Capitol Account Q&A: SIFMA CEO on the Financial Policy, Regulatory Landscape

This post was originally published by Capitol Account DC on December 6, 2024.

Though Donald Trump's inauguration is more than a month away, the incoming administration's plans for financial oversight have been slowly coming into focus. Thus far, the president-elect's choices for the top posts at the Treasury Department and SEC have signaled an inclination toward unleashing market forces, rather than new regulations. Wall Street, of course, couldn't be more pleased.

Looking for an insider's view, we sat down recently with Kenneth Bentsen Jr., president of the Securities Industry and Financial Markets Association. His roots in both the business and Washington run deep. Bentsen was a Democratic House member from Texas, serving four terms. But he also worked as congressional staffer and an investment banker, specializing in municipal and housing finance.

Read on to learn Bentsen's assessment of the Biden administration's rulemaking efforts and his thoughts about what next year may bring, both at the agency level and on Capitol Hill. Hint: he's not so sure that calling Trump's nominees "pro-Wall Street" rings true. What follows is our (lightly edited and condensed) conversation.

Capitol Account: What does SIFMA do?

Kenneth Bentsen Jr.: We're the trade association for the U.S. capital markets business. Our members are investment banks, broker-dealers and asset managers…We're not in the commercial or consumer banking area. We have members who are, but that's outside of our mandate.

Capitol Account: You're often referred to as the largest Wall Street trade group.

Kenneth Bentsen Jr.: We represent north of 80 percent of broker-dealer market share in the U.S. And on the asset management side, I'd say our members comprise around 50 percent global [assets under management].

Capitol Account: So your lobbying agenda is big - and varied.

Kenneth Bentsen Jr.: We advocate in the federal and the state area, as well as with international standard setters. Advocacy is a big component of our business, but we do a tremendous amount of work in the operations space - market resiliency, [business continuity planning], cyber resiliency…We do a lot around the compliance space in working with our members on regulatory compliance, whether it's Finra, SEC, CFTC…And of course, like any other trade, we have a pretty robust conference business.

Capitol Account: How has government oversight of financial companies evolved since you've been on the job?

Kenneth Bentsen Jr.: When I joined SIFMA 15 years ago, there was a little bit of a perception among some that New York was where it was at - Washington was just sort of an outpost….I was brought in to run the Washington office so maybe I had a bias here, [but] it's hard to say that Washington hasn't played a massive role with respect to the industry, at least going back to Dodd-Frank. I would argue before then. But at least since the financial crisis.

Capitol Account: The Biden regulators must have kept you pretty busy over the past four years.

Kenneth Bentsen Jr.: There was a heightened focus on the SEC because of Chair [Gary] Gensler and his agenda…There's been some fatigue with the volume and pace of rulemaking coming out of just the SEC. Then you add on that many of our members are impacted, either directly or indirectly, by the Basel III endgame. Then…the long-term debt [rule], the brokered deposits [proposal at the FDIC] - that's been an issue. We don't normally deal with the CFPB, but I'm aware they've been doing a lot of stuff too. I think people are trying to catch their breath.

Capitol Account: Trump has announced a few nominations that will have a lot of sway over finance. What's your assessment?

Kenneth Bentsen Jr.: We don't, as a rule…endorse nominees. We don't think that's our role. We work with these agencies. They're very important for our members, in setting policy and in some cases, regulating our members.

Capitol Account: They're not even nominees yet, of course. But any early thoughts about Scott Bessent who is the choice for Treasury secretary?

Kenneth Bentsen Jr.: I don't know him, but everything I have heard and read about him is incredibly impressive…He has grown up in the markets. He's really studied markets and economic history. He has a global perspective that is, for that role, very important.

Capitol Account: This week, the president-elect also selected Paul Atkins to run the SEC.

Kenneth Bentsen Jr.: I know Paul quite well. I think you would be hard-pressed to find someone with the level of qualifications and experience and understanding of the agency that Paul has - a former commissioner, former senior staff to two chairs…He's a person who is not going to have trouble finding his office the first day he goes there.

Capitol Account: The picks so far haven't been as surprising as some of Trump's other appointments.

Kenneth Bentsen Jr.: They are known quantities within the financial world, the economic world. And I think that's good.

Capitol Account: Does it give your members comfort that the choices are seen as pro-Wall Street?

