The Senate confirmed former Sullivan & Cromwell partner Jay Clayton
as chairman of the Securities and Exchange Commission on Tuesday, with
a 61-37 vote. Before the ink was dry on his confirmation document, financial
industry groups already began pushing for quick reforms, among them, a
new uniform fiduciary rule for brokers and advisors.
With the Trump administration placing the reform of Dodd-Frank high on
their “to-do” list, it will be interesting to see just how
quickly the new chairman moves towards modification or repeal. However,
industry insiders see the uniform fiduciary standard rule as the low hanging
fruit that can give markets the quickest boost.
Under Dodd-Frank, the SEC has the authority to develop an investment-advice
rule, but it has yet to issue any such rule, or even a draft. The Department
of Labor finished a fiduciary rule for retirement accounts last year,
but its implementation has been delayed in Congress.
The executive vice president and general counsel of the Financial Services
Institute, David Bellaire urged Chairman Clayton to pursue a uniform fiduciary
standard rule, stating that FSI has “always believed the top priority
of the SEC should be protecting investors. Adopting a true, uniform fiduciary
duty that protects investors and their access to affordable, objective
financial advice must finally be given the serious attention it deserves.”
Even as Clayton is cleared to head the agency, two positions on the SEC's
five-person financial panel are yet to be filled. Democrat Kara Stein
and Republican Mr. Piwowar currently sit on the panel.
Cathy Weatherford, president and CEO of the Insured Retirement Institute,
agreed that chief among Clayton’s tasks should be for the Commission
to” take a leading role in promulgating a consistent best interest
standard of care for financial professionals” as well as a variable
annuity summary prospectus.
Other financial experts believe the Chairman should continue on the path
that was set forth by his predecessor. According to Dennis Kelleher, President
and CEO of Better Markets, Chairman Clayton needs to make fixing “the
conflict-ridden credit rating agencies” and adopting a comprehensive
fiduciary duty rule among his top priorities.
Among the other challenges the incoming chairman will have to tackle is
the matter of declining IPOs, which is concerning to many insiders. Some
see the dip in IPOs as a direct result of the stricter regulations coming
out of Dodd-Frank. The SEC is already making moves to address those concerns
by chairing a symposium in New York on May 10 that will discuss the economic
causes and consequences of a declining IPO market. The capital raising
function of IPOs is seen as imperative to maintaining liquidity within
the U.S. financial markets.
Democrats have not been shy about opposing the nomination of Clayton, claiming
he will weaken the agency by rolling back Dodd-Frank regulations in order
to garner favor with his former Wall Street clients. Sen Elizabeth Warren
(D-MASS) said that we would have weaker enforcement under Mr. Clayton,
and suggested he recuse himself from any disciplinary action decisions,
due to his extensive Wall Street ties.
Republicans counter the Democrats, however, by pointing out that Clayton’s
many years of experience on Wall Street and his wealth of knowledge about
the intricacies of the financial markets make him the best-qualified person
to head the Commission.
Senate Majority Leader Mitch McConnel (R-KY) said about Clayton, "His
extensive work in the private sector will serve him well as he looks to
strengthen our financial markets, thereby supporting American businesses,
boosting job creation and spurring economic growth."
Melissa Lucar for more information.