SEC Under Pressure to Implement Agenda in 2022, While Democrats Control Congress

With Democrats at risk of losing their thin majorities in the House and Senate after November’s midterm elections, the coming months could be critical for Mr. Gensler, whom President Biden tapped last year. If Republicans win either chamber of Congress, they could move to slow Mr. Gensler’s progress.

In a speech Wednesday, Mr. Gensler said his priorities for this year are focused around increasing efficiency in the $100 trillion capital markets that the SEC oversees and on updating agency rules for modern technology. A key goal is to reduce the amount of money that companies raising capital and their investors spend on fees.

“We made good progress in 2021, finalizing a handful of rules and proposing many others,” he said in prepared remarks to the Exchequer Club of Washington, DC. “We have much more to come.”

The SEC has yet to issue formal proposals for the biggest policy changes the chairman has floated, including meatier disclosure requirements for public companies and a potential overhaul to stock-market plumbing.

A trading frenzy in GameStop Corp. and other meme stocks in January 2021 prompted congressional hearings and a lengthy report from the SEC division that oversees markets and broker-dealers. The record surge in initial public offerings and mergers by special-purpose acquisition companies, or SPACs, overwhelmed staff in the division that writes disclosure rules for companies.

One result is that the SEC has taken longer than Mr. Gensler originally expected to propose a rule requiring public companies to report more information about the risks they face from climate change. 

Federal law requires agencies to seek comments from the public and study a rule’s costs and benefits before finalizing major changes, a process that usually takes at least several months. That means 2022 will be a crucial year for Mr. Gensler to implement his agenda.

If Republicans gain control of the House or Senate next year, the committees that oversee the SEC would likely summon Mr. Gensler to testify more frequently at hearings on Capitol Hill. They could also threaten to cut the agency’s budget or forbid it from pursuing certain policies via amendments to must-pass pieces of legislation.

Experts say Mr. Gensler’s top priorities in the coming months will likely be to advance rules that Republicans have expressed the most concerns about. Aside from the climate-change initiative, these include forthcoming proposals to require more information from public companies about their workforces, and from asset managers about the criteria they use when touting the sustainability of their investment products.

With Congress, so far, unable to pass a bill President Biden has sought to directly address issues such as climate change, the SEC and other regulators have taken on an increasingly proactive role.

Mr. Gensler said Wednesday that the timing of agenda items is a question that’s “more about sequencing than prioritization.”

“The process is intentionally flexible,” he said. “It’s about getting proposals right, based upon the economic analysis and our legal authorities, and learning from public feedback.”

While shifting political winds may pose one risk to the SEC’s plans, legal scholars say there are also dangers in moving too hastily.

“The agency needs to think deeply and carefully…about adopting rules that will be upheld by increasingly conservative, textualist courts that are disinclined to accept muscular interpretations of agency authority,” said

Joseph Grundfest,

a Stanford Law School professor and former Democratic SEC commissioner.

The top Republicans on the House and Senate committees have already complained that the SEC is moving too fast. In a joint letter to Mr. Gensler on Jan. 10, they criticized the “unreasonably” short comment periods provided for several of the rules that the SEC has proposed, such as an effort to shore up some money-market mutual funds. The aim of the money-market rules are to prevent episodes that occurred during the past two recessions when the Federal Reserve was forced to backstop the funds after they were hit with a wave of redemption requests.

“The SEC should remedy this disturbing and unprecedented pattern—which contradicts executive orders from both Democratic and Republican administrations meant to encourage deliberative rulemakings—by extending the comment period of all proposed rulemakings that have been released during your time at the SEC,”

Rep. Patrick McHenry

(R., N.C.) and

Sen. Pat Toomey

(R., Pa.) wrote.

Write to Paul Kiernan at paul.kiernan@wsj.com