The Commission Under a New Administration

• DOI: http://doi.org/10.1002/jcaf.22317
• Author: Donald A. Walker
• Published date: 01 January 2018
• Date: 01 January 2018

174

© 2018 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22317

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SEC

The Commission Under a New

Administration

Donald A. Walker Jr.

On July 12, 2017, the Securities

and Exchange Commission’s

(SEC) newly appointed chair-

man, Jay Clayton, gave his

first public address before the

Economic Club of New York.

He outlined the eight Guiding

Principles he planned to use to

shape his chairmanship. Those

principles were set forth in a

manner that seeks to reduce,

if not eliminate, distraction

and needless addition of fur-

ther demands for compliance.

His emphasis was to focus on

the mission of the SEC, as

often stated, to protect inves-

tors; to maintain fair, orderly,

and efficient markets; and to

facilitate capital formation. His

stated litmus test for actions

was whether the SEC is acting

in the long-term best interests

of the “Main Street” investor,

whether as an individual or

relying upon advisors or invest-

ment managers.

Chairman Clayton empha-

sized the importance of main-

taining the SEC’s historical

regulatory approach of requir-

ing and overseeing presenta-

tion of a package of accurate

disclosures that are material to

an investor’s decisions about

investing. He also emphasized

the importance of requiring

and overseeing the responsibili-

ties of participants in the secu-

rities markets such as broker-

dealers, advisors, and clearing

agencies and markets. Finally,

he emphasized the importance

of the SEC’s antifraud and

enforcement actions to support

investor protection and fair

markets. He rejected assertions

that the SEC should change

its fundamental approach to

regulation.

Behind his presentation,

a reader could sense a chair-

man who opposed consenting

to “mission creep” driven by

outside forces—the use of the

SEC’s disclosure process to pro-

vide information that lawmak-

ers or other regulatory bodies

might deem important to their

missions but which might not

be material to an investor.

Chairman Clayton specifically

challenged the SEC and law-

makers and other regulators for

“… expanding required disclo-

sures beyond the core concept

of materiality.” Examples of

such information could include

disclosures about doing busi-

ness with states asserted to

be supporting terrorism and

extensive disclosures about

executive compensation and its

relationship to average worker

compensation.

Chairman Clayton linked

the expansion of required

disclosures to the decline in

U.S.-listed public companies

over the past two decades. He

suggested that the expanding

disclosure requirements are

cumulative—that disclosures,

once provided, become perma-

nent and that any additional

requirement should be ana-

lyzed as a cumulative as well

as an incremental burden. My

own shock at reading a 450-

page Form 10-Q in 2012 that

had been 250 pages in 2008 is a

personal attestation to the con-

cerns the chairman highlighted

about burden as well as about

materiality. As a practice, com-

panies find it difficult or inde-

fensible to remove a disclosure

once it takes root in an SEC

filing. Companies analyzing the

burden of being a public com-

pany, if not driven by a need

for substantially more capital

or liquidity for shareholders,

might be well advised to stay

private as long as possible.