Volunteer State News

NASHVILLE, TN—United States Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, and Representative French Hill (R-AR-02), Chairman of the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, on may 24 sent a letter to Securities and Exchange Commission (SEC) chairman Gary Gensler raising concerns about the SEC’s Investor Advisory Committee’s (IAC) April 6 Letter on Digital Assets.

“We have serious questions regarding the process (or potential lack thereof) used by the IAC to draft and approve the Crypto Letter, including whether a committee vote was held and whether any dissenting views were registered,” the members of Congress wrote. “More broadly, the Crypto Letter follows on the heels of the IAC’s September 2022 draft recommendations supporting the SEC’s radical climate disclosure rule proposals, which suggests that the IAC may increasingly be functioning as an echo chamber for this Commission’s pro-ESG, anti-free markets agenda.”

The drafting and approval of the IAC’s letter appears to violate the procedures and bylaws of the Committees, and the unsubstantiated views expressed reflect the academic and activist heavy composition of the Committee. 

“We are also concerned that the Committees’ current membership does not adequately reflect the categories listed in the SEC’s Procedures for Appointments to the Investor Advisory Committee (‘Membership Procedures’) or the diverse array of investors who participate in U.S. capital markets,” the members of Congress continued. “We believe the IAC must be investigated and reformed from the ground up, starting with a thorough review of its structure and activities, as well as whether its current membership is capable of effectively representing American investors.”

Hagerty and Hill requested the following information from the SEC by June 7, 2023:

•    All minutes and notes of the IAC or any member thereof addressing cryptocurrencies or the Crypto Letter.

•    Documentation of any vote taken to draft and/or issue the Crypto Letter including, but not limited to, a full list of all IAC members who voted in favor of the decision to draft and/or issue the Crypto Letter and all IAC members who voted against the decision to draft and/or issue the Crypto Letter. If no such votes were held, provide a detailed description explaining why.

•    A description of the rationale of each IAC member’s decision or vote to approve or disapprove of the views expressed in the Crypto Letter.

•    A description of any interactions between or among IAC members and third parties relating to the Crypto Letter, and copies of all communications with third parties.

•    All communications (including off-platform communications) between any member of the IAC and the Chairman or the Chairman’s office staff related to cryptocurrency including, but not limited to, the Crypto Letter.

A copy of the letter can be found here and below.

Dear Chairman Gensler:

We write to express our concerns regarding the Securities and Exchange Commission (SEC) Investor Advisory Committee’s (“IAC” or “Committee”) April 6, 2023 letter to you titled, “IAC Views on Crypto Assets” (“Crypto Letter”). This letter, which purports to represent the views of “a consensus of the IAC Members,” conveys broadly and without any evidentiary support the IAC’s position that “virtually all, if not all, crypto tokens are securities,” and that the platforms and custodians dealing in these tokens must comply with the federal securities laws. We have serious questions regarding the process (or potential lack thereof) used by the IAC to draft and approve the Crypto Letter, including whether a committee vote was held and whether any dissenting views were registered. More broadly, the Crypto Letter follows on the heels of the IAC’s September 2022 draft recommendations supporting the SEC’s radical climate disclosure rule proposals, which suggests that the IAC may increasingly be functioning as an echo chamber for this Commission’s pro-ESG, anti-free markets agenda.

Section H of the IAC’s Bylaws state, “When a decision or recommendation of the Committee is required, the presiding officer will request a motion for a vote.” The Bylaws further state that the IAC follows Robert’s Rules of Order, which also generally require a vote on significant decisions or recommendations. However, we see no evidence based on the Committee’s public agendas going back to the start of 2022 that the IAC met to discuss the matters covered in the Crypto Letter, solicited feedback from informed market participants, or voted to approve issuing the Crypto Letter. Drafting and issuing a public statement of this significance—which purports to represent the consensus views of the IAC on a topic of importance to tens of millions of investors—surely amounts to a “decision”, if not a recommendation.

Moreover, while the Crypto Letter states that the Committee chose not to issue “a formal IAC recommendation”, this attempted distinction further rings hollow given that the Crypto Letter “encourages”—i.e., recommends—that the SEC take a number of steps with regard to regulating the cryptocurrency markets. The extent of the Commission’s involvement in this matter (beyond that of the SEC’s own Investor Advocate who sits on the IAC) is also unclear, although the IAC’s views on cryptocurrency markets and products bear strong similarities to a number of your recent statements.

We are also concerned that the Committees’ current membership does not adequately reflect the categories listed in the SEC’s Procedures for Appointments to the Investor Advisory Committee (“Membership Procedures”) or the diverse array of investors who participate in U.S. capital markets. For example, only one of the Membership Procedures’ 23 functional membership categories is “Academic,” but five of the IAC’s 23 members fall within this category. And, even though the Membership Procedures say nothing about environmental and social experience or interests, such as environmental-driven investing, multiple representatives highlight “sustainable investment” or “carbon neutrality” in their IAC biographies. As noted above, the IAC appears to be increasingly dominated by progressive activists and academics who have no obvious, direct experience in the markets about which they purport to advise the Commission.

We believe the IAC must be investigated and reformed from the ground up, starting with a thorough review of its structure and activities, as well as whether its current membership is capable of effectively representing American investors. We request that you provide the following information no later than June 7, 2023:

•    All minutes and notes of the IAC or any member thereof addressing cryptocurrencies or the Crypto Letter.

•    Documentation of any vote taken to draft and/or issue the Crypto Letter including, but not limited to, a full list of all IAC members who voted in favor of the decision to draft and/or issue the Crypto Letter and all IAC members who voted against the decision to draft and/or issue the Crypto Letter. If no such votes were held, provide a detailed description explaining why.

•    A description of the rationale of each IAC member’s decision or vote to approve or disapprove of the views expressed in the Crypto Letter.

•    A description of any interactions between or among IAC members and third parties relating to the Crypto Letter, and copies of all communications with third parties.

•    All communications (including off-platform communications) between any member of the IAC and the Chairman or the Chairman’s office staff related to cryptocurrency including, but not limited to, the Crypto Letter.

Original Source can be found here.