Congress Considers Subpoena against SEC

Congress Considers Subpoena against SEC

Time Stamp: September 27, 2023 2:46 PM
Source Node: 2295209

The tension between the US House Financial Services
Committee and the Securities and Exchange Commission (SEC) escalated today
(Wednesday) after the Committee Chair Representative Patrick McHenry suggested
that he may use a subpoena against the commission to acquire critical documents
about former FTX CEO Sam Bankman-Fried.

McHenry accused Chairman Gary Gensler of attempting to
stifle the digital asset ecosystem while failing to maintain transparency in
the SEC’s dealings with Congress. This clash dates back to February when the
committee, under McHenry’s leadership, initially requested documents related to
communications between the SEC’s staff and the Justice Department concerning
the charges against Bankman-Fried.

“Your lack of responsiveness to this Committee’s
legitimate oversight continues to be unacceptable,” McHenry said. “In
February, this committee made multiple requests for documents to the SEC. Yet,
seven months later, the committee has not received a single non-public document
that was not part of a FOIA production. ”

The committee had previously made multiple requests for
documents, particularly concerning the timing of SBF’s arrest, considering his
scheduled appearance before Congress. However, these requests have yielded no
non-public documents besides those obtained through the Freedom of Information
Act (FOIA).

McHenry renewed these requests in April and May,
dissatisfied with the SEC’s provision of only publicly available information.
Thus, McHenry conveyed his impatience, emphasizing that the SEC is not above
the law and should be responsive to congressional oversight like other
financial regulators.

He added that he did not wish to be the first Chairman of
the Financial Services Committee to issue a subpoena to the SEC, urging Gensler
to consider the long-lasting consequences of his actions on the agency’s
reputation.

Gensler Defends SEC’s Actions

In response, Gensler defended the SEC’s regulatory actions, saying the agency’s responsibility to protect investors and ensure
transparent disclosures. He emphasized the importance of compliance

to
safeguard crypto platform users and investors, calling for proper protection of
customer funds and separating conflicting lines of business.

Last year, the SEC formally charged Bankman-Fried, the CEO
and co-founder of FTX, with orchestrating a scheme to defraud investors.
Bankman-Fried, once celebrated for his role in the crypto world, is facing
allegations of concealing the diversion of FTX customers’ funds through his
crypto hedge fund, Alameda Research.

But McHenry has pointed out that the SEC’s current approach
to rulemaking potentially threatens the integrity of financial markets and
poses risks to investors. McHenry stressed the need for a comprehensive
economic analysis of proposed rules and their combined impact, accusing the
Commission of failing to carry out such assessments adequately.

Additionally, McHenry criticized the SEC for not
prioritizing capital formation, noting a glaring absence of initiatives aimed
at improving access to capital or enhancing market competitiveness within the
agency’s rulemaking agenda.

The tension between the US House Financial Services
Committee and the Securities and Exchange Commission (SEC) escalated today
(Wednesday) after the Committee Chair Representative Patrick McHenry suggested
that he may use a subpoena against the commission to acquire critical documents
about former FTX CEO Sam Bankman-Fried.

McHenry accused Chairman Gary Gensler of attempting to
stifle the digital asset ecosystem while failing to maintain transparency in
the SEC’s dealings with Congress. This clash dates back to February when the
committee, under McHenry’s leadership, initially requested documents related to
communications between the SEC’s staff and the Justice Department concerning
the charges against Bankman-Fried.

“Your lack of responsiveness to this Committee’s
legitimate oversight continues to be unacceptable,” McHenry said. “In
February, this committee made multiple requests for documents to the SEC. Yet,
seven months later, the committee has not received a single non-public document
that was not part of a FOIA production. ”

The committee had previously made multiple requests for
documents, particularly concerning the timing of SBF’s arrest, considering his
scheduled appearance before Congress. However, these requests have yielded no
non-public documents besides those obtained through the Freedom of Information
Act (FOIA).

McHenry renewed these requests in April and May,
dissatisfied with the SEC’s provision of only publicly available information.
Thus, McHenry conveyed his impatience, emphasizing that the SEC is not above
the law and should be responsive to congressional oversight like other
financial regulators.

He added that he did not wish to be the first Chairman of
the Financial Services Committee to issue a subpoena to the SEC, urging Gensler
to consider the long-lasting consequences of his actions on the agency’s
reputation.

Gensler Defends SEC’s Actions

In response, Gensler defended the SEC’s regulatory actions, saying the agency’s responsibility to protect investors and ensure
transparent disclosures. He emphasized the importance of compliance

to
safeguard crypto platform users and investors, calling for proper protection of
customer funds and separating conflicting lines of business.

Last year, the SEC formally charged Bankman-Fried, the CEO
and co-founder of FTX, with orchestrating a scheme to defraud investors.
Bankman-Fried, once celebrated for his role in the crypto world, is facing
allegations of concealing the diversion of FTX customers’ funds through his
crypto hedge fund, Alameda Research.

But McHenry has pointed out that the SEC’s current approach
to rulemaking potentially threatens the integrity of financial markets and
poses risks to investors. McHenry stressed the need for a comprehensive
economic analysis of proposed rules and their combined impact, accusing the
Commission of failing to carry out such assessments adequately.

Additionally, McHenry criticized the SEC for not
prioritizing capital formation, noting a glaring absence of initiatives aimed
at improving access to capital or enhancing market competitiveness within the
agency’s rulemaking agenda.

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