Gensler on Market Structure: In more than four hours of testimony before the House Financial Services Committee, SEC Chair Gary Gensler addressed questions on a variety of issues including crypto, artificial intelligence, climate policy, minimum accredited investor standards, and equity market structure. On market structure, members expressed bipartisan concern regarding the fast pace of rulemaking over the past year, interplay of four proposals on equity market structure and unknown potential negative outcomes for everyday investors, and focus on pilot programs and incremental approach.

Equity Market Structure Roundtable: SIFMA hosted an equity market structure roundtable with industry participants with key topics discussed tick sizes, disclosure of order execution information regulation best execution, and the SEC’s auction proposal.

Gensler on AI: SEC Chair Gensler noted that the rise of artificial intelligence and predictive data analytics is transforming finance. He noted that artificial intelligence is being used in finance for call centers, account openings, compliance programs, trading algorithms, and sentiment analysis, and has fueled changes in in robo-advisors and brokerage apps, among other uses of AI.

Regtech Market Growth: It was reported that the global RegTech market is expected to grow at 17.55% CAGR in the next six years, and anticipated to rise from $6.5 billion  market in the USi in 2023 to above $28.83 billion by 2029.

Hedge Fund Scrutiny: Hedge funds and other parts of the shadow banking system could face greater scrutiny after last month’s upheaval in U.S. government bonds. SEC Chair Gary Gensler said he wants a better understanding of how bets by such asset managers can spill out across asset classes and into the real economy.

Misleading Accounting: The SEC is scrutinizing public companies that tout overly rosy earnings numbers that don’t comply with US accounting rules. In December, the SEC released guidance about which unofficial accounting adjustments are acceptable and which are out of bounds. So far, Academy Sports & Outdoors Inc., Dave & Buster’s Entertainment Inc., and Petco Health & Wellness Company Inc. have been questioned by the SEC.

Cybersecurity Concerns: The SEC has recognized that cyber-related threats are a widespread and serious danger to capital markets. Building off of the momentum of their 2022 initiatives, the SEC is now proposing Rule 10, which would require market entities to report cyber risks and incidents to the SEC on a partially public SCIR form.

Crypto Charges: The SEC charged crypto exchange Bittrex Inc. and its co-founder William Shihara for operating an unregistered securities exchange, broker, and clearing agency. SEC Chair Gary Gensler commented on the matter, stating that “crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity.”

Crypto Dealmaking: According to M&A advisory firm Architect Partners, there were 54 mergers and acquisitions among digital-asset firms in the first quarter of 2023 – almost 10% more than the first quarter of 2022. According to the report, about 65% of activity last quarter involved one crypto company buying another.