activists to influence your decision whether a company is allowed access or not to be listed uh companies as long as they comply with the law can list and I also want to agree with commissioner Pur earlier um materiality is about the investors and decision useful because they were words I use are about Investors investors making decisions not non-investors sorry um pcaob uh yes or

no if as Miss ho at the pcaob has said that uh the actions may end up breaking the public company auditing professions back particularly for small firms yes or no if we break the profession in the name of investor protection are we really in protecting investors I know it's a I will ask for a written response on that but I appreciate that Mr chairman I yield back gentleman from California Mr Sherman's now orgnized for five minutes all the money and power in this town is with the crypto industry they make money literally by making money they put a couple hundred million dollars that we know about into politics just recently and of course I say

survive we know about because crypto's one magic skill is the ability to hide money hence the name cryptocurrency which did money we are literally terrible campaign Finance laws there's no way for a brad to to enforce them ni uh when a politician accepts uh crypto and has really no idea where that money is coming from no you can actually po you have no idea the rest of us totally know thank you for standing up for the rights of those investors who care about the environmental impact on their of their investment and let me point out that many Court's decisions have basically come down to materiality is decision useful

information and it is simply an a renunciation of capitalism for government to say investor you're wrong you can't make decisions based on the environment you have to make your decisions only based on earnings per share um last I heard government telling uh the investors what to do is not the capitalist system uh commissioner kensaw you haven't had a question this is something we discussed um and it particularly concerns me about the crypto industry it's my understanding that you have a not a ethics rules so that if you leave the commission you

can't Lobby the commission for the people who are paying you for another two years um now we know crypto is trying to influence Congress but there are hundreds of us it's very inefficient they're only five of you and frankly they don't really want to influence you us we want to influence you um it's my understanding that crypto is free to offer any one of you uh a $5 million five $5 million a year fiveyear contract so long as in the first two years uh you're uh not uh uh going to be lobbying the commission do I have that right is that is that the rule or I'm not suggesting any career arent uh are the rules so loose

that any commissioner could take a $5 million a year contract from crypto uh I believe they could take a job at a a crypto entity um and there are ethics restrictions in and the ethics restrictions don't differentiate between a quarter million doll a year job and a $50 million a year job I don't believe so well maybe you'd want to propose at least some limits on uh What uh those jobs could do um I'm concerned chair guinsler about uh webull and other uh other who might have investor information in China uh is the commission going to do anything especially in light of our concerns here about Tik Tock to make sure that uh when

investor data is in the hands of say a brokerage firm that it is not accessible to Chinese Communist Party um whether a a brokerage firm is owned by Chinese or Americans or Europeans they have to comply with their laws and they have to protect information uh customer information but does that as a practical matter uh are they free to comply with those laws by storing the information in China uh I there might there might be cheap data storage available in Shanghai no I I believe I believe so as long as long as they comply with our laws they can store any G I would hope the commission would look at a requirement

that understands that in reality if it's stored in Shanghai it's not prot protected from the Chinese Communist party we should require that the data not be uh not be stored in China um and uh I want to commend you for withdrawing and I know you're going to be republishing roles on swing pricing liquidity rule uh safeguarding uh asset the safeguarding rule and I think you've really listened to Congress I think those rules needed change on the other hand I want to commend you for the rules giving climate investors the information that they uh need and deserve uh I want to point out as you look at the safeguarding rule that there uh do you see any reason why that would have

to deal with the safeguarding of real estate I mean it's hard to move and the county records are pretty clear are we worried that uh would we need the the safeguarding role to cover real estate um again we we put a something out for comment we got a lot of feedback including around real estate and I've asked staff to take all those comments in and and make a recommendation to the five of us on how to move forward uh on in essence repr proposing taking in consideration the scope of the assets for instance this real estate but also the requirements uh there were many comments about the requirements and whether to to do do that which Congress had originally laid out in do Frank on

this the general woman from Missouri the chair of the Capital Market subcommittee Miss wier's now recognize yes thank you Mr chairman commissioner Pur uh the SEC continues to extract huge settlements for Enforcement cases relating to I'm going to call off Channel Communications firms have paid a combined total of over $3 billion dollar in fines as part of the overall sweep has any fraud our customer harm been found and what is the SEC basing these fines on it is it is certainly has become a a cash cow for the SEC and and so the typical case is not based on fraud um or any evidence of a problem other than a

recordkeeping problem now that's a serious problem but I think we need to address it not through enforcement first but through regulatory work that involves working with people on the outside the industry and so forth to to try to figure out how to make these rules workable and also effective for our reg no fraud no customer harm um why didn't the SEC issue a risk alert during covid for instance when it knew that the whole world was becoming more reliant on using phones for communication during this time of abrupt uh forced remote work why did the SEC wait and play gotcha after the fact with enforcement actions yeah I mean I think you point

out that a lot of this probably did stem from the fact that covid changed the world and the way we do things um and that's why we should have taken a regulatory approach first and then for people who who were outliers and Bad actors and were defying the rules we could have brought enforcement action over $3 billion dollar it's quite the cash cow I'd like to enter Mr chairman into the record theion Ann released regarding this commissioner UA uh UA pardon me retail investors are statutorily allowed to invest in private Investments including private funds via close-end funds which are subject to important protections under the inv Investment Company act

however SEC staff through informal guidance whatever that is and not Ru making has prohibited a close-end fund from investing more than 15% of its net Assets in privately offered funds unless the close in funds Shares are available only to accredited investors private funds have grown enormously in number and variety sir in the past two decades but ordinary investors are are unable to invest in them that's why I sponsored by partisan legislation along with representative Meeks the increasing invest investor opportunities act to overturn the informal staff position and

allow Clos end funds to more fully invest in private funds uh earlier this year this important legislation passed the house with significant bipartisan support why has the SEC permitted its staff to deny everyday ordinary retail investors the same opportunities for investment returns from alternative asset classes enjoyed by affluent investors I find the position taken by the staff to be uh frustrating um those staff positions are under the control though of not the commission but whoever serves as chairman one thing we've learned is that diversification matters particularly for retirement investors

