Ali Abbas
SEC Chairman announces departure: Is a more aggressive approach to enforcement in sight?
The Securities and Exchange Commission’s (SEC) Chairman, Jay Clayton, has announced that he will be stepping down from his position at the end of the year. What does this mean for the future of enforcement in the US?
One of the Securities and Exchange Commission’s (SEC) longest running Chairmen, Jay Clayton, has announced that he will be stepping down from his position at the end of the year, following three and a half years in the position. Clayton will be leaving his post just six months before his tenure was due to come to an end.
Across Clayton’s term, the SEC saw various annual records in its enforcement program, including:
- Bringing over 2,750 enforcement actions since May 2017
- Obtaining $14 billion in monetary remedies, including record $4.68 billion in fiscal year 2020
- Returned approximately $3.5 billion to harmed investors
- Paid approximately $565 million to whistleblowers, including a record $114 million in a single award
- Advanced more than 65 final rules – many of which modernized historic rules that had not been updated for more than ten years
- Increased the number of investment adviser examinations under the Commission’s enforcement and examination program by more than 25% in a three-year period (2016-2019)
Industry reaction
Clayton was liked across the industry, with many endorsing his approach to streamlining regulations that were previously seen as “burdensome” or that prevented corporate growth.
Chairman of the Commodity Futures Trading Commission (CFTC), Heath Tarbert, issued a statement noting that Clayton will receive the CFTC Chairman’s Award for Regulatory Excellence – for having “embodied the principles of sound regulation throughout his tenure.” He added that it has been “an honour to serve alongside Jay Clayton” and that “as leaders of the SEC and CFTC [they] have worked together closely to harmonize rules where appropriate and hold wrongdoers accountable.”
Robert Cook, President and CEO of FINRA, commented that Clayton has been a “strong advocate for investors and for fairness and integrity in our securities markets” and wished him luck in future endeavours.
CUBE comment
Jay Clayton was appointed to the SEC by Donald Trump in 2017 and has since overseen a wave of deregulation – brought in by the Trump administration in a bid to undo Obama-era requirements. While he has been lauded for his work towards simplifying many regulatory obligations, as well as remodelling the Commission’s enforcement system to focus more on retail investors, this has often been in the face of opposition from Democrats.
Clayton’s term was due to come to an end in June 2021, with many industry commentators suggesting that the newly appointed Biden presidency could see him replaced by a more leftward-leaning candidate that would be firm on big banks and take a more aggressive, protective approach.
It will be interesting to see what the future holds for the SEC following Clayton’s departure. It is expected that, until Biden takes office, Republican commissioner Hester Pierce will serve as interim chairwoman. Pierce is renowned for frequently voting against penalizing companies for wrongdoing. We could then see a month of conservative SEC action, before Biden names a replacement after 20 January.
Following the COVID-19 pandemic, the next chair will face the unenviable task of overseeing the largest capital market recovery effort since the global financial crash of 2008. 2021 is certainly shaping up to be an interesting year for the US, before it has even begun.
Webcast: What does a Democrat win mean for the future of finance?
In the wake of the recent US election, CUBE is hosting a fireside chat with industry expert Mitch Avnet to discuss exactly what a Democrat victory means for the future of finance. It will be hosted on the revised date of 2 December 2020 at 10am (EST)/ 3pm GMT.
