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Will the Real Jay Clayton Please Stand Up?
Traders Magazine Online News, May 25, 2017
There’s a new sheriff in town to police the securities industry. And that man is Jay Clayton.
So, is the fox now going to be guarding the proverbial $7 billion dollar per day equities market henhouse? Some in Congress have said “yes” but that might not just be the case. A lot hinges on Jay Clayton’s focus and resultant success.
President Donald Trump’s selection of Jay Clayton as Chairman of the Securities and Exchange Commission (SEC) is now a matter of history. But the lingering question on the collective mind of the markets remains - what kind of SEC Commissioner or cop will he actually be? And what will his legacy be?
William Cohan, former senior Wall Street M&A investment banker for 17 years at Lazard Frères & Co., Merrill Lynch and JPMorganChase and a New York Times bestselling author, said that as far as Clayton’s credentials, his background in M&A means he understands Wall Street, finance and capital structures. Not a bad place to start.
William Cohan
“He may not understand trading quite as well, but he understands all the documents that need to be filed. It’s a good background,” Cohan said. “My concerns are not with his knowledge, but with his dedication to the job – his inclination to do the job – that needs to be done.”
And that seems to be the early sentiment on Clayton, as one major private execution-only broker said that the firm views his candidacy as a “solid choice” and that Clayton has a good grasp of important industry issues.
But Cohan isn’t so sure.
What Does the Chairman Actually Do?
“What does an SEC head do? Part of it is simply, of course, ‘What the President wants him to do’, how much or how little does the President want the rules enforced,” Cohan said. “The problem has been that regardless of who the President has been for 10-15 years, Bush or Obama, the appointee has been milquetoast, ineffectual and has not gotten the job done that needed to get done, in terms of monitoring Wall Street before the crisis, and prosecuting bad behavior during and after the crisis.”
He added what the market really needs the SEC to do is make sure Wall Street doesn’t misbehave, and to hold it accountable when it does. Since about 2004, he reminds that the SEC Chairs and the heads of enforcement have been professionals revolving between Wall Street and Washington.
“Simply put, the biggest issue is the SEC’s reputation, i.e. who does it work for? Wall Street or the American people? Unfortunately, I don’t think Jay Clayton will be working for the American people; he’ll be working for his friends and former colleagues on the Street. But I hope I am wrong.”
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