The Securities and Exchange Commission (SEC) has announced that Chairman Jay Clayton will depart the agency at the end of the year. The exit by Clayton has long been expected regardless of the outcome of the Presidential election.
Clayton joined the SEC on May 4, 2017. During his tenure at the Commission, Chairman Clayton dealt with the unprecedented emergence of digital assets exemplified by the boom in initial coin offerings (ICOs). This new type of asset challenged the SEC’s resources while necessitating an intense review of securities law and the application of existing law to the technology – a review that frequently determined that issuers had transgressed securities law. The rise of digital assets compelled the SEC to create a new Cyber Unit to better tackle the digital transformation of securities markets.
Simultaneously, Chairman Clayton refocused the SEC’s energy on improving capital formation for vital smaller firms and underserved markets thus benefiting the overall economy. Effective investor protection joined Clayton’s mission to improve both private and public markets.
Chairman Clayton issued the following statement in release:
“Working alongside the incredibly talented and driven women and men of the SEC has been the highlight of my career. I am proud of our collective efforts to advance each part of the SEC’s tripartite mission, always with an eye on the interests of our Main Street investors. The U.S. capital markets ecosystem is the strongest and most nimble in the world, and thanks to the hard work of the diverse and inclusive SEC team, we have improved investor protections, promoted capital formation for small and larger businesses, and enabled our markets to function more transparently and efficiently. I would like to thank President Trump for the opportunity, and the support and freedom, to lead the women and men of the SEC. In addition, the cooperation and assistance of Secretary Mnuchin and his team at the Department of the Treasury, Chair Powell and Vice Chair Quarles and their colleagues at the Federal Reserve, Chairmen Giancarlo, and Tarbert and the CFTC, Chairman McWilliams and the FDIC, and our other fellow federal financial regulatory agencies have been remarkable. I also want to thank my immediate predecessor, Mary Jo White, and all former Chairs of the Commission. The opportunities we have had are a result of their efforts and stewardship. I am also grateful to my fellow Commissioners and the SEC staff for their dedication. Through their continued service, I know the SEC is well-positioned for prolonged success.”
In recent months, the Commission significantly improved access to capital by updating several exemptions created by the JOBS Act of 2012. These changes included raising the funding cap on Reg CF (Regulation Crowdfunding) to $5 million from its prior cap of $1.07 million. Additionally, Reg A+ saw its funding cap rise to $75 million from $50 million. Both exemptions are utilized by online capital formation platforms to facilitate funding for smaller firms that cannot raise money in public markets. By improving access to capital for smaller firms, Clayton has left a legacy on US markets that should boost innovation, entrepreneurship, and opportunity for future generations – a key policy move that drives economic growth and prosperity for all.
In a separate note, Congressman Patrick McHenry, the Republican leader of the House Financial Services Committee, distributed the following statement:
“Chairman Clayton has worked tirelessly on behalf of Main Street investors throughout his time at the SEC. As Chairman, Jay has expertly led efforts to strengthen our capital markets, provide regulatory clarity, and expand investment opportunities to support savers and small businesses. Under his leadership, the SEC has played a key role in the whole-of-government response to COVID-19, and I thank him for his service to ensure our nation’s recovery and long-term success.”
In a release, the SEC published a list of highlights during Chairman Clayton’s tenure. They are republished below.
- Substantially enhancing, through Regulation Best Interest, the standard of conduct required for broker-dealers when dealing with retail customers, and clarifying the fiduciary duties owed by investment advisers to their clients;
- Providing retail investors with simple, easy-to-understand information about the nature of their relationship with their financial professional, through new Form CRS;
- Simplifying, improving and harmonizing the “patchwork” exempt securities offering framework utilized by smaller and medium-sized businesses and startups;
- Facilitating the ability of companies to transition to public status subject to strong investor protections, including through modernizing and simplifying corporate disclosures (including financial disclosures), expanding the scope of smaller public companies that qualify for scaled application of disclosure and other requirements, and expanding JOBS Act benefits to additional public companies while generally improving the review process for initial offerings;
- Increasing protections for retail investors against microcap fraud by modernizing the rule governing quotations in over-the-counter securities and issuing guidance regarding omnibus accounts;
- Enhancing the Commission’s whistleblower program rules to add clarity, transparency and efficiencies, allowing the Commission to get larger awards into the hands of whistleblowers at a faster pace;
- Standing up the comprehensive framework for the regulation of security-based swaps mandated by Title VII of the Dodd-Frank Act;
- Improving disclosure content requirements to reflect changes in technology, business operations and our economy more generally, including by adding a description of human capital resources as a specific disclosure requirement for the first time;
- Establishing a consistent framework to launch certain types of ETFs, promoting innovation and competition;
- Modernizing disclosure processes, both for companies and investment funds, to more effectively deliver material information to investors;
- Modernizing the shareholder engagement process, including the shareholder proposal process and the use of proxy voting advice businesses by investment advisers;
- Improving the National Market System (NMS) and rules governing securities exchanges and alternative trading systems to benefit investors; and
- Enhancing transparency in trading, including specific initiatives in alternative trading systems and the municipal bond market.