Lawmakers to probe SEC over suspected political favoritism in staffing

Lawmakers have launched a joint investigation into the Securities and Exchange Commission (SEC), raising concerns that the agency may have engaged in politically motivated hiring practices, according to a Sept. 11 letter addressed to SEC Chairman Gary Gensler.

The joint letter, signed by Judiciary Committee Chairman Jim Jordan (R-Ohio), Financial Services Committee Chairman Patrick McHenry (R-N.C.), and Oversight and Accountability Committee Chairman James Comer (R-Ky.), outlined specific concerns over political hiring within the SEC.

The probe seeks to determine whether the SEC violated federal law by considering political affiliations in its hiring of senior employees, potentially compromising the agency’s impartiality.

Politically motivated hiring

Lawmakers cited evidence suggesting that political considerations influenced the hiring of senior SEC staff under Gensler’s leadership. The letter specifically pointed to Dr. Haoxiang Zhu’s hiring as Director of Trading and Markets in November 2021.

In an email exchange prior to his appointment, Zhu reportedly assured Gensler of his political compatibility, writing in May 2021, “I believe I’m in the right place on the political spectrum,” following a discussion with the SEC chair regarding the role.

The lawmakers wrote:

“This email correspondence indicates that the SEC may have unlawfully considered an applicant’s political ideology when hiring.”

The congressional committees’ letter emphasized that the alleged violations are not limited to one instance and highlighted a broader pattern.

It added that several senior SEC hires have reportedly come from left-leaning organizations, including the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the Consumer Federation of America, and the Washington Center for Equitable Growth.

According to the lawmakers, this trend suggests a deliberate effort to fill senior positions with individuals aligned with specific political ideologies, raising concerns about the agency’s impartiality.

The Committees on the Judiciary, Financial Services, and Oversight and Accountability have ordered the SEC to produce all documents and communications related to the hiring, termination, or transfer of senior staff within the agency since April 2021.

Regulatory agenda

In addition to hiring practices, the letter also questioned whether political ideologies have influenced the SEC’s regulatory agenda under Gensler’s leadership.

Republican lawmakers have frequently criticized the SEC for its aggressive stance on issues such as climate change disclosures and cryptocurrency regulation, which they argue reflects a partisan agenda rather than an impartial interpretation of securities law.

The oversight committees have given the SEC until Sept.24 to comply with the document requests. The lawmakers warned that failure to comply could lead to further action, potentially including subpoenas.

Judiciary Committee Chairman Jim Jordan (R-Ohio) said:

“This is about ensuring that the SEC remains an impartial regulator, free from political influence. If political biases are influencing who gets hired, it undermines the public’s trust in the SEC’s ability to fairly enforce securities laws.”

The SEC has not yet responded to the letter or addressed the specific allegations related to political hiring. However, the agency is expected to face increasing pressure as the committees’ investigation continues.

The probe comes at a critical time for the SEC, which has been involved in several high-profile regulatory battles, including its enforcement actions against major crypto exchanges and its ongoing efforts to impose new disclosure requirements on publicly traded companies.

Critics have argued that the agency’s actions under Gensler reflect partisan priorities rather than neutral enforcement of the law, leading many to call for leadership changes at the regulator.

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