Doge may make funds weak to front-running, Democrats warn | USAEMALL.com

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House Democrats have urged Securities and Exchange Commission acting chair Mark Uyeda to “safeguard” the agency’s data and work from the Department of Government Efficiency, or Doge.

The SEC’s vast trove of data from market participants helps ensure market integrity and prevent fraud, the lawmakers noted. “Improper access to this sensitive information could have disastrous consequences for the stable functioning of the US capital markets,” they wrote in a letter to Uyeda.

House financial services ranking member Maxine Waters and subcommittee on capital markets ranking member Brad Sherman, both Democrats from California, warned in the letter that Doge, an initiative created by President Donald Trump to slash costs and reduce the number of government employees, and its head Elon Musk, could use data from the agency to front-run investment decisions made by mutual funds, money market funds and exchange traded funds.

Through the SEC, Musk could also get access to non-public market data, such as pre-initial public offering filings, merger and acquisition information, and non-public information on Form N-Port, to then use for personal advantage, Waters and Sherman wrote.

This article was previously published by Ignites, a title owned by the FT Group.

If those associated with Doge were to use non-public trading data in the Consolidated Audit Trail in such ways, it could lead “to a loss of investor confidence, market instability and potentially significant economic repercussions — including the collapse of our financial markets and individual retirees’ nest eggs”, the Democratic lawmakers wrote.

The House members’ letter also included a list of questions including whether Doge had contacted the SEC, and, if so, whether the agency gave Doge access to any data.

The lawmakers also asked whether Doge staff had communicated with the SEC on any regulatory or enforcement matters related to Musk or Trump.

In addition, they sought information about how Uyeda planned to protect SEC employees from potential personal retaliation by Musk.

A spokesperson for the SEC said Uyeda would respond to the lawmakers directly.

Members of Doge could not be reached for comment.

Doge has posted information on its website about the SEC, including its headcount and total employee expenses, as well as its average employee’s tenure, salary and age.

The workforce data comes from the US Office of Personnel Management as of March 2024, the site notes.

SEC workforce data on divisions, offices and branches had not been immediately added to the website, though Doge.gov had mapped out the agency’s 103 offices, divisions, committees and branches.

“This is Doge’s effort to create a comprehensive, government-wide org chart. This is an enormous effort, and there are likely some errors or omissions. We will continue to strive for maximum accuracy over time,” the site said.

Running Doge as a “special government employee”, Musk, the world’s richest man, has gained access to sensitive Treasury Department payment data, closed agencies such as the Consumer Financial Protection Bureau and the United States Agency for International Development, and cut other agency budget items without congressional assent.

Democratic attorneys-general and non-government organisations have filed scores of lawsuits to stop many Trump and Doge actions.

The Government Accountability Office will investigate how Doge got access to Treasury’s payments system, Senate banking committee ranking member Elizabeth Warren and Ron Wyden, both Democrats, have stated.

“[W]e do not doubt that the approach Musk has taken at other agencies will soon come knocking at the SEC’s door,” Waters and Sherman wrote. “[T]he potential for conflicts of interest is clear.”

Musk has been probed by the division of enforcement in the past, Waters and Sherman noted.

“Mr Musk’s involvement in any decisions regarding the future of the [SEC] is highly inappropriate and raises significant questions about the agency’s continued independence and ability to enforce the law impartially and ensure our capital markets remain fair, transparent and free from manipulation,” the letter stated.

The lawmakers also questioned whether Uyeda recognised that the executive branch does not have the unilateral authority to dismantle a congressionally created agency.

“Additionally, can you confirm your commitment to preventing Doge from making any cuts to appropriated funds without Congress passing legislation to approve such cuts?” they asked.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com.