yes for two and a half years I was a state Securities regulator therefore I'm a member of cpers my portfolio at cpers looks very different with its allocation to private Equity Venture Capital um and private credit than I can ever obtain as an ordinary worker trying to seek to save money through a an IR or a 401k plan so you're obviously concerned about the SEC staff position uh I'm sorry you're concerned about this SEC staff position and should retail investors have access to these Investments through regulated products such as close end

funds I think it would we need to provide those opportunities to retail investors yes yes not just the rich and affluent there's bipartisan approach to the SEC swing prizing proposal we've heard a little bit about it industry commenters have claimed that the proposal is both unworkable and and harmful for retail investors and even the consumer Federation of America opposes the proposal uh let me just say chair gender did you still intend because I'm not clear on this to advance this swing pricing rule in the face of overwhelming opposition uh sir I wish I knew more about these questions we we got a lot of comments as you mentioned about the challenges of

that rule also I want to note that the banking Regulators oversee about $6 trillion dollar of collective Investment Trust and what we've said and what I've said is until and we see what the bank Regulators do I think so still not clear on this and others that oppose it greatly along with two of your Commissioners a repr proposal cure is uh has got fatal flaws too so I yield back Mr chairman as my time has expired the gentleman from Massachusetts Mr Lynch is now recognized for five minutes thank you Mr chairman uh very quickly I understand Mr chairman this could be one of your last hearings uh as a member of this esteemed body and I just want to say that uh while we spend most of our

time arguing I I I still regard you as a good and decent man and uh I'm I'm I'm pleased to have served with you I I also have to confess that there are a handful of of your Republican colleagues that I wish would leave Congress um however uh fired you you are not among them you are not among them so so thank you for your service thank you friend to Congress really appreciate it um chairman G oh Mr leaga good to see you again welcome back welcome back uh Mr chairman so on September 3rd 2024 let me shift over here uh the FBI issued an alert uh warning the crypto industry

that North Korea is quote conducting highly tailored difficult to detect social engineering campaigns against employees of decentral ized Finance defi uh cryptocurrency and other businesses to deploy malware and steel cryptocurrency um the alert specifically noted that North Korea has quote conducted research on a variety of targets connected to cryptocurrency exchange traded funds which suggests ETFs may be a target of North Korea soon so uh North Korea as you well know is a serious threat to the United States and and I know you've done an awful lot of work on the crypto ETFs um and I I I I know you're aware that the vast majority

of the hundreds of billions of dollars worth of funds in these ETFs are held in custody at a single entity and uh just the structure of this doesn't this put investors funds you know unlike the traditional Financial system doesn't this put investors funds at at serious risk if there is a uh a breach a cyber security incident coinbase has too much ETF it is one of the structural challenges with crypto itself that it's it's stored on this uh irrevocable Ledger that if somebody takes a hack and and is able to take it and so the concentration could

be a risk and that's why competition is good as well I know there's other uh service providers that are looking to provide that service to custody that crypto as well it's ironic that you know this is supposed to be a decentralized system but we have this concentration that introduces so much risk in the then definitely Finance tends towards concentration but crypto uh field is uh not immune to that there's quite a bit of concentration that FBI alert that went out also noted was a whole attached to a whole report that talked about four or five billion dollars of uh uh investor harm that had happen just in the last year uh as well right the other

the other piece of this related to that is the way the stack works so uh you you've spoken before uh about the risk of the vertical integration of crypto where we have you know for example you get a single entity uh should not be acting simultaneously as an exchange and a broker and a dealer and a custodian yeah you know because that that puts customer funds at risk and presents conflicts of interest as well as we saw with FDX can you can you talk about that can you talk about why these are are concerns and do you take issue with the proposed Market structure legislation under uh fit 21 that's been introduced and what changes uh you might suggest

look I think one of the Hallmarks of our Capital markets have been that stock exchanges are separate from broker dealers that that uh they each make money they each have a important role but that conflict is is not uh mixed we wouldn't have the New York Stock Exchange actually operating a hedge fund operating the dealers on the floor as well they're kind of separated and we've seen in the so-called crypto exchanges co-mingling this and also taking custody of their customer funds and at times uh you know as we you mentioned the FTX collapse uh being fast and loose with those customer

funds I actually don't care ACC remember he accused ACC K do that the point I think is valid but the application that he uses to make that point is just terrible we're g to uh put this on a blockchain that we can sidestep all of the regulations that we've adopted here for the traditional Finance industry I I I think that uh the time tested protections are really important I would also say Court after court has actually spoken uh it's to an earlier point if I can that this hoe standard is actually uh uh quite uh clear um you know one Court said how he

provides clearly expressed test for determining what constitutes an investment contract uh another Court said the SEC based its claim on straightforward am application of a venerable Supreme Court president I could go on and on it's got these W glass quot after quote from cases in the crypto field oh thank you thank you for your courtesy Mr chairman and I back yeah seen those thank you um we'll now recognize the gentleman of Kentucky Mr bar for five minutes uh thank you Mr chairman um chair gor you say hoe is clear but let me tell you what's not clear what's not clear is what the rules of the road are if you're in the in the crypto business over the past several years the SEC has brought approximately 150 enforcement actions related to the

digital asset ecosystem system in 2023 alone the SEC brought nearly 50 up from 53% from 2022 let me read a description uh of what uh your agency is doing to one particular company coinbase okay here we go today's Wells notice does not provide a lot of information for us to respond to the SEC staff told us that they have identified potential violations of Securities Law but little more we asked the SEC specifically to identify which assets on our platforms they believe may be Securities and they declined to do so today's well Wells notice also comes after coinbase

provided multiple proposals to the SEC about registration over the course of months all of which the SEC ultimately refused to respond to so let's go coinbase repeatedly 30 times tried to come in and register with the SEC and the SEC refused to respond they then submitted a petition for a rulemaking which was rebuked which was completely give this to Hester then the SEC identified potential violations in a Well's notice but refused to identify what those were Howie in your mind is very clear what participants in the crypto space uh are telling us is that

