Federal Trade Chairman Joseph Simons, (L), Federal Trade Commissioners (2nd L-R), (Photo : REUTERS/ Leah Millis/File Photo)
U.S. President Joe Biden's pick to head a key market regulator promised on Tuesday a thorough review of issues raised by the GameStop Corp stock frenzy and suggested companies may have to disclose their potential risks from climate change.
Gary Gensler, the president's nominee to lead the Securities and Exchange Commission, said he would look into whether retail investors get the best prices when brokers are paid for their order flow and business practices that incentivize trading.
He also said the agency could explore potential issues that are raised when a handful of firms, such as Citadel Securities, dominate the processing of orders for retail traders.
"What if a company ... concentrates and dominates a field? One firm now has 40% to 50% of the retail flow and so what does that do to pricing of capital in this country?" he said during a confirmation hearing before the Senate Banking Committee.
Shares of video-game retailer GameStop have swung wildly in recent weeks as retail traders on social media site Reddit championed the stock in the face of heavy bets by short sellers - who profit when shares fall.
Wall Street is keeping a watchful eye on the Biden administration's moves in the regulatory arena after a relatively easy four years under former President Donald Trump.
Progressives see the SEC and the Consumer Financial Protection Bureau as key to advancing policy priorities on climate change and social justice and expect Gensler and Rohit Chopra, who Biden nominated to lead the CFPB, to take a tough line on Wall Street.
Republicans have warned that Gensler and Chopra, both experienced corporate regulators, could take too heavy an approach to private enterprise if confirmed to the positions.
As head of the Commodity Futures Trading Commission, Gensler developed a reputation as a tough operator willing to stand up to powerful Wall Street interests.
Gensler suggested he would pursue some sort of disclosure for public companies when it comes to the risks posed by climate change. He said companies should not be able to hide those risks and investors rather than companies should determine what information gets disclosed. He also said the SEC should study whether companies should disclose any political spending, a longtime priority for Democrats.
Gensler also indicated he could pursue new regulatory clarity around cryptocurrencies, which he said can be a "catalyst for change" but pose investor protection concerns.
"It's important for the SEC to provide guidance and clarity ... sometimes that's a clarity that will be a thumbs up, but even if it's thumbs down, it's important to provide that."
CONSUMER PRIVACY
Currently a commissioner at the Federal Trade Commission, where he campaigned for tougher consumer privacy and enforcement penalties, Chopra helped establish the CFPB, which was formally launched in 2011.
Democrats pushed Chopra to revive the agency after the Trump administration weakened enforcement and several rules, while Republicans warned the CFPB overstepped its authority previously under Democratic control.
Chopra said one area he would like to focus on if confirmed would be on the entry of large technology companies into financial services, and what it could mean for consumers' privacy.
He also said he would prioritize enforcing fair lending statutes and monitoring the student loan market, adding that it was important to pursue monetary penalties against firms that commit wrongdoing, both to repay harmed consumers and as a deterrent.
(Writing by Michelle Price; additional reporting by Katanga Johnson; Editing by Paul Simao)
