Tom Emmer, a US lawmaker, has Accused the Security and Exchange Commission (SEC) of “cracking down on companies outside its jurisdiction.”
🚨SEC Director for Enforcement acknowledges that the SEC is taking action against companies operating outside of its jurisdiction. Absolutely unacceptable. pic.twitter.com/wRQU54Ov6v
— Tom Emmer (@RepTomEmmer) July 19, 2022
In a subcommittee hearing on Investor Protection held on July 19, SEC’s Director of Enforcement, Gurbir Grewal, admitted that the commission routinely operated outside of its jurisdiction.
SEC operated outside jurisdiction
Senator Emmer wondered how the SEC would handle a company that has not responded to an industry sweep email from the commission.
A sweep letter is sent to companies asking them to give information voluntarily.
Director Grewal responded that the regulator might “proceed with a subpoena, and then a subpoena enforcement action.”
According to Grewal, SEC is not limited by “jurisdiction when we’re collecting evidence. We follow the evidence wherever it leads us.”
Grewal’s statement elicited a biting response from Emmer, who said the commission was using its Enforcement division to expand its jurisdiction.
Per Emmer, the SEC is not interested in clarifying whether crypto falls under its jurisdiction, as seen with the dissolution of FinHub –a SEC division focused on crafting crypto regulations.
Instead, the SEC under Gary Gensler is “hellbent on expanding the size of its crypto enforcement division using enforcement to unconstitutionally expand its jurisdiction.”
Emmer continued that the SEC was “politicizing regulations, baiting companies to ‘come in and talk’ to the Commission, then hitting them with enforcement actions,” thereby “discouraging good-faith cooperation.”
Another lawmaker, Brad Sherman, had criticized the commission’s failure to bring enforcement actions against major exchanges that facilitated Ripple (XRP) trading.
SEC takes flak for its crypto regulation approach
There have been criticisms of the SEC’s approach to crypto regulation.
Hester Peirce, an SEC commissioner, criticized the financial regulator’s approach to regulating the crypto space.
Peirce says that one-off enforcement actions do not provide the best way to create a framework for the sector.
A number of industry players are also involved. criticized the regulator’s regulation by enforcement tactics.