this is totally unclear commissioner Pur yes is this moving Target is this lawlessness by the commission conducive to investor protection no it's not thank you chair gor I think um we need not only fit21 but we need an SEC that actually establishes rules so that everybody knows what they are and enforces those rules instead of making everything a moving Target and refusing to respond to requests from investors and providers of crypto assets what those rules are but I want to I want to move to another question really quickly um over and over again um your administrative actions have been

invalidated by the courts and we've seen it in the proxy advisory rule the private funds disclosure rule the debt box example the stock buyback rule grayscale Ripple over and over and over and over again your administrative actions have been a struck down in federal court um commissioner purse what does this say about the legitimacy and reputation of the SEC when the agency is constantly losing in federal court well certainly says we need to be a little more careful when we go out with proposals uh and when we take actions to make sure that we're acting within the constraints that Congress gave us these are things that in in many of these instances private fund rule advisor rule for example we knew ahead

of time that there were there were legal questions about whether we had the authority to do what we did but we moved forward and this is not good for our institutional integ Integrity well it's in administrative law fils violation of the APA arbitrary and capricious actions but let's go to the basics the basics is statutory Authority and now we have West Virginia versus EPA and Loper brigh overturning shevron here we go in light of those decisions uh commissioner um uh um can you identify any specific statutory Authority uh commissioner Pur can you identify any specific statutory Authority where Congress has granted the SEC authority to promulgate regulations that compel companies to disclose

General and immaterial information about environmental or social issues as I pointed out in connection with the climate rule I I'm very concerned about moving beyond materiality I I think that we are on shaky um legal ground when we move away from Financial materiality which is the Touchstone of our well is there any statutory Authority all specific statutory Authority there are instances where Congress has told us specifically conflict minerals for example where we want you to go and do something regardless of materiality well let me ask you this our colleagues my colleagues on the other side of the AL Mr Caston and Mr Vargas introduced the climate risk disclosure act in the 116th Congress and then the house passed a a a version of that in the 117th

Congress representative vargas's corporate governance Improvement investor protection act those those pieces of legislation to their credit to my colleagues credit attempt to to confer specific statutory authority to the commission to do what you did in the climate disclosure rule but guess what the Senate didn't pass those laws the fact that this body has proposed statutory Authority but specifically declined to enact it into law what does that say about the sec's authority to promulgate the climate disclosure rule again our Baseline is is materiality if Congress wants us to do something in immaterial disclosures then they can tell us to do that point is we haven't done it you don't have the

authority to do it I yield back General Ys back the from Ohio Mrs batty is now recognized for five minutes thank you Mr chairman and rank member to our Witnesses let me start with you chair Gensler we got a couple questions I'm going to try to get through um the first one is on proxy advisory firms as you know these firms are contracted by investors to provide them with independent advice and analysis on proxy votes which is where the shareholders are presented with an opportunity to vote on a whole host or range of matters requiring the company's policy proxy advisory firms also help level the plan

field for those smaller investors who may not have the money the the resources to conduct such re uh research on their own can you tell me how the sec's regulations on property proxy advisory firms ensure that these firms are in the acting in the best interest of the shareholders um it's a little bit complicated because the prior Commission in 20120 had proposed and adopted a role on proxy advisors that then has recently gotten uh I guess the word would be vacated commissioner first I have that

right work oh wait on this one all right all right it's this complicated for you all so no no I'm just saying because uh I think she just you're own she has no fear um all right so um this is not a like crypto related question it seems to me that the the the anti- crypto um group in Congress is kind of hang on let me let me play this one second that right word I guess the word would be vacated but I have to get the right word commissioner Pur do I have that right word I'll defer to you as the lawyer on this

one some some collegial uh you know back and forth right Gary gendler cannot not respect commissioner Hester Pur right uh it's just impossible so okay so it strikes me that um many the like anti- crypto against crypto members of Congress are just like not really asking crypto questions with the exception of like Brad Sherman just super you know against crypto like many of them are just asking other non-related crypto questions right the pro crypto tribe is I I thought um representative was the uh our last representative here bar bar was killer he was killer and he

did what I think we've all been wanting which was was ask questions directly not of Gary gendler who gives the exact same answer every time he's brought in front of a congressional hearing but ask those questions of Hester purse who has not yet spoken in this way about crypto and the crisp answers Congress yeah right in front of Congress and the crisp answers coming out of like Hester purse are just like on point right yeah so precise so poignant you like wishing that most people talked like this uh and yeah Gary just like Phil his time and just does this sneaky political like workaround yeah I guess it's it's striking that this is um so partisan but I I guess that's kind of like what we we kind of

come to expect right now um ready yeah let's go back in this uh has raised concerns across the financial service industry particularly due to overlapping implementation dates rule requirements and compliance periods which has create uncertainty about how these regulations will I want to go until at least Richie Tes so for small businesses and I chair the small business committee and I am a small business there are growing compliance burdens can be especially overwhelming off and stretching they already limited resources Mr chairman uh have you consulted with the National Economic Council of the Treasury Department regarding the effects of these numerous new regulatory requirements on millions of investors and retirement Savers and

if you have what feedback have they provided and furthermore is the SEC considering the significant resource strains that firms May face when required to implement these rules simultaneously we put each of our rules out with economic analysis and also uh call to small businesses to get their feedback uh and we do take it very much into consideration uh whether it's from small businesses or if it were a comment from the small business administration for instance if they had feedback for us or I think you mentioned the US Treasury Department um on a number of our roles not all of them on a number of our rules we go to them in advance whether it's

about the treasury markets or the the capital structure um uh but we don't have a we don't have a we're an independent agency from the US Treasury Department uh Commissioners Pur or uata do you have a comment on that I think we consistently Overlook the the disproportion effects on small businesses and that has been been very evident in our in our failure to use accommodations for small businesses occasionally we give them a little more time but I think we could do much more I agree there is a disproportionate impact on small businesses and in some cases there are loopholes that allow us to not consider the effects for uh

