4th October 2023 > > The SEC.

tl;dr

The SEC takes another loss in the law courts, further undermining its reputation, which will have long-term negative implications for financial markets and industry going forward. The SEC violates the concept of financial privacy.

Market Snap

Market Wrap

Strong numbers for job openings in the US propelled long-term rates towards a 5-handle. Long bond portfolios have taken another 1.5% hit since yesterday. These stresses and strains will likely show up with renewed fears around mid-ranking banks. 2s/10s remain inverted at 22bps highlighting the lack of confidence in the markets about the Fed’s understanding of basic financial facts.

In the last week stocks are down 3% with BTC up 4% further enhancing BTC’s reputation for resilience.

Curious Cryptos’ Commentary – XRP (Ripple)

You will recall that back in July Ripple Labs Inc. had an outstanding day in court, beating the SEC on three out of four charges brought against it. As the CCC explained:

“Ripple 3 SEC 1:

“Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales.”

The SEC responded in the only way it knows how, and that was through further litigation. Initially it did this by referencing the judgement above in a totally different court, in a totally different case, to get a totally different judge to throw out the earlier decision. This subterfuge, this strategy which leaves a dark stain on the reputation of Gary Gensler and the SEC, was roundly and rightly rejected.

Not content with losing twice, Gensler pressed on with an appeal to the original judge, who ruled that “… the SEC had failed to meet its burden under the law to show that there were controlling questions of law or that there are substantial grounds for differences of opinion.” The appeal was summarily dismissed just yesterday.

There is another trial in April 2024 for some other issues that still need resolution, and we should not be surprised to see the SEC try a third attempt to get the initial ruling overturned.

But the number of cases that the SEC is losing is stacking up. And don’t forget the judge in the Grayscale vs SEC case described the SEC ruling as “arbitrary and capricious”.

The SEC’s actions are undermining investors’ faith in the SEC, which can only lead to increased cost of capital for industry, and therefore lower productivity, hurting job creation, increasing inflation, and generally dampening economic activity.

Gensler has got to go.

Curious Cryptos’ Commentary – The SEC is spying on you

Or it is if you live in the US.

The SEC is now tracking all stock trades by Social Security Number under the guise of market monitoring. Originally proposed in 2016 by then Chair Mary Schapiro, she explained at the time:

“A consolidated audit trail that accurately tracks orders throughout their lifecycle and identifies the broker-dealers handling them will provide us with an unprecedented ability to effectively oversee the markets we regulate.”

The proposal sat quietly gathering dust but has now been implemented.

The data, all linked to individuals, is being shared with over 3,000 organisations outside of the SEC. This is an extraordinary and dangerous invasion of financial privacy, to which the Wall Street Journal has taken exception:

“As an American, you have a right to privacy—unless you own stock. The Securities and Exchange Commission has created a centralized database to track the personal and financial information of every U.S. investor. Congress should immediately stop this unconstitutional power grab.”

The only ones cheered by this news are hackers and scammers.

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Did I mention that Gensler has got to go?