Representative Byron Donalds (R-FL) spearheaded a recent letter to Acting SEC (Securities & Exchange Commission) Chairman Mark Uyeda urging for reforms to the SEC, which he claims was weaponized by the Biden-Harris Administration.
Rep. Donalds explained that the weaponization of the SEC came in the form of "regulation by enforcement," which means "those enforcement actions involving conduct that market participants did not previously understand to be a violation of the federal securities laws despite reasonable reliance and interpretation of existing laws, regulations, policies, and guidance."
In other words, regulators would coerce entities to follow a specific interpretation of rules, which is regulatory overreach.
More specifically, the SEC under the Biden-Harris Administration loosened the definitions of "broker" (the middleman in exchange) and "dealer" (the seller) so that "any company whose business model is based on the purchase and sale of securities is a dealer, regardless of whether the company renders any of the services that have been the hallmark of a dealer, such as effectuating customer orders."
Furthermore, private investments in public equities (PIPEs) and equity lines of credit (ELOCs) have been subject to unnecessary scrutiny as dealer registration obligations despite the definitions of these investments being public knowledge for many years.
Rep. Donalds noted that such actions are "extremely problematic" and harm everyone involved by disrupting capital investment, denying fair notice to market participants, and blurring the lines of acceptable conduct.
"Many firms are no longer willing to provide capital to small public companies because of the risk of enforcement prosecution and a lack of any guidance as to what types of investments or what types of companies are allowable without registering as a dealer," the Florida Congressman continued, further adding, "Other firms have unsuccessfully attempted to register as dealers, with their applications being deferred or denied by the sole available self-regulatory organization, [the Financial Industry Regulatory Authority (FINRA)]."
As a result, Donalds urged Uyeda to dismiss dealer cases resembling such weaponization, freeing small investors from unnecessary oversight and restoring the SEC's credibility.
At the end of February, the Florida Congressman introduced legislation abolishing the Consumer Financial Protection Bureau (CFPB), which he similarly accused of being weaponized and stifling innovation.
