Republican lawmakers probe SEC Chair Gary Gensler over alleged political hiring practices

Three Republican lawmakers accused U.S. Securities and Exchange Commission Chair Gary Gensler of hiring the agency's employees based on their political beliefs, which, if true, they said could be in violation of the law.

House Financial Services Committee Chair Patrick McHenry of North Carolina, House Judiciary Committee Chair Jim Jordan of Ohio and House Oversight Accountability Committee Chair James Comer of Kentucky asked Gensler to hand over documents involving the agency's consideration of political idealogy for prospective employees.

They say the SEC's hiring practice could violate the Civil Service Reform Act of 1978 , designed to prevent unfair practices.

"The Committees’ oversight is essential to assess whether the SEC is appropriately complying with federal law in its hiring of civil servants and to determine the extent to which individuals’ political affiliations have affected the SEC’s personnel decisions," the lawmakers said in their letter sent earlier this week.

Though the letter does not mention crypto, Gensler himself has also faced scrutiny from the crypto industry for years. The chairman has asserted that most cryptocurrencies are securities and, therefore, fall under his agency's jurisdiction and has also called for crypto platforms to register with the SEC. Crypto firms have argued it's not possible to register with the SEC and have said the current regulatory framework doesn't work for digital assets.

McHenry, Jordan and Comer said they found out about the SEC's potentially unlawful hiring practices in an email correspondence between Gensler and Dr. Haoxiang Zhu, the SEC's director of trading and markets.

After a call between the two in May 2021 about Dr. Zhu's future employment, lawmakers said Dr. Zhu emailed Gensler about his political affiliations.

"Dr. Zhu emailed you to affirm his ideological suitability for employment under you, stating, 'I believe I’m in the right place on the political spectrum, and I’m happy [to] provide as many details as needed so you feel comfortable,'" according to the letter. "The SEC hired Dr. Zhu six months later on November 19, 2021."

Gensler will respond to members of Congress directly, an SEC spokesperson said in an email to The Block.