The Trend
Surging growth in IPOs and SPACs, as well as challenges associated with regulating cryptocurrencies, fintech and private equity will prove too much for an underfunded — and understaffed — SEC to police.
The Driver
SEC Chairman Gary Gensler told members of the House Appropriations Committee in recent testimony that while the capital markets have grown, "the SEC has not grown to meet the needs of the 2020s." The agency not only needs more funds, but more people, Gensler said.
The SEC is requesting $1.993 billion for FY 2022 so that it can add 65 positions — including nine examiners, nine new positions in the Division of Enforcement, and five new positions to bolster the agency's data analytics capabilities.
Gensler pushed for more resources so that the agency can police these market developments:
- A "once-in-a-generation wave" of traditional initial public offerings and "an unprecedented surge" in special-purpose acquisition companies, or SPACs;
- "Significant growth" in the number of private funds, particularly private equity and venture capital funds;
- The "highly volatile and speculative asset class of crypto tokens"; and
- Fintech startups, which "raise a variety of policy questions around gamification, behavioral prompts, the use of data analytics."
We're interested to hear from you. How do you see these trends reshaping the advisory business? Let me know what trends you're spotting this week at [email protected].
The Buzz:
Jim Lundy, partner, Faegre Drinker in Chicago
Chair Gensler has one of the deepest and most sophisticated regulatory and enforcement backgrounds of all of the SEC chairs. His testimony regarding highlighting 5 key capital market trends, and in particular IPOs and SPACs, reflects that. While his statement focuses on possible proactive regulatory measures such as rulemaking, he does also discuss focusing the Division of Enforcement's efforts in this area. Thus, while Chair Gensler's regulatory and rulemaking initiatives may be forward looking, we should expect enforcement initiatives as well to address what he may have inherited regarding the booming IPO and SPAC marketplace.
