SEC Chair Clayton will leave before year's end

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Securities and Exchange Commission Chair Jay Clayton is leaving his post after three and a half years, as a new presidential administration rolls in.

The SEC announced Clayton's decision Monday morning. Clayton’s term is set to end in June 2021. SEC experts have said that if Clayton were to leave before his term ended, Commissioner Hester Peirce would take his place until a new chair is confirmed.

SEC Chair Jay Clayton will leave by the end of this year.

Clayton was appointed by President Donald Trump on Jan. 20, 2017. Before becoming chair, Clayton was a partner at Sullivan & Cromwell LLP.

“I would like to thank President Trump for the opportunity, and the support and freedom, to lead the women and men of the SEC,” Clayton said in a press release.

The announcement comes as it appears the White House will Change hands in January, as Joe Biden is the presumptive president-elect. Though President Trump has not conceded electoral defeat, the Associated Press and other organizations have declared Biden the winner. Trump has since begun letting go of some of his staff such as his Secretary of Defense Mark Esper.

Biden is expected to pick an SEC chair that is more polarizing, lawyers have said. Clayton was widely considered a centrist and was likely not to be reappointed by Biden. It’s important to note that the SEC chair historically doesn’t view municipals as a priority and municipal stakeholders have said it would be “pure chance” for the next SEC chair to have municipal finance experience.

Municipal issues are likely to be a point of bipartisan consensus, such as timeliness of financial documents and pricing transparency in the secondary market. The SEC has long been focused on the timeliness of issuers’ financial reporting.

Clayton almost left the SEC during the summer of 2020, following the announcement that he was Trump’s first pick to become the new top federal prosecutor in New York City. Trump fired the U.S. Attorney for the Southern District of New York in June, and since then Audrey Strauss has been serving as acting U.S. attorney.

During his time at the SEC, Clayton has pushed for more disclosure in the municipal market and published a statement in May with the Office of Municipal Securities on disclosure during the coronavirus pandemic. SEC staff also came out with a bulletin to address how anti-fraud laws apply to disclosures earlier this year.

During the summer, Clayton also oversaw an order granting municipal advisors temporary relief to arrange certain private placement deals without needing to register as a broker-dealer. That order was put into place until the end of this year and was heavily criticized by dealers and cheered by non-dealer MAs.

Clayton also put into place Regulation Best Interest in June 2019 — a new rule to strengthen the broker-dealer standard of conduct beyond existing suitability obligations and make it clear that a broker-dealer may not put its financial interests ahead of the interests of retail investor.

In 2018, under Clayton’s leadership, the SEC adopted amendments to SEC Rule 15c2-12, adding two new material events issuers must agree to disclose on an ongoing basis.

Clayton was born at Fort Eustis in Newport News, Virginia and was raised in Pennsylvania. He earned a B.S. in engineering from the University of Pennsylvania and a B.A. and M.A. in economics from the University of Cambridge as well as a J.D. from the University of Pennsylvania law school.

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