GS Goldman Sachs Group Inc

By Andrew Ackerman and Dave Michaels 

WASHINGTON -- President-elect Joe Biden is expected to choose Gary Gensler, a former financial regulator and Goldman Sachs Group Inc. executive, to head the Securities and Exchange Commission, according to people familiar with the decision.

Mr. Gensler's nomination would please liberal Democrats who cheered the former regulator's tough approach to rule-making during the Obama administration, when he spearheaded the overhaul of derivatives markets mandated by the 2010 Dodd-Frank Act and oversaw enforcement actions against investment banks accused of manipulating benchmark interest rates.

The choice of Mr. Gensler, who declined to comment, wasn't final and could still change, the people said.

As head of the Commodity Futures Trading Commission from 2009 to 2014, Mr. Gensler developed a reputation among his colleagues for bare-knuckle tactics as he drove to create a regulatory framework for derivatives, a multi-trillion dollar market that had largely been free from federal oversight. By the time he left the commission, the rule set was largely complete, years before other regulators wrapped up their postcrisis work.

It was a surprising turn for the former Goldman executive who had previously resisted calls for additional derivatives regulation when he served in the Treasury Department under President Clinton. The decision not to tightly regulate derivatives in the 1990s has been blamed for contributing to the financial crisis a decade later.

Mr. Gensler was tapped to lead the CFTC in 2009, as the agency's mission was expanding to address risks to financial stability posed by derivatives, financial instruments including options and futures that are derived from other assets. In that role, Mr. Gensler drew the ire of Wall Street banks as he implemented Dodd Frank.

"He was terrifically effective at the CFTC, he knows the markets as well as anyone on Wall Street, he's a smart and tough regulator who knows how to get things done, and he cares about investor protection," said Barbara Roper, director of investor protection at the Consumer Federation of America.

Ms. Roper and other progressive groups are hoping the SEC under Mr. Biden will move swiftly to undo policy changes implemented by recently departed Chairman Jay Clayton. Those include curbs on shareholders' ability to propose resolutions at company proxy meetings and efforts to make it easier for private companies to raise capital without registering with the SEC.

Other priorities that a Democratic-led SEC are expected to consider include requiring companies to disclose more information about risks related to climate change and about workforce diversity and political contributions.

"We need a new SEC chair who will put this climate crisis at the top of the agency's agenda," Sen. Elizabeth Warren (D., Mass.) said during a hearing late last year. She criticized the agency under Mr. Clayton for not mandating that companies disclose aspects of their business that could be affected by climate change or governments efforts to curb it.

The decision to nominate Mr. Gensler was reported earlier by Reuters.

Mr. Gensler occasionally came under criticism for his management of the CFTC, including how his agency oversaw MF Global Inc., the brokerage firm that imploded in 2013 after huge bets it made on European bonds that went south. The CFTC in 2013 sued MF Global and its former chief executive, Jon Corzine, for improperly transferring some customer funds to banks and clearinghouses as it tried to fill margin calls. Mr. Corzine settled the claims in 2017 by paying a $5 million fine.

Mr. Gensler recused himself from the investigation, citing his previous work with Mr. Corzine, a former Democratic senator who also had worked with Mr. Gensler at Goldman Sachs. Senate Republicans said Mr. Gensler's decision to remove himself from the investigation was an effort to sidestep Congress' questions about how the CFTC oversaw Mr. Corzine's firm. An inspector general's report found that Mr. Gensler had used his personal email while dealing with some MF Global issues while he was away from the CFTC's Washington headquarters.

While Mr. Gensler's candidacy to lead the SEC has been strongly supported by progressives, some worried that he could face an uphill battle to confirmation if the Senate remained under Republican control. Others in the Democratic Party had hoped Mr. Biden would pick a woman or a minority candidate to promote diversity in a sector that remains dominated by white men.

Mr. Gensler's stock rose after Democrats won both runoff elections for the Senate in Georgia on Jan. 6, giving them control of the chamber and smoothing his likely path toward confirmation. Since the election, Mr. Gensler has overseen a team of volunteers for the Biden transition focused on banking and markets regulators, such as the Federal Reserve and the SEC, as part of an agency review process that occurs with incoming administrations.

Mr. Gensler, 63, also advised Hillary Clinton's 2008 and 2016 presidential runs. Since 2018 he has taught courses on blockchain and digital currencies at the Massachusetts Institute of Technology's Sloan School of Management.

His profile on the school's website notes that he has completed nine marathons and the JFK 50-mile race in his home state of Maryland, a feat he accomplished in 2007.

--Paul Kiernan contributed to this article.

Write to Andrew Ackerman at andrew.ackerman@wsj.com and Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

January 12, 2021 17:40 ET (22:40 GMT)

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