Hester Peirce, Republican thorn in the SEC’s side

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When the US Securities and Exchange Commission met this week to impose sweeping reforms on the $27tn private funds industry, Republican commissioner Hester Peirce did not mince words.

“The rulemaking is ahistorical, unjustified, unlawful, impractical, confusing and harmful . . . In the name of fostering competition, we are squelching it,” she said.

The reforms passed anyway, by a majority of 3-2. But her sharply worded and methodical dissent laid the groundwork for a possible industry lawsuit to have them thrown out.

The role of regulatory objector is a familiar one for Peirce, an Ohio-born lawyer who has devoted her career to fighting against what she sees as unwarranted and unwise government interference in financial markets.

First appointed to the SEC by former president Donald Trump, she has spent the past three years fighting current chair Gary Gensler’s efforts to impose a wide range of new restrictions on the financial industry.

“Hester believes in people [and] that given good information, individuals are going to make better choices than the government,” said Jay Clayton, a former Republican SEC chair who overlapped with her at the commission.

That approach led her to become an early supporter of the crypto industry. She earned the nickname “crypto mom” for her view that the SEC should make it easier, not harder, for investors to participate in the sector.

“Our role is not as gatekeepers to innovation,” she said. “We should be constantly striving to foster an environment in which people can innovate without spending all their time thinking about regulatory trapdoors.”

The daughter of a real estate agent and an economics professor who ran for governor of Ohio on the Libertarian party ticket, Peirce has been interested in finance for most of her life. She loved graphing stock prices as a pre-teen and dreamt of being a securities analyst.

After studying economics in college, she went to Yale Law School. She then spent time in private practice and on the SEC staff. There she served as counsel to Paul Atkins, another Republican commissioner known for uncompromising attacks on regulation.

“Hester taught me everything I know,” he joked, before praising her deep knowledge of legal history and the details of regulation. “She is somebody who can stand her ground.”

During and after the 2008 financial crisis, she worked as an aide to Richard Shelby, the top Republican on the Senate Banking Committee. While most of Congress concluded that banks got into trouble because they were insufficiently regulated and needed tighter supervision, Peirce took home a different lesson.

“It was a scary time . . . I saw how if you write a bad rule, it can have a dramatic effect on what people do,” she said, citing the way bank capital regulations led some lenders to load up on securities that proved riskier than expected. “It gave me more humility about approaching the exercise of writing rules.”

Now 52, she lives alone — not even a pet — and described running and baking bread as her hobbies. Colleagues and even her ideological opponents cite her work ethic and enthusiasm for detailed research. She unfailingly thanks the SEC staff for their hard work even as she pokes holes in their work and votes against their recommendations.

“Hester is a dedicated public servant,” said Gensler, who is on the opposite side of almost every policy divide. “Though we have policy differences, I very much appreciate her thoughtful contributions . . . Further, she is always gracious and encouraging of the staff.”

While reserved in personal interactions, Peirce is outspoken in her free-market beliefs on formal occasions. She recently referred to the SEC as “a paternalistic and lazy regulator” and another time complained of “distorted thinking”.

But Allison Herren Lee, a former Democratic commissioner, said: “She’s smart and professional and she’s never been unkind to me in our disagreements.”

Peirce’s firm views have brought her both fans and vicious detractors, particularly on the social media site X, formerly Twitter. When she voted against forcing more disclosure on private funds in January, the hashtag #FireHesterPeirce started trending and opponents leapt on board with attacks, including on her physical appearance.

Those who support Gensler’s regulatory agenda contend Peirce’s constant dissent damages the SEC by calling into question its purpose as a regulatory agency and the good faith of those that disagree with her. Such views undermine an agency that is required by design to have two members of one party and three of the other to foster compromise, they said.

“Hester is smart and a nice person but uncompromising libertarian views threaten the pre-eminence of the US capital markets. Investors worldwide have confidence in those markets because they are well-regulated,” said Dennis Kelleher of the financial reform group Better Markets.

While three years of losses might grate, Peirce continues to fight. “I‘d rather that everyone agreed with me and we weren’t writing rules that I didn’t think we should be writing. But this is the world we’re in,” she said.

Atkins, her former boss and ideological ally, praised her commitment: “Good for her for hanging in there for so long.” He predicted that the strong conservative majority on the Supreme Court would eventually pick up on her arguments and reward her fight. “There is a long arc of history, and courts listen to dissents,” he said.