investment advisors we the rules say you have to get special consideration if you have $25 million or less of assets under management well as it stands today you need to have at least a hundred million of assets under management just to register with the SEC so we conveniently take the position that we don't need to analyze the effects on smaller investment advisors because we don't have uh them registered with the SEC under this $100 million threshold right thank you in recent years the expense of entering US public markets has skyrocketed which the cost of doubling since the 1990s and consequently the number of publicly traded companies has plummeted with many choosing against initial public offerings so this

reduction IPO activity has diminished investment opportunities and slowed both growth and Innovation although the SEC Tas for the fostering Capital formation it's current regulatory efforts have uh centered on expanding complex and expensive disclosure requirements from rather than tackling the obstacles that companies face and going public so with over 68 regulatory actions on the agenda not one directly addresses Capital formation which is key to Market accessibility and instead the emphasis on more stringent regulations has made us markets less appealing so further discouraging companies from coming here particularly small businesses and from mentoring the public sector so commissioner Pur how has the sec's focus on increasing Regulatory and disclosure

obligations rather than facilitating Capital formation contribut to the decline of the IPO activity and and the reduction of the number of us publicly traded companies you're raising such an important issue because if companies don't go public early in their lives retail investors have very a very difficult time getting access to them there are many reasons but regulatory burdens are one and all we're doing is adding to that list of requirements for public companies we're not thinking about right sizing it and so it is a a real problem that's why we're not seeing one of the reasons we're not seeing companies go public limited time in another favor of the sec's under chairman Ganer has been the inadequate consideration of opposing viewpoints in the agency's regulatory agenda this practice is particularly risky because

excluding diverse input can lead to regulations that lack world real world analysis and Overlook how they might disappropriate proportionately impact smaller firms limit investment opportunities or raise the cost for Market investment so it's crucial for any regulatory agents to actually seek and incorporate feedback from all stakeholders to fully understand the potential consequence of his actions from every perspective so the limited time commissioner yata that does the sec's tendency to push forward major R making without adequate public input increase risk for invest that's been I think the biggest problem with all of these overlapping complicated role makings we're not getting the input we need to make a good decision you have my time the gentleman from California Mr

Vargas is represent recogniz five minutes thank you very much Mr chairman Tes I want to thank you and the ranking member for convening this important hearing and I want to add my voice to the chorus of those who' have been saying thank you for your service and your fairness I think you've treated all of us very fair and I think it is a big loss to this in how do you feel whatever your endeavors are after this thank you also thank the Commissioners the chairman and the rest of the Commissioners for being here I don't think it's that for the service for your country for the past 90 years the SEC has been fulfilling its stated mission of protecting investors maintaining fair and orderly and efficient markets and facilitating Capital formation under your leadership

we've seen increased transparency for investors increas accountability for those committing fraud this makes it so investors get to decide which they would like to take so long as public companies hold up their end of the bargain by providing full fair and faithful disclosure but I want to blame all of you and in particular chairman I want to blame you what for a very boring meeting today oh my God very really and there's a reason for that and the reason for that is there isn't a whole whole gaggle of reporters and Camera people here in the front because you've done a good job I knew that was coming and because the

markets are doing well if you had messed up there'd be a whole bunch of reporters here wanting to know but even my colleagues are not here they all left boring hearing so I want to blame all of you for working so hard to make this stop being so fantastic and I have to say I do follow politics a little bit and I heard the 2020 election there's something like this a prediction the stock market will crash if Biden wins in 2020 he's not talking about Trump right important you know who made that comment

as a trump quote and now that same individual says if we lose we're going to have a a crash like you wouldn't believe and went further the largest stock market crash all right so he's just like using this as a platform to say what he wants he's like thank you you're doing a great job no further questions now I'm going to talk about like how and now we gonna talk about like Trump and malga people and why you need to like vote Kamala and why the are good this is what I'm talking it's like the same Maxine Waters is like stroke the sec's dick Gary Gensler are doing a great job magga Republicans are trying to destroy this nation and like some other stuff yeah I like I I'm here for the substance honestly the policy and I feel like that's that's coming from you know

people like representative Williams did you ever see that you ever see this chart David uh this one right here private Equity versus S&P 500 Total return right so this is this is charted from like you know 1990 all the way to like you know like I guess this is uh yeah current days this 2010 or whatever but it doesn't go that far but basically like private equity and public markets were about the same but then with increasing complexity regulatory issues uh the difficulty of like launching a publicly traded company started to increase such that companies just launched later and later and later and later so even the big tech companies like Facebook like Microsoft you could get in incredibly early and get rich as

a retail investor who saw potential in Microsoft stock and technology and Company right that's just like no longer possible under this existing regime I think so as boastful as Gary is about his Equity markets they're not just like retail Fair markets in the way he like he thinks they are and that's why like a lot of investors retail investors see upside potential in crypto assets because it's always been the potential start at zero dollars publicly traded yeah yeah ether started at zero dollars publicly traded yeah you know like anyway that was the substance that I'd like to see more of uh and we got some of that from a republican was that was that bar no who was this rep Williams

