OPINION:
Today’s Securities and Exchange Commission is emblematic of everything that is wrong in Washington, a city an increasing number of Americans refer to as “the Swamp.”
Unaccountable, constantly overstepping and arrogant, the SEC bumbles from one adventurous imposition to another, often leaving wreckage in its wake. Frequently overturned by federal courts, the SEC under Chairman Gary Gensler remains undeterred in its seeming mission to expand its bureaucratic fiefdom at the expense of the American people. Underpinning these efforts is a litany of questionable practices, from deceiving federal courts in a relentless persecution of the emerging cryptocurrency industry to “gagging” those that settle with the commission.
The SEC is an “independent agency,” which is Washington-speak for devoid of oversight and not even subject to the separation of powers.
Nominally part of the executive branch, in practice, the SEC exists in all three branches of government. Imbibed with the expansive rulemaking authority of a legislature, the agency’s ambitious regulatory agenda under Mr. Gensler stretches the SEC’s reach far beyond financial markets into extraneous areas such as climate change.
The SEC aggressively practices the enforcement powers of the executive branch but crucially does not report to the Justice Department or even the president of the United States. Worse, the SEC also hears many of the cases that it prosecutes, employing administrative law judges like a modern-day Star Chamber. This constitutionally dubious yet convenient arrangement is pending before the Supreme Court. An unholy alliance of legislative, executive and judicial power is emboldening the SEC to commit abuse after abuse.
Like the fictional prosecutor Chuck Rhoades in the TV show “Billions,” Mr. Gensler’s aggressive prosecutions frequently appear to run afoul of not only ethics but also against the law itself. Take, for example, the SEC’s DEBT Box case. In Mr. Gensler’s zeal to stamp out the emerging cryptocurrency industry, a judge found that SEC attorneys misrepresented evidence to obtain restraining orders, freezing the startup’s assets and putting them in receivership.
Luckily, their deception was foiled. After being caught, the SEC attorneys lied more to cover its original lies. All was uncovered, and this embarrassing episode ended with an admonishment from presiding Chief Judge Robert Shelby, who called it a “gross abuse of power.” After dismissing his case, the court imposed sanctions on the SEC and ordered the agency to pay attorney fees. The offending attorneys eventually resigned, scapegoats for Mr. Gensler’s reckless ambition.
For companies unwilling to endure the DEBT Box ordeal, settling with the SEC may seem attractive. But there’s a catch: Those who settle are contractually barred from speaking about the actions brought against them. This abuse, unbelievable in America, is known as the SEC’s “gag rule.”
It certainly raises the question: What is the SEC so afraid of? If the SEC were truly guided by justice and played by the rules to put the bad guys in jail or out of business, one would expect it to confidently rest on its laurels. Instead, it’s clear the SEC uses the gag rule to paper over prosecutorial overreach, hide questionable behavior, and even pursue political enemies of the Biden administration.
Famously, the SEC gagged Elon Musk after its wild and speculative attempt to nab Mr. Musk for trying to rip off Tesla investors. Never mind that Tesla is one of the most successful stocks in America, and its value has made Mr. Musk one of the richest men in the world.
Rather than pursue a long and costly court fight, Mr. Musk settled. And was gagged. Never the quitter, the X, Tesla and SpaceX head has since tried to lift the gag order but has so far been unsuccessful. If even the pugnacious Elon Musk can be silenced, it’s chilling to think what Mr. Gensler’s cronies can do to the rest of us.
The SEC must end these practices and restore confidence in its ability to police the markets. For too long, the SEC has been playing judge, jury and executioner of the financial world. My organization, the Financial Fairness Alliance, is dedicated to educating the public about what the government is really doing.
Through research, outreach and litigation, if necessary, we aim to inform citizens and elected officials on what public servants like Gary Gensler are doing with their tax dollars and liberties. Only a well-informed public can fix the overreach at the SEC.
• Justin Bis is the director of the Financial Fairness Alliance. He has held senior government roles, including at the White House and the Department of Energy, where he assisted with recruiting top-level governmental leaders responsible for regulating the U.S. financial and energy markets.
Please read our comment policy before commenting.