Kenneth Bentsen Jr.: They have a mandate, they have a remit and a responsibility - they work for the government…Their views are not always the same views as the industries they regulate. And people should have no illusions otherwise. History has always proven that out…What you want in those roles, in my view, are people who are smart and capable.

Capitol Account: So describing these selections as a win for financial firms is a bit simplistic?

Kenneth Bentsen Jr.: I think so. I'm sure there are people that would disagree with me on that, but these people we've talked about, Bessent and Atkins, they've been very successful in their careers. I'm sure they have their own views…It's a false assumption to say they're always going to be aligned with one sector or another. They're going to come in and do the job the way they think that it should be done.

Capitol Account: There is a populist streak that runs through Trump world. Are you concerned that some of his regulators could be anti-big banks?

Kenneth Bentsen Jr.: There certainly has been in some respects, you might argue, almost a right-left axis on that - not liking large entities. Probably more focus in the tech world than our world, but our world sometimes gets that as well. I would just argue that the financial services sector, it's a hyper-competitive sector…We have new entrants into the business on a regular basis in the wealth management space. Our clients walk with their feet - and money - every day.

Capitol Account: It's safe to say that big changes are coming in financial regulation. That might be most true at the SEC, where the industry spent a lot of time arguing that the agency wasn't soliciting enough input before issuing far-reaching rules. SIFMA even was forced to hold its own roundtable discussions on market structure.

Kenneth Bentsen Jr.: I think the SEC should have done more roundtables. They should have used the advisory committee structure that's been used before. I hope we will see that come back. I hope that there will be more use of a concept release, as opposed to going to formal rulemaking.

Capitol Account: It's pretty clear that crypto is going to be a main focus at the SEC. Will that be a big issue for SIFMA?

Kenneth Bentsen Jr.: I would also argue there's some things that the SEC could do in the traditional digital assets world, as well. We're not as engaged in the crypto world, if you will. But we are very much engaged in the tokenization world and working on a pilot project with a bunch of stakeholders on tokenized Treasury securities. There's some [policy work] that probably needs to be done there.

Capitol Account: How about sorting out the crypto market structure?

Kenneth Bentsen Jr.: My own personal view is that Congress has a role to play. I think they need, just like we did in the swaps world, going back almost 25 years ago, to figure out: What's a security? What's a commodity? How do they fit under the current framework? Are there gaps in the framework?

Capitol Account: Your members are companies of all types and sizes. Do they have the same stance on crypto?

Kenneth Bentsen Jr.: There are certainly some firms that are very interested in native digital assets as a product. We have members who are sponsors of bitcoin ETFs, which is a more traditional product. There are other members who, because the rules are uncertain, are not inclined to engage…because they don't know what the compliance liability may be. There are others who maybe just don't want to have anything to do with it.

Capitol Account: Is there common ground?

Kenneth Bentsen Jr.: We have a sort of an overarching view of…same risk, same outcome, same rule. And that there should be investor protection, including things like segregation and custody that apply to the securities market.

Capitol Account: Do you see more financial-services related legislation passing next year?

Kenneth Bentsen Jr.: It seems to me there's going to be a big focus on - again - crypto…and [bills] like FIT 21 and Lummis-Gillibrand. Probably more so than in the traditional finance area. We would certainly like to see this Congress take up things like e-delivery [for regulatory documents]. That's a top priority for us.

Capitol Account: What about tax?

Kenneth Bentsen Jr.: We're watching that very closely, even though the expired provisions are almost exclusively on the individual side and not on the corporate side. But where we're focused is if they want to open up any of the corporate issues - Trump's talked about lowering the corporate tax rate.

Capitol Account: Are there any worries about a return of a financial transaction tax?

Kenneth Bentsen Jr.: We're always concerned about things like an FTT. I don't think that's in the cards, but we keep our eyes on that.

Capitol Account: What do you do when you're not running a big trade association?

Kenneth Bentsen Jr.: I cater to my family and elderly Labrador Retriever and occasionally play tennis - and try to live a normal life.

Capitol Account: Is that possible with so many CEOs having your cellphone number?

Kenneth Bentsen Jr.: I do not work 24-7. But I do love my job. I was in this industry before. I dealt with it when I was a staffer back in the day, in the 1980s. And then certainly when I was a member of Congress…Being able to be in this position between the markets and public policy and business policy - it gets me up in the morning.

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Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance.

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