Roger Williams Williams brought that up yeah yeah Republican out of Texas here yeah because I do think that the rule that you've adopted is a very good one but you didn't go far enough and we have difference of opinions um did you have the authority to do that Mr chairman promate and ultimately adopt the rule that you had I very much do think so I think it was grounded in materiality very much grounded in materiality to investors not to others solely to investors and I want to augment something fellow commissioner said I think we all five do get on pretty well we have policy differences but that's by Design Congress wanted this to be a robust policy debate and I've chaired some people are doing a policy

to other people are just doing something else give and take that we have and and I my time is about up so again I'd just like to thank all of you for your service thank you thank you Mr chairman I yield back I thank you and now will recognize the gentleman from Minnesota the weip the Republican we Mr emmer let's go oh oh oh emmer Emmer's on bring It leadership comes from the top correct leadership comes from a lot oh oh what happened my stream is buffering wow that's a terrible time to buffer lot of things but the top matters a lot it it's yes the answer is yes but under your leadership at the it appears

that you expect political allegiance not just from the political appointees but also from the civil servants you hired isn't that correct is not correct sir well sir that's yet another deliberate Distortion of the truth the house has obtained emails between you and your now director of training and markets he interviewed with you and then sent you a follow-up email reassuring you sir that he aligned with your political views so that to me seems like you expect political Allegiance from the people that you hire as civil servants at the SEC the way you hire and the culture you require encourages your staff to have loyalty to you Above the Law and above the mission of the SEC which brings us to the debt

box case in Utah where you're attorneys who no doubt heard your anti- crypto rhetoric which is not based in law went out and deliberately lied to a court in order to effectuate the commands from their chair to prosecute crypto companies boo chair ganor do you know of any other time in history where the SEC has been sanctioned by a court for material misrepresentation first if I might say when we uh hire folks we hire no reclaiming my time sir the answer to that question is no it has never happened but let me ask you another one does the fact that we're talking about this today even slightly embarrass you look the matters in that case were not well handled said that to the court

claiming my time again the debt box case should absolutely be embarrassing to you sir wow just to be clear the SEC had to pay with taxpayer dollars nearly two million in legal fees for this material misrepresentation for this lie you are aware of that I'm sure is the debt box case the reason that why the sec's head of crypto asset and cyber unit resigned in June sir damn no they went to take another job okay so no one in a senior level position here in Washington DC has been held responsible for this complete abuse of taxpayer dollars the SEC broke the law your attorneys lied to the court and no one in your leadership here in DC has been held accountable at tracks seems

like business as usual here in Washington okay Switching gears very quickly it's been recently reported that vice president Harris has finally said she'd craft clear rules of the road for the digital asset space if she becomes president is this your approach too sir or do you think she's rebuking you because she doesn't think you've done a good good enough job establishing these clear rules over the last three years of her Administration I think that there's laws in place if Congress wishes to change them they'll change them but we are enforcing the laws and there are many claiming my time so you don't think she's the laws reclaiming my time well it's very interesting that you uh view your performance that way because we

have a Litany of court cases extraordinary confus in the marketplace and millions of Americans pining for clarity from you you've abused the agency's enforcement tools and you've been you've even baited companies eager to comply with you only to hit them with enforcement actions you've retaliated against businesses and people who have come before this committee to talk about the next generation of American Finance and perhaps somehow worst of all you've made up the term crypto asset security this term is nowhere to be found in statute you made it up you never provided any interpretive guidance on how crypto asset security might be defined within the walls of your SEC yet

you made the broad Proclamation that you believe a majority of tokens are crypto asset Securities you did this and you would deliberately use this madeup term as the basis for your entire enforcement Crusade over the past three years only for your lawyers to retract it in a footnote to a court just last week you're inconsistencies on this issue sir have set this country back we could not have had a more historically destructive or Lawless chairman of the SEC and I yield back recogniz for thank you Mr chair thanks all for being here um gets up and leaves first follow up on my friend Mr

bar raised earlier about the this issue around ESG rules um when Congressman Vargas and I had these last year of conern want to invest in that's fine you deliberately made up the term crypto asset Securities and you're made it up like why do we have to suffer through like two hours of nothing to get to that and we get like four minutes of that you be supportive of establishing a regular regime for ESG ratings providers like man G Gary knew he was going to be grilled I mean it was just like yeah when when Tom em was coming God Tom emmer is like one person I do not isue we should have we have clear

accounting rules for other issues we should have clear accounting rules there as well appreciate it um we'll follow up offline on that one um I want to shift now to um some concerns I have that have come up a couple times here about merging the functions of the self-reporting organizations into the SEC specifically finra and the pcaob now if I'm doing my math right if we were to merge finra and the pcob into the SEC that would more than double the sec's headcount just looking at the number of employees of those agencies and would probably increase your budget by 75% I think after Warren Davidson I don't know if there's much left the I think there's a rich conversation around whether the people who would like to

merge would also increase your budget um in order to do that but chair gendler I'd like to shift to you in your view and I'm sorry I'm G to peek peek around Mr Williams had here um how does fer and pcob oversight supplement the work of the SEC and if they were to be merged could they still do all the things they do now or would would there be some gaps in what we we were able to do I think I think that Congress uh could of course changed this but we have self regulatory orous case that is the regulator sort of the first line of regulation for broker dealers goes all the way back to the

late 1930s something called the Maloney act that Congress passed and um that certainly allows industry and the the broker dealers to get the benefit of that but then we are the the the official sector uh overseeing the overall industry um and that that's worked reasonably well over the decades there's certainly time where there's been gaps in that the pcob great debates in this Congress 20 some years ago about taking that and moving it into an agency that was done in a trade Association the aicpa used to inspect and set standards for the

auditing field and better to do it in something overseen by this five member commission again Congress could change that but I think that too has its benefits to be outside of I'm not asking do a plan on whether we could do it it seems to me that you know as as as outside organizations you know you know finra has private enforcement mechanisms if broker dealers are V in the lose I I don't think you'd have that ability if you came in right if they were inside the SEC could you still do private enforcement or would you have to you know would you have to subpoena information could you take the fifth no we'd have to follow federal law and do things in a way exactly so so essentially bringing them in would would make them weaker as institutions

