The Commission Under a New Administration

Published date01 January 2018
Date01 January 2018
© 2018 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22317
The Commission Under a New
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
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
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.

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