Compliance

Jay Clayton Named SEC Chair At Pivotal Time For Industry

As a new leader takes the helm at the SEC, advisers wonder whether the regulator’s recent focus on retirement industry conflicts of interest will be relaxed. 

By John Manganaro editors@assetinternational.com | May 05, 2017
Page 1 of 2

U.S. Supreme Court Justice Anthony Kennedy has sworn in Jay Clayton as the 32nd Chair of the U.S. Securities and Exchange Commission (SEC).

President Donald Trump nominated Clayton on January, 20, 2017, and he was confirmed by the Senate on May 2. The nomination by President Trump sends a clear signal to advisers about the likely style and character Clayton will bring to the Commission, especially compared with the ostensibly aggressive approach outgoing Obama-era Chair Mary Jo White brought to the role.

While the SEC is by design supposed to be non-partisan, in that no more than three Commissioners may belong to the same political party at one time, the political party that controls the presidency and gets to name the chair can naturally expect a “friendlier” SEC. Right now the Commission actually has three open vacancies, and so the full picture of what the regulatory body will look and act like moving forward is still coming together.

Under White’s leadership, the SEC launched an ambitious effort to expand its role in policing the retirement investing industry. Readers may recall the 2015 launch of the “Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative,” or ReTIRE for short, as a prime example. That effort had SEC examinations staff closely review whether registered representatives and their firms met their obligations under the securities laws and self-regulatory organization (SRO) rules, with regard to selection of account types—especially rollovers from defined contribution plans to an individual retirement accounts—and performing diligence on retirement investment options, initial investment recommendations and ongoing monitoring of investments.

The same SEC initiative had examination staff work to “confirm that marketing materials and disclosures provided to retirement investors are not deceptive or misleading.” Staff were further ordered to “confirm that disclosures regarding fees are complete and accurate, and that credentials and other endorsements are valid.”

White also caught the attention of retirement specialist financial services providers when she signaled the SEC could sooner-rather-than-later move ahead on potentially changing its rules for how advisers and brokers must address and disclose conflicts of interest. Much of the industry speculation was that the SEC’s independent advice standards would soon be made to look more akin to the approach historically taken by the Department of Labor (DOL)—considered by many to be a higher standard of care. 

All of that speculation has pretty much been made irrelevant by the victory of Donald Trump in last year’s presidential election—at least for the short- and probably the medium-term. Now it falls to Trump's pick for SEC Chair, Clayton, to continue or reverse the efforts championed by White.

NEXT: Clues from Clayton’s background