Gary Gensler: Full disclosure rules are key to maintaining market stability

The outgoing chairman of the U.S. SEC, Gary Gensler, has issued a warning to the next government: be careful not to touch the barriers protecting small traders (mom-and-pop traders).

In an interview on Friday, Gensler said that going too far in reducing disclosure requirements or expanding the definition of "qualified investors" could harm public interest.

Critics believe that qualified investor rules are designed to protect retail traders from potential risks of private investment but have stifled growth. "Project 2025" is an initiative aimed at providing policy blueprints for the incoming Trump administration, calling for financial regulators to expand the definition of qualified investors or completely remove restrictions.

"It depends on how far things go; this could disrupt this important part of our capital markets," Gensler said, adding that full information disclosure is crucial for investor confidence and market stability.

"As long as issuers provide comprehensive, fair and truthful information disclosures, investors can decide which risks they want to take," Gensler said.

Company information disclosure is a core part of U.S. SEC regulations and also a way for investors to measure risk. However, private companies (including early-stage startups and other companies) are basically not subject to these disclosures.

Currently people who meet certain professional or income thresholds such as having net assets exceeding $1 million (excluding primary residence) may qualify as accredited investors.

When this definition was implemented in the 1980s it accounted for about 1% of Americans. The SEC estimates that by 2022 more than 18% of American households will qualify.

Key lawmakers including House Financial Services Committee Chairman French Hill hope to expand this definition. In 2023 Hill proposed a bill allowing individuals who demonstrate understanding about investing in private markets

Some supporters updating this definition also say current criteria pose high barriers preventing Black communities Latinx communities and other minority groups from accumulating generational wealth

Last December President-elect Trump announced former U.S. SEC Commissioner Paul Atkins would lead the agency. During his tenure as commissioner and in private sector work, Atkins has publicly discussed unnecessary company disclosures and how they hinder investment opportunities.