I I think it would one of the things that might make it weaker is also the funding point that you say so okay so both pcob and finra have funding models uh uh that basically tap into their members and as in the PC's case Congress approved a funding model that then we annually approved that budget as a commission no I I I share the concern like we're going to continue to highlight this in part because these are lifted directly out of project 2025 um this idea that we should weaken organizations we should put them in places where others are involved and I'd like to unanimous consent to enter into the record president Trump's right-wing policy map called mandate for leadership the conservative promise uh without objection or general

leave uh so thank you we we'll bring that in and and again the concern you know we've we've seen a lot of proposals that are lifted straight out of that from udap hearings eliminating cfpb funding in and indeed weakening the SEC and I want to make sure that we we address those issues um and and understand the importance of investor protection so thank you all for doing what you do for being here and I Y back some back the gentleman from Georgia Mr louder M now recognize for five minutes well thank you Mr chairman thank you all for being here as a historic moment to have everyone here together um and uh unfortunately we only get five minutes a piece I think we could sit here for a couple of days uh to explore some things if uh any of you

have followed any of my previous questioning you you know that uh my greatest concern is the Consolidated audit trail from a constitutionality cost and vulnerability standpoint someone who spent uh almost 30 years in the it all right this is not about crypto uh I don't think Richie Torres is here I think the last person work listening to is Warren Davidson but I don't think he uh do these just go alphabetically I haven't been paying attention to the last names I'm not sure actually yeah um how much longer you want to you want to stream this you know what's uh kind of interesting I I would love to um if if maybe our team listening to this could just try to get a list of like how

many more we have if that's even possible to get but if not so I I have a like how many members there are and there are like 29 Democrats 23 Democrats and 29 Republicans I don't but I don't think that they're all here so we don't really know because yeah they can't all be here all right you know one thing that's interesting about this is like it's all I'm seeing here asking questions are either A's on standard crypto or FS it's a good point there's like one D it's just like extremes M and that is so wild to me that there's not like I'm not sure yet I haven't made up my mind like there's no in between here it's very polarized as well well remember when two

years ago when crypto was getting increasingly political one of the big talking points that we had was that like and this is great because crypto is so bipartisan like both Democrats and Republicans like align with crypto and then slowly it just the ball just fell onto one side yeah and it just became increasingly partisan and now we're seeing it here right like a lot if like if it's not actually effective messaging about the functioning and the legitimacy of the SEC then it's the Democrats just like saying thank you for your fantastic service and repu magga Republicans suck and are dangerous I did hear though in opening comments before I joined I was listening a little bit Maxine Waters said something about stable coin

legislation that's not at all related SEC but she was she said I'm hopeful we can get stablecoin legislation here cooking yeah it was it was a jab at Patrick McKenry too it was kind of like blaming Patrick McKenry and like his tribe for like not pushing forward stable coin legis why because uh McKenry prioritized fit which is like again the fit legislation is sort of like understanding what's a what's a commodity in crypto and you know she thinks he could have gone yeah I mean he wants stable coin legislation too though yeah he wants both right and there's no way that whatever stable coin legislation that Maxine Waters wants is good for crypto you don't think so I'm guessing not I don't Max wat's anywhere near my legislation not for

decentralized crypto there's like a lot of wins for the US government in terms of just exporting the Dollar on crypto rails it's just like could not be clear that should be so bipartisan even if you're like a staus super authoritarian type of individual who absolutely hates crypto right I mean your stable coin legislation you have the ability to like freeze accounts you have the ability to just like surveil them all you should have no problem with some sort of stable coin legislation now whether they try to pack in like the the Banning of like uh your self custody or something like that you just like I guess maybe that's what you're worried about well I'm just worried about any any like legislation out of Democrats is going to be something about control like the the big

theme of the all the Democrats when they do bring up crypto is all about the loss of control that we that their government has over crypto it's not about Innovation it's not about markets it's just like hey this might take away our control and we're concerned about that yeah do you do you hear the representative um asking about you know saying that K Harris weighed in and uh Gary gendler do you consider this a weigh in in a positive way on crypto and Gary gendler do you consider this a rebuke of you and your Administration this is referring to a comment she made earlier in the week that um was very short but also the first comment that she ever made about digital assets she said she said the words digital assets she said the words

digital assets I think the quote is something like let's see uh in I will as president this is K speaking in a speech front of like as the Wall Street Executives I believe encourage Innovative Technologies like Ai and digital assets while protecting consumers and investors so that's the first time she's ever said a thing anything about crypto in quotes uh but it's interesting the phraseology of that right so one she didn't say crypto she said digital assets right which she she didn't say our words she said she said their words not our words yeah like if you want the support of our industry you need to say our words yeah call it like what they are I mean they using this

sort of um I guess you know you polished uh version of it's the Trad version it's like the Black Op version and then and then and then Jake trinsky made the point that this um protecting consumers and investors like what does that mean while protecting consumers and investors right you know G Gary gendler could be like oh yeah this is exactly what I'm doing it's totally consistent so not very much of a supportive statement from KLA Harris I thought uh this tweet thread was pretty good which I'm sending to you in Discord from Jesse eckel uh and he's kind of just alluding to the idea that like kamla is saying the same thing that Gary gendler says which is like uh I'm I'm

here to support digital assets like I'm here to support crypto like I I'll support them uh and ask ask Brad how Gary's Pro Innovation approach is protecting investors right Gary is all about Innovation and Protec investors and so he made all these like tweets of Gary gendler statements that are very similar to kamla's saying I'm here to support digital assets yeah yeah I I agree right it really matters what you mean by support what do you mean by that yeah I I will encourage Innovative Technologies like digital assets while protecting consumers and investors and I guess you know Jesse's making the point that that's a lot like what is saying

