After five months on the job, the S.E.C. chair will speak before the Senate Banking Committee about crypto, climate, SPACs and more.
Gensler takes the hot seat
The S.E.C. chair Gary Gensler will testify before the Senate Banking Committee today, after five months on the job. Since his confirmation, his public statements have generated much debate, many headlines and more than a few market movements. This morning, based on his prepared remarks, he’ll make the case for additional resources to achieve a more expansive agenda than many of his predecessors at the commission.
Here’s what to expect on some hot-button issues:
Gensler wants to “freshen up” the rules. To promote efficiency and competition, he’s considering structural issues, like whether there is too much concentration among market makers, and conflicts of interest, like those arising from payment for order flow. Speeding up transaction settlements, which now take about two business days, is also a goal Gensler notes in his remarks, and one that Republican senators want him to pursue, a committee aide said.
When it comes to crypto, buyers beware. Gensler will say that the new digital currency markets resemble a time before securities laws: He wants more investor protection in crypto finance, issuance, trading and lending. Senator Elizabeth Warren, Democrat of Massachusetts, who has been outspoken about regulatory gaps in the crypto industry, will follow up on those concerns, an aide said. Senator Cynthia Lummis, Republican of Wyoming, will also press Gensler for regulation, but with an emphasis that reflects her support of the crypto industry. “We must have a balanced legal framework for digital assets that enables innovation and protects consumers,” she told DealBook in a statement.
More required disclosures on climate risk, human capital and cybersecurity are in the works. Perhaps sensing the resistance he’ll face on this issue, Gensler will note that “these proposals will be informed by economic analysis and will be put out to public comment, so that we can have robust public discussion.” Ranking committee member Patrick Toomey of Pennsylvania has pushed back on added disclosures on environmental, social and governance issues before, and he’ll likely renew these criticisms at the hearing.
Other priorities include greater transparency on SPACs, China and insider info. The surge in special purpose acquisition companies that allow businesses to go public with fewer rules than traditional I.P.O.s is cause for concern, Gensler will say, due to conflicts of interest he believes are “inherent” in the structures. He also wants the risks of Chinese companies that list on U.S. exchanges to be made more apparent. And Gensler will discuss efforts to “modernize” a rule known as 10b5-1 on executive stock sales, which helps insulate insiders from accusations of trading on nonpublic information.
It’s a lot. At the hearing, Gensler will get guidance from senators on what they think his priorities should be. How far he can advance his plans could depend, in part, on whether lawmakers give him more authority and resources. Like Gensler, committee chair Sherrod Brown of Ohio is keen on added transparency and stricter investor protections. Brown will open the hearing by saying that “the disconnect between the stock market and most Americans’ lives has never been more painfully clear,” and that, whatever the economic circumstances, “the hedge funds, the SPAC sponsors, the big banks, the brokers — the big guys seem to do just fine.”
HERE’S WHAT’S HAPPENING
Inflation may finally be slowing. Economists expect government data released today to show that prices rose last month at their slowest pace since February. However, a survey yesterday showed that consumer expectations for inflation are higher than they have been in more than seven years.
Apple issues an emergency patch to fix a flaw that gave hackers “zero-click” access to devices. The nonprofit watchdog Citizen Lab identified the flaw, which can be fixed by following these steps. It had been exploited by an Israeli spyware firm and signaled a serious escalation in the cybersecurity arms race.
Intuit is buying Mailchimp for about $12 billion. The deal is Intuit’s largest to date and a notable expansion for a company largely known for its finance software. Intuit wants to combine the email marketing services offered by Mailchimp with QuickBooks to help small businesses manage their customers as well as their accounts.
President Biden makes more nominations at key agencies. Alvaro Bedoya, a privacy expert and Big Tech critic, is the president’s nominee for a seat at the F.T.C., and Rostin Behnam, the acting chair of the C.F.T.C., who has backed efforts to mitigate climate risk, was nominated to lead the agency permanently. Meanwhile, the two men behind the Dodd-Frank act, which tightened financial regulation after the 2008 crisis, urged the renomination of Fed chairman Jay Powell, whose term expires in February.
Is uranium the new GameStop? The price of the radioactive metal has risen nearly 40 percent in the past month, with users of the influential Reddit investment board WallStreetBets talking up the shares of uranium mining companies. The switch to greener technologies could lift demand for the fuel for nuclear reactors, but some worry a new exchange-traded fund is inflating another market bubble.
Walmart gets pulled into a crypto hoax
Yesterday, a phony news release purporting to come from the retail giant Walmart announced a partnership with the digital currency Litecoin. This briefly drove up crypto prices and showed how vulnerable markets are to fake news in the social media age. The hoax is likely to bolster calls for greater regulation of the cryptocurrency industry, in which trading on largely unregulated markets can be susceptible to misinformation.
What happened: The market-moving event began with a release published on GlobeNewswire that revealed signs of inauthenticity upon close inspection but duped several news outlets, including Reuters and Bloomberg, which published articles based on it.
