US lawmakers press Wall St regulator over coming climate rule

© Reuters. FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo

By Douglas Gillison

(Reuters) - Republican lawmakers on Wednesday prodded Wall Street's top regulator to justify his agency's efforts to regulate companies' climate disclosures and criticized the U.S. Securities and Exchange Commission for what they said was hasty rulemaking.

In an appearance before a House of Representatives panel overseeing federal spending, SEC Chair Gary Gensler defended the agency's request for a 12% budget increase to respond to burgeoning growth in financial markets and the mounting risk of misconduct.

Gensler said that, with the frequency of stock trades and volume of privately managed assets soaring, "we must be able to meet the match of bad actors." He also described cryptocurrency markets as a "wild West" that was "rife with non-compliance."

It was his first testimony since Republicans took control of the lower chamber of Congress in November, bringing some of his staunchest critics into the majority.

Conservative lawmakers and commentators have cast Gensler as an interventionist regulator saddling markets with left-leaning social policies unrelated to making money.

The SEC last year proposed requiring publicly traded companies to disclose climate-related financial impacts, including physical risks from weather events, as well as carbon emissions that they, their energy providers and their suppliers produce. The agency cited widespread demand and emerging consensus among international regulators.

Industry fiercely opposed aspects of the rule, including farmers who fear they may have to report emissions to customers covered by the rule. Republican lawmakers also repeatedly disputed the securities regulator's legal authority to mandate climate disclosures.

"Why is the SEC getting involved in emissions with this climate change?" asked Alabama Republican Jerry Carl. "I'm not a fan of it."

Gensler said investors by and large now demanded and many companies were providing climate disclosures.

"Our role is to ensure that those disclosures... that investors are getting are not misleading," he said.

Carl cited Gensler's past remarks that the definition of so-called Scope III emissions described in the 2022 proposal, which would govern carbon generated in companies' supply chains, were "not well developed," drawing speculation that the Commission may water down or entirely eliminate that part of proposal as some have called for in industries such as retail and aerospace.

Gensler said he did not want to "prejudge" the rulemaking process. "It's trying to bring some consistency to those disclosures," he said.

Gensler portrayed the $2.4 billion request for fiscal 2024 as marking a continued recovery from decline. Under the administration of former President Donald Trump, he said, staffing levels fell 4%. With about 5,300 positions currently, agency staffing is only 3% larger than it was before Trump took office, according to Gensler.

Lawmakers questioned him about conclusions of a recent internal watchdog report that staff attrition and a heavy workload were endangering the quality of rulemaking.

Gensler said turnover was in part driven by the desirability of SEC employees on a competitive labor market.

"We run about 6% attrition right now, which is consistent with other agencies," he said.

The final budget will be determined by a narrowly divided Congress now deadlocked over raising federal borrowing limits. The SEC routinely tells lawmakers its budget is "deficit neutral" since its spending is offset by transaction fees assessed from the markets.

(This story has been refiled to say Gensler, not Gensler's, in paragraph 3)