In summary
- SEC Chairman Gary Gensler has come under fire for allegedly hiring public officials based on political affiliations, which would be a violation of federal law.
- The allegations stem from a joint letter sent by the House Judiciary, Financial Services, and Oversight Committees, questioning the appointment of Dr. Haoxiang Zhu as SEC Director of Operations and Markets.
- Lawmakers allege that Dr. Zhu reassured Gensler about his political alignment, suggesting a possible violation of the Civil Service Reform Act of 1978, which prohibits discrimination in federal hiring based on political affiliation.
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has come under fire for allegedly hiring public officials based on political affiliations, which would be a violation of federal law.
The allegations come from a joint letter sent by the House Judiciary, Financial Services and Oversight Committees. While the allegations do not appear to align with the regulator’s crypto enforcement actions, they come at a time when firing Gensler has become one of Republican candidate Donald Trump’s campaign promises as he seeks reelection.
The letter, signed by Judiciary Committee Chairman Jim Jordan (R-OH), Financial Services Committee Chairman Patrick McHenry (R-NC), and Oversight and Accountability Committee Chairman James Comer (R-KY), questions the appointment of Dr. Haoxiang Zhu as SEC Director of Operations and Markets.
The lawmakers allege that Dr. Zhu reassured Gensler about his political alignment after a call about his potential employment. They cited emails made public during comment on the SEC rulemaking.
Zhu wrote: “I believe I am in the right place on the political spectrum and I am happy to provide all the necessary details to make you feel comfortable.” On November 19, 2021, Zhu was hired by the SEC.
“As this correspondence suggests, the SEC appears to be unlawfully considering an applicant’s political ideology when hiring bureaucrats, a conclusion reinforced by the SEC’s hiring of individuals from left-leaning organizations to senior SEC positions,” the lawmakers wrote.
The Committees argue that this exchange suggests a possible violation of the Civil Service Reform Act of 1978, which prohibits discrimination in federal hiring based on political affiliation.
This political climate puts Gensler at the center of two high-profile issues: ongoing regulatory disputes with the Cryptocurrency industry and internal controversies over the SEC’s hiring practices.
In light of these allegations, the Committees are conducting oversight to determine whether the SEC has complied with federal law in other personnel decisions.
Specifically, they are investigating whether political ideology has been a factor in hiring decisions under Gensler’s leadership.
The letter requests that Gensler provide documents and communications related to the hiring of directors, associate directors, and staff in the Chairman’s office since April 2021, as well as any materials related to the consideration of political affiliations during the hiring process. The SEC has until September 24, 2024 to comply with the request.
The Judiciary Committee, the Financial Services Committee, and the Oversight and Accountability Committee have jurisdiction over different aspects of this investigation, including civil liberties, SEC oversight, and federal civil service accountability.
This investigation comes at a time when, according to recent reports, Gensler’s tenure could be in jeopardy after the upcoming election.
Ripple CEO Brad Garlinghouse recently predicted that Gensler could leave the SEC regardless of the election outcome, hinting at the possibility of a leadership change at the agency.
Edited by Stacy Elliott.
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