Incoming Securities and Exchange Commission Chairman Jay Clayton will be stepping into his post just as the Trump administration plans to rein in funding for federal agencies.
While funding cuts will plague the agency during his tenure, Sullivan & Cromwell partner Clayton — who was confirmed by the full Senate on May 2 by a 61-37 vote — has been chided by lawmakers and others for representing Wall Street firms that he now must regulate.
Industry groups were quick to applaud the former Sullivan & Cromwell partner’s appointment, with most expressing their view that Clayton should put adopting a uniform fiduciary rule (also known as a best interest standard) for brokers and advisors at the top of his priorities.
Chief among Clayton’s priorities should be proposing a “harmonized best interest standard” for broker-dealers, Paul Schott Stevens, president and CEO of the Investment Company Institute, said recently at ICI’s Annual Meeting in Washington.
ICI, Stevens said, is “deeply disappointed” that the Labor Department’s fiduciary rule was only delayed by 60 days — with a compliance date of June 9 — “because the rule is already causing great harm.”
ICI members complain that “hundreds of thousands of small retirement accounts have been ‘orphaned’ just since the Department” announced the rule’s 60-day compliance extension, Stevens said.
“Faced with the sizable if uncertain legal and regulatory risks of assuming DOL fiduciary status vis-à-vis these fund shareholders, brokers are simply resigning from small accounts en masse,” he said. “All this carnage is unnecessary because, in the end, we believe the rule must be rescinded or significantly revised.”
Senate Banking Committee Chairman Mike Crapo, R-Idaho, downplayed Clayton’s ties to Wall Street as nothing new for an SEC chief, saying he was confident Clayton will be “vigilant to ensure that he acts appropriately and ethically.”
But the top Democrat on the committee, Sherrod Brown, noted that while Clayton has experience as a corporate lawyer, “his deep ties to Wall Street will leave him hopelessly conflicted in the SEC’s most high-profile” enforcement actions.