TLDR
- GOP lawmakers accuse SEC Chair Gary Gensler of politically-driven hiring
- Email correspondence suggests political affiliation influenced a senior hire
- Republicans claim this violates the Civil Service Reform Act
- Gensler asked to provide hiring documents by September 24
- SEC’s crypto enforcement actions have increased under Gensler’s leadership
U.S. House Republicans have launched an inquiry into the Securities and Exchange Commission’s (SEC) hiring practices under the leadership of Chair Gary Gensler.
The probe centers on allegations that the agency may be considering political ideology when filling senior positions, potentially violating federal law.
On September 10, Republican lawmakers Jim Jordan, Patrick McHenry, and James Comer sent a letter to Gensler expressing their concerns.
The letter claims that email correspondence made public in an SEC rulemaking comment suggests that Gensler’s decision to hire Dr. Haoxiang Zhu as the agency’s director of trading and markets may have been influenced by political affiliation.
According to the lawmakers, emails from May 2021 show that Zhu told Gensler he was “in the right place on the political spectrum.” Zhu was subsequently hired for the position on November 19, 2021, approximately six months after this exchange.
The Republican representatives argue that if these allegations are true, the SEC would be in violation of the Civil Service Reform Act. This act prohibits federal agencies from basing hiring decisions on political affiliation. The lawmakers contend that such practices could undermine the SEC’s impartiality.
In their letter, the GOP members requested that Gensler provide all documents and communications related to the SEC’s hiring and staffing decisions for director, associate director, and Gensler staffer roles dating back to April 17, 2021.
They also asked for any information regarding the SEC’s evaluation of applicants’ political affiliations or ideologies.
The lawmakers set a deadline of September 24 at 5:00 pm for Gensler to produce the requested information to the House Judiciary Committee, which is chaired by Jim Jordan.
This inquiry comes amidst a period of increased regulatory activity by the SEC, particularly in the cryptocurrency sector.
Under Gensler’s leadership, the agency’s enforcement actions against crypto firms have reached a 10-year high in 2023, with 46 actions recorded. This represents a doubling of enforcement actions compared to 2021.
Gensler, who was nominated by President Joe Biden, has faced criticism from some quarters for his approach to regulating the crypto industry.
Former President Donald Trump, who is running for re-election, has stated that he would remove Gensler from his position on his first day in office if elected in November.
It is worth noting that it is common practice for SEC chairs to resign when there is a change in the White House administration during their term. However, the current inquiry focuses specifically on hiring practices rather than Gensler’s overall leadership or regulatory approach.
The SEC has not yet publicly responded to the request for information or the allegations made in the letter. As this situation develops, it may have implications for the agency’s operations and public perception.
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