House Republicans Accuse SEC of ‘Hypocrisy’ and Violating Record-Keeping and Transparency Laws

Gary Gensler, Chair of the U.S. Securities and Exchange Commission, testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC in Washington, on Sept. 14, 2021. Evelyn Hockstein-Pool/Getty Images

House Republicans accused Securities and Exchange Commission Chairman Gary Gensler and his agency of hypocritically failing to comply with federal record-keeping and transparency laws that they impose on others.

A letter signed by Republican congressmen Jim Jordan of Ohio, Patrick Henry of North Carolina, James Comer of Kentucky, and Tom Emmer of Minnesota, was sent to the SEC chair on Nov. 2, accusing him of “skirting federal transparency and records laws” by failing to collect and provide records of official business conducted on social media and communications platforms such as Signal, Facebook’s WhatsApp, Microsoft’s Teams, and Zoom.

The representatives currently serve as ranking members of the House Financial Services, Judiciary, and Oversight committees.

“Recent reports suggest the SEC, under your leadership, is … failing to comply with federal record-keeping statutes,” wrote the lawmakers.

“In particular, evidence uncovered during Freedom of Information Act (FOIA) litigation suggests the SEC is failing to identify and produce records of official business conducted on non-email or ‘off-channel’ platforms, such as Signal, WhatsApp, Teams, and Zoom, regardless of whether the communication took place on a personal or business device.”

A Beltway Lawyer Exposes Hypocrisy Among the Enforcers

The letter referred to an Oct. 10 opinion column in The Wall Street Journal by Washington attorney Chris Horner, alleging that SEC staffers were extensively using unauthorized public messaging platforms rather than official government email for official correspondences.

“It seems notable that so many government officials have personal accounts on the same encrypted messaging app as others in their agency,” wrote Horner.

“It isn’t difficult to identify officials’ personal email accounts and cellphone numbers, the latter of which reveals if they have accounts on apps such as Signal or WhatsApp. From this I know that at least a couple of Biden White House ‘climate’ officials, four current SEC appointees, and one recently departed SEC commissioner have personal Signal accounts,” he concluded.

Gensler and the SEC Ironically Caught Breaking Their Own Rules

The ranking house members accused the SEC and the Biden administration of hypocrisy, while the agency acts as the top federal regulator for U.S. financial markets.

“While the SEC is failing to comply with federal transparency and record-keeping laws, the SEC is aggressively enforcing record-keeping laws on private businesses,” noted the congressmen, after Gensler’s agency recently charged 16 major banking firms with $1.1 billion in fines for failing to maintain the same electronic communications standards for which they themselves failed to comply.

They demanded in the letter that “the SEC must practice the transparency and accountability that it preaches.”

The lawmakers noted that a recent SEC press release announced penalties against private-sector businesses, emphasizing the importance of transparency.

The SEC’s September press release against the financial firms stated: “Finance, ultimately, depends on trust. By failing to honor their record-keeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.”

“The SEC’s Director of Enforcement similarly intoned that record-keeping requirements are ’sacrosanct,'” the congressmen commented.

The House Republicans ordered Gensler to respond to their inquiry no later than Nov. 15, in order to certify if the SEC is following it own record-keeping laws.

They also requested that Gensler and his staff immediately stop using unauthorized communications software for official business, if the allegations were true.

Gensler was further asked to define the SEC’s definition of “off-channel communications” for purposes of responding to FOIA requests and other federal transparency requirements.

“Chair Gensler’s regime at the Securities and Exchange Commission has been characterized by regulatory hypocrisy and inconsistency. This is no different. The American people deserve transparency from their regulators, but time and time again, Chair Gensler refuses to practice what he preaches,” Tom Emmer (R-Minn.), ranking member of the House Financial Services Subcommittee on Oversight and Investigations, wrote in the letter.

“It is inappropriate for SEC to target the private sector for failing to comply with record-keeping laws when the SEC itself is in violation of similar transparency laws. I’m proud to join Ranking Member Jordan, Ranking Member Comer, and Ranking Member McHenry in demanding accountability from Chair Gensler and the Securities and Exchange Commission,” Emmer said.