Signaling his intention to shift the focus of the Securities and Exchange Commission toward deregulation and reducing regulatory burden as a vehicle to create jobs and away from the Dodd-Frank Act and enforcement, President-elect Trump has chosen veteran Wall Street lawyer Jay Clayton as his nominee to head the SEC. If confirmed, as is expected, the SEC under Mr. Clayton is likely to move in a direction that differs sharply from that of the Obama administration and the current SEC Chair Mary Jo White, a former federal prosecutor who has collected record fines during her tenure from firms under the SEC’s supervision.
Mr. Clayton, a 50-year-old partner at Sullivan & Cromwell, forged deep ties to the financial industry from his work on major stock and bond deals, representing some of the most prominent firms on Wall Street. A 1993 graduate of the University of Pennsylvania law school, his practice has focused largely on mergers, acquisitions and initial public offerings, and on the capital markets. His biography indicates that he also has interest and experience in cybersecurity issues. Mr. Clayton was involved with Alibaba’s record-breaking $25 billion 2014 IPO, British Airways merger with Iberia and the sale of the NBA’s Atlanta Hawks. He also advised Bear Stearns in connection with its 2008 purchase by JP MorganChase and advised Barclay’s in connection with its acquisition of Lehman Brothers assets.
Like several other Trump nominees such as Treasury Secretary nominee Steven Mnuchin, National Economic Council Chairman Gary Cohn and White House Senior Adviser Steve Bannon, Mr. Clayton has a very close relationship with Goldman Sachs, having advised Goldman when it was receiving TARP funds and also in connection with Warren Buffett’s $5 billion investment in Goldman through Berkshire Hathaway in the midst of the 2008 financial crisis. Mr. Clayton’s wife, Gretchen, also works for Goldman as a broker and private-wealth adviser.
These Wall Street ties have led several Democratic opponents of Mr. Clayton’s nomination to assert that his prior relationships with Goldman Sachs and with several other major firms such as Barclays and Alibaba will make Mr. Clayton the most conflicted SEC Chairman in history and they note he will be required to recuse himself in any enforcement action involving Goldman Sachs or any of his other former clients. Both Senator Sherrod Brown (D-OH), the Ranking Member of the Banking Committee, and Congresswoman Maxine Waters (D-CA), the Ranking Member of the Financial Services Committee, have sharply criticized Mr. Clayton’s nomination, arguing that his nomination proves, despite Mr. Trump’s anti-Goldman Sachs rhetoric during the campaign, that Mr. Trump has no intention of being tough on Wall Street.
As Senator Brown put it in a statement, “It’s hard to see how an attorney who’s spent his career helping Wall Street beat the rap will keep President-elect Trump’s promise to stop big banks and hedge funds from ‘getting away with murder. I look forward to hearing how Mr. Clayton will protect retirees and savers from being exploited, demand real accountability from the financial institutions the SEC oversees, and work to prevent another financial crisis.”
Mr. Clayton has not taken many public positions on issues within the SEC’s jurisdiction. However, in one notable exception, Mr. Clayton led a task force that produced a 2011 New York State Bar Association report attacking the Obama administration’s SEC and Justice Department for “causing lasting harm to the competitiveness of U.S. regulated companies and the U.S. capital markets” through their “zealous” enforcement of laws aimed at American corporate bribery of foreign officials.
