WhatsApp with Gary Gensler and his old email habits?
That’s the question on Wall Street this week after the hard-charging boss of the Securities and Exchange Commission reportedly nears a deal with banks over employees who use private messaging apps — with critics noting that Gensler has his own awkward history of using his personal email account to conduct official business.
While Gensler has fined Wall Street firms more than $1 billion for being less than careful about their habits of using WhatsApp and other encrypted messaging platforms for work, he used similar practices when he ran the Commodity Futures Trading Commission a decade ago, according to reports.
In 2013, the Office of the Inspector General raised concerns about Gensler’s “use of personal email to perform official business.”
The IG report revealed Gensler “used his personal email so much that he carried two smartphones, one issued by CFTC with his work email, and another for his personal email.”
At the time, Gensler said that he used his personal email to communicate about official affairs because ”he did not know how to access his official email at home.”
The IG’s report also noted that under Gensler, the CFTC’s examination process was “not written down” nor did it “conform to audit standards or other standards” — in other words, he did not carefully make or preserve communications.
The IG’s rebuke of Gensler’s business practices were strikingly similar to the criticisms Gensler levied at financial firms last September after announcing 16 firms including Goldman Sachs and Morgan Stanley were being fined $1.1 billion for “widespread record keeping failures.”
“As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications,” Gensler lectured.
“The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws,” he added.
There are no reports Gensler has used personal devices for professional affairs more recently during his time at the SEC. Still, critics say his past behavior is rankling Wall Street firms that wish they would be extended the same understanding Gensler was given during his time at the CFTC.
Gensler didn’t face fines or penalties as a result of using personal devices.
The SEC declined to comment but pointed to comments that Gensler made Wednesday in a hearing. In response to a question about whether he ever conducts government business with anything other than official SEC resources Gensler said, “No, I comply with the laws. But I also if I inadvertently, if somebody sends me an email then I forward it into the SEC.”
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On Thursday, Reuters reported Gensler could announce a possible settlement with two dozen firms as soon as the end of the week. As part of the deal, the firms would pay as much as $50 million in fines, admit wrongdoing and commit to resolving the issue by hiring consultants to help with record-keeping.
“I think it’s an ongoing issue with Gensler and his SEC that the agency holds the entities it regulates to a much higher standard than it holds itself,” said Jennifer Schulp, director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives.
“It smacks of unfairness and creates a problem where firms don’t think their regulator understands their business or the implications of regulations on their business,” Schulp added.
Gensler’s conduct at the CFTC initially came under scrutiny amid his investigation of MF Global, a commodities brokerage firm that went bankrupt in 2011.
The firm was helmed by Gensler’s former boss: Jon Corzine, a Goldman Sachs executive who also served as New Jersey governor and senator. Gensler’s ties to Corzine raised eyebrows about his impartiality examining the case and he ultimately recused himself.
Journalist Matt Taibi wrote in Rolling Stone, “this business with Corzine will likely be a black eye for [Gensler], and rightly so.”
Not only does excessive regulation undermine respect for a regulator, it also takes resources and staff away from more pressing issues, according to Schulp.
“The probe of Wall Street communications doesn’t seem to fit the SEC’s mission. It’s doing little to protect investors, nothing to protect capital formation — and based on the cases they’ve brought — little for market integrity as well,” Schulp adds.