Jay Clayton gave his first public speech on Wednesday as Securities and Exchange Commission chairman, telling the Economic Club of New York that he’s in charge of an agency that has much more discretion over its agenda than his predecessor, Mary Jo White.
In his speech, Clayton focused on disclosure overload and the unintended consequences of overregulation for hampering capital formation. In particular, he said,” the reduction in the number of U.S.-listed public companies is a serious issue for our markets and the country more generally” because that limits the ability of retail investors to participate in their growth.
Clayton has only been on the job since May 2, but in interviews and limited remarks so far he’s made it clear that capital formation is his main priority for the SEC. On Wednesday he elaborated on his “guiding principles” for the agency and specific actions the agency should take in the near-term to further its mission.
Although Clayton says the SEC’s focus on disclosure and materiality to guide its regulatory approach is sound, he’s worried it’s “worked so well” that the SEC, lawmakers and other regulators have implemented too many required disclosures that go beyond materiality to investors.
Clayton wants to the SEC to improve its rule-writing so that affected companies can determine how to comply and how to demonstrate their compliance. “Vaguely worded rules can too easily lead to subpar compliance solutions or an overinvestment in control systems,” said Clayton.
Clayton mentioned the SEC’s move to open up the JOBS Act for all IPO draft registration statements even if they do not qualify as emerging growth companies. The purpose is to encourage companies to go public in U.S. markets and at an earlier stage, by allowing companies of all sizes to utilize the non-public review process for draft offering documents.
The SEC plans to continue to have “strong and active enforcement and examination programs.” The agency will put significant effort towards “fraud and shady practices in the markets, particularly in areas where Main Street investors are most exposed.” Clayton says the agency is already stepping up activities to identify and prosecute pump-and-dump scammers, fraudsters who target retirees, and those who use new technologies like social media to exploit investors.