Courtesy of Pam Martens
Gary Gensler, SEC Chairman
The House Financial Services Committee will hold its third hearing today at noon on the GameStop and other meme stock trading fiascos of January. It will be the first time that the newly sworn in Chair of the SEC, Gary Gensler, gives testimony to Congress. Thus, the written statement that Gensler provided to the Committee has been eagerly awaited by the denizens (and charlatans) of Wall Street for insight into his plans for reining in market abuses and regulatory dodges.
While Gensler was just as ambiguous on most fronts in his statement for today’s hearing as he was in his testimony at his confirmation hearing, he did provide a strong hint that he may use the SEC’s authority to force the mega banks to accurately report the beneficial owners of stocks held under tricked-up derivative contracts.
The public learned from the implosion of the Archegos Capital Management family office hedge fund in late March that Archegos was the beneficial owner of an estimated $100 billion in stocks, for which it had provided just $10 billion in collateral. The banks had allowed Archegos to keep its identity hidden as the beneficial owner of the stocks because the banks were reporting those stocks as if the banks actually owned them on their publicly-disclosed 13F filings with the SEC.
Gensler wrote this in his statement for today’s hearing:
“Additionally, I wanted to mention briefly the events in late March related to the failure of the family office Archegos Capital Management and the significant losses incurred by several global financial institutions that provided prime brokerage services to Archegos. At the core of that story was Archegos’ use of total return swaps based on underlying stocks, and significant exposure that the prime brokers had to the family office. Under Dodd-Frank, Congress gave the SEC rulemaking authority to extend beneficial ownership reporting requirements to total return swaps and other security-based swaps. Among other things, I’ve asked staff to consider recommendations for the Commission about whether to include total return swaps and other security-based swaps under new disclosure requirements, and if so how.”
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