SEC’s Clayton Slower to Hold Public Votes Than Prior Chairs

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By Andrew Ramonas

The Securities and Exchange Commission has yet to vote in public under Chairman Jay Clayton, who has waited longer than any recent predecessor to hold his first open meeting, according to a Bloomberg BNA analysis.

Clayton, an independent who was sworn in May 4, has gone more than 82 days without public deliberations on proposing or adopting SEC regulations. The Donald Trump appointee hasn’t set a date for an open meeting or said why he hasn’t scheduled one. Clayton and his staff are working behind closed doors for now, leaving only hints about their possible near-term rulemaking plans on market structure, public company reporting, and other issues.

The chairmen named during the Bill Clinton, George W. Bush, and Barack Obama administrations held their first open meetings about 41 days into their terms on average, a Bloomberg BNA study of SEC records shows.

At 71 days, Obama appointee Mary Schapiro took the longest before Clayton. Mary Jo White, another Obama pick, was the quickest, presiding over her first open meeting the same day she was sworn in.

Republican Chairman Harvey Pitt, a Bush appointee who like Clayton became part of a three-member board with one Democrat, held his first public session 53 days into his tenure. Under SEC quorum rules, a three-member commission can only act if all three commissioners participate, unless there’s a recusal or disqualification.

In response to a question from Bloomberg BNA, Commissioner Michael Piwowar, who held two open meetings as acting chairman earlier this year, said he wasn’t “surprised or troubled” by the time Clayton is taking to hold public votes on agency matters. The commission can move forward on some policy initiatives without an open meeting as it did on initial public offerings in June, he said. Staff action alone allowed all companies to file draft registration documents for IPOs confidentially to encourage more of them to go public.

“We’re going to be able to do things that are going to be able to help the capital markets,” the commissioner said.

‘Busy Guy’

Piwowar said he and Democratic Commissioner Kara Stein completed “a number of things” in the agency’s regulatory queue before Clayton joined the agency. Clayton now is busy building a team of senior staff who can work on what’s next, Piwowar said.

The chairman has held more than 20 large staff gatherings at SEC headquarters, and has met several times with agency divisions and offices, in and out of Washington, a commission official told Bloomberg BNA.

“He’s been a busy guy,” said the official, who spoke on condition of anonymity.

William McLucas, an SEC enforcement director under former chairmen Richard Breeden (R) and Arthur Levitt (D), said the date of an agency leader’s first open meeting is “not a real barometer” of the individual.

“I attach very little significance to the timing of the first meeting,” said McLucas, chairman of the securities department at Wilmer Cutler Pickering Hale and Dorr LLP in Washington.

Open v. Closed Meetings

Commissioners vote privately to bring enforcement actions and settle cases, but typically hold open meetings to consider rulemaking and related issues.

The SEC under Clayton has had more than a half-dozen closed meetings, according to agency records. The last open meeting was in March under Piwowar. He and Stein voted unanimously to adopt a rule that shortens the time frame to settle most trades from three days to two.

Agenda items for the first open meetings of former chairmen included rules on identity theft (White), short sale restrictions (Schapiro), and accelerated filers (Bush appointee Christopher Cox). All of the votes were unanimous.

Clayton, like Piwowar, probably would need Stein’s support to adopt or propose regulations in an open meeting with only three commissioners. Stein wielded veto power when she and Piwowar were the commission’s only two members, but worked with him to advance matters. She still can torpedo anything at an open session by not showing up, even when Clayton and Piwowar are in agreement, under the agency’s quorum rules.

The addition of Republican think-tank scholar Hester Peirce to the SEC would take away Stein’s special clout. However, even assuming Senate confirmation, Peirce, nominated earlier in July, is unlikely to be on board any time soon.

Moreover, Clayton “probably would want to have consensus on the first items he brings to an open meeting,” former Democratic Commissioner Annette Nazareth told Bloomberg BNA. She leads the trading and markets practice at Davis Polk & Wardwell LLP out of Washington and New York.

Chairman’s Agenda

Clayton could take up a pilot program to lower fees traders pay for stock exchange access and engage in rulemaking under the FAST Act in an open meeting, Piwowar said. The FAST Act directed the SEC to simplify the commission’s Regulation S-K rules, which cover companies’ non-financial statement reporting requirements.

A study on access fees could come up for commission consideration “in the coming months,” Clayton said in his first major policy speech in July. Staffers also are “making good progress” on preparing Regulation S-K updates, he said.

A rulemaking agenda drafted under Piwowar included a transaction fee pilot program and FAST Act implementation.

Clayton’s private meetings with industry groups also could offer hints about possible next steps. Top officials of the Investment Company Institute and Investment Adviser Association met with Clayton and his staff in June.

ICI president Paul Schott Stevens and his colleagues discussed “a number of issues affecting registered investment companies,” such as proposals on business continuity and transition plans, derivatives use, and investment company reporting modernization, a memorandum said.

The organization generally supports agency initiatives that would allow mutual funds to post shareholder reports online and would require investment advisers to create plans for mitigating client harm in the event of a major business disruption, according to commentletters to the SEC. The group opposes a proposal that would restrict funds’ use of derivatives. All of those matters are in the “final rule stage” of the SEC’s docket.

IAA president Karen Barr, her staff, and representatives of Franklin Templeton Investments, J.P. Morgan Investment Management, T. Rowe Price Associates Inc., and other firms talked about “a number of issues affecting registered investment advisers,” including the fiduciary rule, a memo said. The organization has encouraged the SEC to move forward with rulemaking.

The IAA meeting came after Clayton asked the public to assess the Obama-era Labor Department rule intended to fight financial industry conflicts of interest by requiring retirement advisers to place customer interests ahead of their own. Under the Dodd-Frank Act, the commission is empowered to initiate its own rulemaking as part of its oversight of financial advice providers.

“I think he’s going to be a very activist chairman,” McLucas said. “He’s a very smart guy.”

To contact the reporter on this story: Andrew Ramonas in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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