I'm already doing this yes right yeah I would not even Luke worm on on that quote I mean I guess good to hear Comm comma Harris get off zero like she had she acknowledged the existence of crypto wow whether it's positive or negative is completely TBD that is so weak all right what do you what do you want to do with the rest of the stream here um well also did you see Stan with crypto's tweet no oh bro it's so bad man so so now now that kamla Harris has issued a somewhat supportive statement about crypto she has now given a B on

stand with crypto that's quite the upgrade I don't think we've earned that upgrade I don't think we've earned that at all and this is what crypto Twitter is all like upset about in this present moment which is just like yo the B he's getting a be somewhat supportive after this this is the notable statement we have notable statements yeah somewhat Pro crypto o and so uh Gabe Shapiro of course the the political attack dog goes like does his like rabbit hole research and apparently whoever is like running the uh stand withth crypto is also an ex Biden staffer and so now everyone is like well stand with crypto is now completely

biased and so we don't trust them anymore and honestly like how can you blame them when you look at this [ __ ] be a b k has a b have to have some more objective like I I mean my my take on this is she's still like na na we don't know for sure we don't know maybe you could do like an F Plus or like a low D like a D minus based on this statement maybe but you'd also have to call into play because she's the only executive on this list besides Donald Trump in the executive office you really to look at her cabinet you really look have to look at the administration she's selecting like my overall take on this is if she

brings in the Biden Administration The Architects of choke point 2.0 for crypto right brings in the exact same people or many the same people as her Economic Policy advisers as her leaders in treasury as her you know uh leaders in kind of like um uh all all of the all of the government agencies the same people you're going to have the same outcome you're going to have the same kind of like choke point maybe she'll be checked a little bit by Congress but gez man all like Congress isn't completely unified on this either yeah so you have another administrative State that's attacking crypto that's not that not B material like the far more effective

analysis like giving her a b is you are doing an f grade on your homework if you are giving KLA a b it's the most unrig analysis unhelpful analysis that you can possibly give you gotta earn it you gotta earn it I not clicking that donate button uh wow there's a donate button I mean I think maybe that's there for all the politicians let's see here yeah it's there for all of them to be fair well what about find find like a C or D or F oh you want to I got I got your my favorite F Brad Brad donate oh they have a donate button all right Fair well why do they have a donate button just donate you should gray it out no this should

like go back to uh Patrick McKenry just should focus over to like whoever's got pick a random a person yeah um yeah well yeah that's too bad I mean I think overall St with crypto is doing a great job I think they very much want some support in a KLA Harris Administration so they're probably grading it on a curve in like a massive way in order to get that support but the problem is it ruins the the neutrality the credible neutrality of this platform it totally does totally does yeah we're about to get Warren Davidson on all right all right let's uh to do that who's who's speaking now

represent I think she just ended gentleman from Ohio Mr Davidson the chair of the house subit right for five minutes thank you chairman McKenry for putting this historic hearing together long in the making thank you to our Witnesses um it's great to have all five of you here today today's hearing directs attention to the commission's dysfunctions and frankly to the Chairman's politization of the commission and its work let me highlight seven failures uh abuse of the rulemaking procedures 61 so far inappropriately short comment public comment periods unworkable and unlawful ESG disclosure mandates Hotel California style rules for crypto oh yeah he where you know

they all have the ability or direction to come check in anytime you like but never with the authority to leave with some approval or Clarity endless Discovery with no resolution no Clarity regulation by enforcement for crypto an unworkable proposal uh to overhauling our Equity Market structure deao ban on crypto through proposed custody rule uh and you know failure to work with Congress frankly undermining the work that Congress done to provide Clarity here so as many of my colleagues have done today at this hearing the courts have even the doj have highlighted severe mismanagement the list goes on but unfortunately I do have limited time commissioner Pur would you say that

the sec's rule making and enforcement agenda reflects the priorities of the Commissioners as a whole or has the commission become an extension of chairman gansler's agenda the agenda is the Chairman's agenda do you I mean I saw one of the Commissioners today look like it might be the first time he was asked his an opinion on something expected to to ratify whatever chairman Gensler throws out there I mean I think the issue is that chair Gensler has a lot of ideas that he's trying to move forward on and um there are other things that I think we should be spending our time on that we're not spending our time on and so I think that's the nature of some of our disagreements problems being left

unsolved I appreciate you for highlighting many of them um you know my concern is just that that by taking the world's best Capital markets I mean we don't even have 5% of the world's GDP but we have over 50% of the world's invested Capital we're taking something that works pretty well that needs Clarity and oversight to continue uh instead we're working uh with a war a declared war by secretary Warren and other Gary Gensler allies uh to undermine our Capital markets and some of the most Innovative companies out there for that reason I proposed the SEC stabilization Act as a structural reform to deal with our Gary Gensler problem but also with the structural challenges at the SEC that highlighted can be exploited by Bad actors uh one of the

areas that I want to highlight is special purpose broker dealers commissional Pur do you believe that a special purpose broker dealer process could provide a first step towards broker dealers handling tokenized Securities I mean at the time that it came out I said it could be a baby step but that was four years ago and this baby's not walking yet so I'm I'm I'm not as optimistic as I was back then yeah I'm concerned as well and it kind of creates a separate path where some of uh chairman gensler's friends and allies could get special permission and the rest of the market be excluded uh for each commissioner maybe we'll start down there with you Mr uh U uh have you or any member of your staff inst been instructed by the SEC staff to direct or otherwise ask fenra to avoid approving broker dealer applications uh with

crypto assets uh no I have not commissioner Pur no but TM is our trading in markets division is the one that interacts with finra so it's I mean the the issue is that there's a cultural there's there's clear messaging from the SEC that we're not trying to move the crypto industry forward and that's reflected in this as well thank you commissioner no uh no and I I I think I might disagree a little bit with the clear messaging uh point from commissioner Pur on the on the clear Direction I think uh there's there's lots of Rh Eric and we can get down to Brass tax and look at ways to move forward well Mr Gensler no

surprise many of us aren't fans of your approach to the job um but it does seem that you've abused your Authority uh and you seem to kind of gloat as as uh you know candidate Harris decides that she wants to Pivot on crypto and say no no you can trust us we're GNA be okay on this it seems like you're gloating I'm still here uh I'm not going anywhere the war on crypto goes on so as highlighted you meet with the chairman of the Federal Reserve regularly do you guys discuss things like operation chokepoint 2.0 the way to block and restrict uh Market certain crypto Affiliated firms I've never heard that term and i' also want get the [ __ ] out of here half of the rules that we've adopted 42 Rules half of them have

actually been by some of the work's been good but a lot of it's been bad last question M uh commissioner U what would it take to allow distributed ledger to be the official record of ownership for token Securities if you could respond in writing that'd be good because my limited time has expired yield yields we now go to the gentleman from New York Mr Torres for oh there's Rich oh he just came in time thank you Mr chair um Mr Gensler uh suppose I were to sell you a Yankee ticket yes and tell you that the Yankee ticket could appreciate in value it could be resold at a profit in the secondary market and as is the case with all sports tickets suppose the proceeds from the the sale of the Yankee ticket goes toward paying for the Yankee game by selling you the

