By Alex Monje
President Donald Trump has nominated Wall Street lawyer, Jay Clayton, to head the Securities and Exchange Commission (SEC). Jay Clayton, of the high-powered New York City firm Sullivan & Cromwell, has built a career defending the likes of Goldman Sachs and other Wall Street banks. There is little doubt that Clayton is qualified to lead the SEC; his successful career in securities litigation alone is evidence that he possesses a mastery of securities law. Clayton is also a double graduate of UPenn, which is considered the top school for finance, and holds a B.A. from Cambridge. Frankly, it seems like Clayton is the most qualified nominee for his respective position when compared to all of Trump’s other nominees for various executive posts.
What, then, could ever be the problem?
One of the SEC’s leading unsettled agenda items is the proposed regulation that would require stockbrokers to act in a client’s best interest when selling and giving advice on non-retirement accounts, rather than pitching products that would yield the highest commission for the broker. Another issue yet to be addressed is the SEC’s authority under Dodd-Frank to ban or limit the use of forced arbitration clauses in brokerage accounts. Will Clayton allow the SEC to use that authority? What about the proposed “Goldman Rule”? Will Clayton crack down on the conflicts of interests these banks face when acting as both a broker and a dealer in the same transaction? You know, because that contributed to the financial crisis and stuff?
What’s the issue with Clayton?
Trump is asking a man who has made an exceptionally successful career out of defending Wall Street against investors, and who even once argued that bribery laws should be relaxed in order to make American businesses more competitive abroad, to now stand up for the little guy.
The problem is not whether or not he is capable. Jay Clayton is an exceptionally capable securities attorney. The question is – will he fight to represent and protect the same parties he has built a career defending Wall Street against?
If the answer is yes, Americans have a Leonidas on their side – a truly accomplished advocate.
However, should the American people truly expect Clayton to abruptly about-face? Will Clayton increase the oversight of exchange traded funds as they become more advanced and complex, or will his experience lead him to shield banks from new regulations?
The real question the American people should ask Clayton is – are you with us?