Litecoin quickly shot up in value, gaining 30 percent in a matter of minutes. Walmart refuted the release after it heard from reporters trying to confirm the announcement. Litecoin gave back most of its gains within an hour of the release, making the episode look like a classic pump-and-dump scheme, with a crypto twist.
Adding fuel to the initial news reports, the Litecoin Foundation retweeted the release on its official Twitter account before deleting it, saying that the retweet was a mistake by a social media manager. GlobeNewswire said the “illegitimate press release” was submitted by a “fraudulent user account” and that it was adding “enhanced authentication steps to prevent this isolated incident from occurring in the future.”
Securities lawyers predict an S.E.C. investigation and possible charges against the fraudsters, whose identity is unknown. “It is a misrepresentation involving a public issuer,” said Andrew Calamari, a lawyer with Finn Dixon & Herling, formerly at the S.E.C. “There is no question the S.E.C. has jurisdiction.”
A.O.C. spells out a message
Representative Alexandria Ocasio-Cortez of New York attended the Met Gala last night, a $300,000-a-table occasion packed with celebrities and fashion’s biggest names. In her first appearance at the event, the progressive Democrat wore a dress emblazoned with a clear message: “Tax the Rich.”
“The medium is the message,” Ocasio-Cortez wrote on social media. House Democrats yesterday presented a proposal to raise income taxes on the wealthiest individuals. However, the plan stopped short of measures that would target wealth and inheritances directly, leaving the largest fortunes alone.
(For sartorially conscious readers, Ocasio-Cortez said she borrowed the gown from New York-based designer Aurora James and her brand Brother Vellies. James, who attended the gala with Ocasio-Cortez, founded a campaign encouraging the world’s biggest retailers to dedicate 15 percent of their shelf space to products from Black-owned businesses.)
Asian Americans in finance face a ‘bamboo ceiling’
Asian American investment professionals are getting stuck in middle management. That’s one of the conclusions from a series of interviews and a survey of 100 finance professionals in the U.S. published today by the Association of Asian Americans in Investment Management. The Times’s Lananh Nguyen got a first look at the report for DealBook.
More than 90 percent of respondents to the poll said they had reached a “bamboo ceiling” that blocked them from climbing the corporate ladder, while around two-thirds said Asian Americans and Pacific Islanders were stereotyped as lacking leadership skills.
At investment firms, Asian American and Pacific Islanders “fill middle management ranks, but their percentages plummet in senior management and C-suites,” AAAIM wrote in the report. “Our research shows that this bias and these racial assumptions are a deep-seated obstacle for some of the industry’s most accomplished professionals.”
Respondents said they were often tapped as technical experts and benefited from the perception that they are good workers. But their advancement stalled as they sought more senior roles that emphasize networking and communication skills.
One senior executive said colleagues often mistook her for other women of Asian descent and treated them as interchangeable. Another investment manager said she received the nickname “Stephanie 2.0,” because white male co-workers preferred her over another Asian American woman with the same name who had worked there before.
“There were tons of personal comments and stories” about discrimination and bias at work, said Jim Park, the head of AAAIM, in an interview. “We’re at a moment in time in our community where people are beginning to say, ‘You know what? We do need to start to speak up.’”
THE SPEED READ
Deals
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Forge Global, a trading platform for private firms’ shares, is planning a $2 billion I.P.O. via a SPAC merger. (WSJ)
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Steven Cohen, the billionaire investor, is backing a new quantitative-trading firm specializing in crypto assets. (WSJ)
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Fox is buying the online tabloid TMZ from WarnerMedia in a deal reportedly valued at around $50 million. (NYT)
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SoftBank is launching its second Latin American fund, with a $3 billion commitment. (TechCrunch)
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The British government has taken stakes in more than 150 start-ups as part of a pandemic support plan. (FT)
Policy
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Eric Adams, the Democratic mayoral nominee for New York, pledged that if he wins the November election, the city will “no longer be anti-business.” (NYT)
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South Korea’s antitrust regulator fined Google $177 million for blocking rivals from modifying its Android operating system. (Bloomberg)
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Six countries are in a bidding war to house the E.U.’s new anti-money laundering agency. (Politico)
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The S.E.C. and three companies owned by exiled Chinese billionaire Guo Wengui have reached a $539 million settlement. (CNBC)
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Russian president Vladimir Putin is self-isolating after people in his inner circle tested positive for Covid-19. (NYT)
Best of the rest
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Millions of Facebook’s V.I.P. users are reportedly exempted from the social network’s rules. (WSJ)
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“We Are Creeping Towards a Continuous Working Week.” (FT Opinion)
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The first criminal trial in the Varsity Blues college admissions case is underway, with a former Wynn executive and a private equity investor among the accused. (WSJ)
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“Bitcoin Cosplay is Getting Real.” (Times Opinion)
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A start-up with $15 million in funding is trying to resurrect the woolly mammoth. (NYT)
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