Yankee ticket and by entering into an investment contract with you and therefore conducting an unregistered Security office um I appreciate the question I don't know all the facts and circum get the F out of here I I I know where we're headed here uh representative but uh I don't think so in that Yanke so a Yankee ticket is not and why why is a Yankee ticket not a security well it's it's really a question and the courts have been clear on this is is the offer and sale specifically with a Yankee ticket though what when when you're buying a Yankee ticket what are you purchasing you're buying access to a Yankee game is that fair to say I I understand it's been a

while since I went to a Yankee game but you're welcome to I used to I used to live in New York and my three daughters were all born in New York so in the stoner cat's case readers were selling an nft that offered access to animated web series from the standpoint of federal Securities Law is there a legal difference between buying a Yankee ticket that offers you the experience of a Yankee game and buying an nft that offers you the experience of an animated web series again I don't want to comment on any one specific uh well it was a settlement a f compete it's not an ongoing litigation you can comment on it but it's it's about how is something offer and sold is it offer and sold is an investment contract act are are

individuals looking to a common Enterprise anticipating profits based on the I'm familiar with the definition you're avoiding the question um see here's the danger I see with the gendler theory of investment it's actually the Supreme Court's Theory your inter your your idiosyncratic interpretation of the Supreme Court the expectation or promise that an object could appreciate in value or that an object could be sold at a profit in the secondary Market that expectation or profit could be retrospectively attributed to just about any collectible or any consumer good or any piece of art or any piece of music The Trouble with the gendler theory of investment contracts is that it's so

open-ended that it lacks anything resembling a limiting principle it blurs the line between collectible and security between art and security Miss kensaw does requiring artists and musicians to register art and music with the Securities and Exchange Commission raise a First Amendment concern I'm not a First Amendment expert but um uh I I think the only thing that have to be registers with the Securities and Exchange Commission are securities uh and so that's what I would look to to determine whether they have to register with us now in the stoner cat's case the SEC not only prohibited the creators from selling nfts the SEC ordered the creators to destroy the nfts

construction of artistic expression by government Fiat raise a First Amendment concern again um I you're not a First Amendment expert I'm not a first am do you need to be do you think artistic expression is protected under the First Amendment do you need to be a First Amendment expert to answer that question uh I think the ins and outs of First Amendment law are actually very nuanced so I so I I would not want to open do you think the SEC has an ation under the First Amendment to take care not to have a chilling effect on artistic expression on the blockchain uh I think we uh can work together to advance the interests of of the industry and I think uh our markets

are the highlight and and of the world because of the laws that have been in place for 90 years you're not answering my question in a September 12th Court filing the SEC had to apologize for using a term it invented out of thin air digital asset security the fictional term digital asset security perpetuates the false narrative that digital Assets in themselves are securities in the Howie case as you know Mr gendler the Supreme Court never held that orange groves in themselves were Securities the Supreme Court held that orange groves can be part of investment contracts which are securities that's such a good point the same logic applies to digital assets in my view using the term digital asset Securities is as intellectually

dishonest as using the term Orange Grove Securities uh Mr gens would you ever use the term Orange Grove Securities I don't believe I have or would right because it gives the impression that orange groves in themselves are securities and that would be misleading my time has expired oh God that was good oh no that was so good oh no McKenry and Richie Torres waters for holding this hearing from the top rope pleasure and their honor to have you all here together skew Kor earlier this year the Securities and Exchange Commission suspended the Consolidated audit Trail or C all right I think that's gonna be the last crypto subject of this whole

entire hearing all let me just check Mr Rose who who he is let me just check Rose dude that was so good that was so good God I he must have practiced that all right Rose is strongly supportive you wanna despite its failure to address any of the concerns raised by commenters the SEC has now allowed these identical fee filings to go into effect chair guinsler can you identify any changes made in the August fee filings that addressed concerns raised by commenters or we already I mean that was how can you get better than I think that's it tor's always comes towards the end too um wow that was W so good I mean asking about artistic expression just pivoting from Gary the question to Gary gendler

to khaw he like put on the spot in this way is not as good at like kind of dodging and slithering out of a question right it's like asking her specifically whether utility nfds the destruction of an nft pictures of cats jpegs of cats registered the blockchain whether that constitutes a violation of the First Amendment an artistic instruction in the courts to actually destroy the nfts and having KR Shaw try to respond to that and she couldn't I'm not an expert on First Amendment do you need to an expert on the First Amendment understand you can't destroy a First Amendment crenchaw going going back and saying well we've created you know hundreds of of trillions in capital we're the Envy of

the world it's a freaking nft right of a cat of a cat what are you talking about dude I thought I didn't think that we could get anything better than Tom emmer because Tom emers was just like you know 10 out of 10 but man Richie Torres man that was so good it was actually Richie Torres was first place for me I'm I'm kind of like ranking our like Advocates here Richie came in first Tom emmer second and very close second very close second yeah Warren DAV did great Warren Davidson did great and then of course Patrick McKenry at the start yeah all good man all right there we go we did it fine thanks to all the 500 600 people that were watching us with us yeah this

is great hope to do it again soon yeah tell them to subscribe you got to subscribe if you're not subscribed to bank lists what's reason to subscribe if you like people clowning on Gary gendler and Brad fman and Maxine Waters this is this is the home no one does it better than us so like And subscribe uh thanks everyone for for staying tuned with us see you later bye bye guys