US Lawmakers to Investigate SEC for Alleged Hiring Bias

The US House of Representatives is set to investigate the SEC for potentially politically motivated hiring practices. This is outlined in a letter to the agency’s head, Gary Gensler.

The joint investigation is spearheaded by Republican chairmen Jim Jordan of the Judiciary Committee, Patrick McHenry of the Financial Services Committee, and James Comer of the Oversight and Accountability Committee.

The inquiry aims to determine whether the SEC violated federal law by considering political preferences when hiring senior officials, potentially compromising the Commission’s impartiality and undermining trust in it.

The investigation was prompted by the appointment of Dr. Haoxiang Zhu as Director of Trading and Markets in November 2021.

Before his appointment, the official reportedly assured Gensler of his “political compatibility.” After discussing the role with the SEC head, he allegedly stated that he was “in the right place on the political spectrum.”

The letter to the SEC chairman emphasizes that the alleged violations are not isolated incidents but suggest a broader pattern.

It notes that other senior officials at the agency have backgrounds in left-leaning organizations, including the American Federation of Labor and Congress of Industrial Organizations, the Consumer Federation of America, and the Washington Center for Equitable Growth.

Lawmakers have mandated the SEC to provide all documents and communications related to the hiring, firing, or transfer of department heads at the agency since April 2021 by September 24. They warned that failure to comply could lead to further actions, including subpoenas.

Besides hiring practices, the letter also questions whether Gensler’s political views have influenced the agency’s regulatory agenda under his leadership.

In July, the bitcoin exchange Coinbase filed a motion to compel the SEC and Gensler to produce emails and internal documents underlying its litigation with the agency.

This followed accusations by the platform against the SEC and the FDIC for failing to comply with the Freedom of Information Act. Such requests allow the public to demand documents from any federal service.

In March, several US House members demanded the SEC clarify the activities of Prometheum. The lawmakers, mostly Republicans, stated in the document that ETH is not a security, making its use in the organization’s operations illegal.

In 2023, American politicians and crypto industry representatives repeatedly criticized the SEC head and the agency as a whole. In January, Grayscale Investments CEO Michael Sonnenshein accused the Commission of delaying industry regulation.

In April, SkyBridge Capital’s CEO criticized Gensler for the “mess” at the SEC. That same month, Republicans in Congress reproached the official for his unclear stance on cryptocurrencies during hearings.

In June, lawmakers introduced a bill to dismiss Gensler. In August, following Grayscale’s court victory against the SEC, the proposal to replace the agency’s chairman resurfaced.

Fox Business journalist Eleanor Terrett explained the regulator’s delay in approving spot Ethereum ETFs as pressure on the SEC head from Senator Elizabeth Warren, a Democrat.