Lawmakers have launched a joint investigation into the Securities and Exchange Commission (SEC), raising concerns that the agency may have engaged in politically motivated hiring practices, according to a September 11 letter to SEC Chairman Gary Gensler.
The joint letter, signed by Judiciary Committee Chairman Jim Jordan (R-Ohio), Financial Services Committee Chairman Patrick McHenry (R-N.C.) and Oversight and Accountability Committee Chairman James Comer (R- Ky.), outlined specific concerns about political issues. hiring within the SEC.
The investigation aims to determine whether the SEC violated federal law by considering political affiliations when hiring senior employees, potentially compromising the agency’s impartiality.
Politically motivated recruitment
Lawmakers cited evidence indicating that political considerations influenced the hiring of senior SEC staff led by Gensler. The letter specifically referred to the appointment of Dr. Haoxiang Zhu as Director of Trade and Markets in November 2021.
In an email exchange prior to his appointment, Zhu Gensler reportedly assured of his political compatibility, writing in May 2021, “I believe I am in the right place on the political spectrum,” after speaking with the SEC chairman about the role.
The lawmakers wrote:
“This email correspondence indicates that the SEC may have improperly taken into account an applicant’s political ideology in hiring.”
The letter from the congressional committees emphasized that the alleged violations are not limited to one case and highlighted a broader pattern.
It added that several senior SEC employees reportedly come from left-leaning organizations, including the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the Consumer Federation of America and the Washington Center for Equitable Growth.
According to lawmakers, this trend indicates a deliberate attempt to fill senior positions with individuals who align with specific political ideologies, raising concerns about the agency’s impartiality.
The Committees on Judiciary, Financial Services and Oversight and Accountability have directed the SEC to produce all documents and communications relating to the hiring, firing or transfer of senior personnel within the agency since April 2021.
Regulatory agenda
In addition to hiring practices, the letter also questioned whether political ideologies influenced the SEC’s regulatory agenda under Gensler’s leadership.
Republican lawmakers have often criticized the SEC for its aggressive stance on issues such as climate change disclosures and cryptocurrency regulation, which they say reflects a partisan agenda rather than an impartial interpretation of securities law.
The oversight committees have given the SEC until September 24 to respond to the document requests. Lawmakers warned that failure to comply could lead to further action, possibly including subpoenas.
Judiciary Committee Chairman Jim Jordan (R-Ohio) said:
“This is about ensuring that the SEC remains an impartial regulator, free from political influence. If political bias influences who is hired, it undermines public confidence in the SEC’s ability to fairly enforce the securities laws.”
The SEC has not yet responded to the letter and has not yet responded to the specific allegations regarding political hiring. However, the agency is expected to come under increasing pressure as the committees’ investigations continue.
The investigation comes at a critical time for the SEC, which has been involved in several high-profile regulatory battles, including its enforcement actions against major crypto exchanges and its ongoing efforts to impose new disclosure requirements on publicly traded companies.
Critics have argued that the agency’s actions under Gensler reflect partisan priorities rather than neutral enforcement of the law, leading many to call for leadership changes at the regulator.
