FOR IMMEDIATE RELEASE
Monday, June 22, 2020
Contact: Pamela Russell at 202-618-6433 or prussell@bettermarkets.com
Washington, D.C. – Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement in response to the reports that SEC Chairman Jay Clayton is going to be nominated to be the U.S. Attorney for the Southern District of New York:
“Before SEC Chairman Jay Clayton is awarded another high-profile, powerful government position, the public should consider his record over the last three years as the leader of what is supposed to be the nation’s premier investor protection and market integrity agency.
“While the Chairman often says that he worries about “Mr. and Mrs. 401k” and protecting Main Street investors, his record shows he has been protecting the profits of Wall Street and his former clients. The fact that almost all of his actions are cheered by the financial industry, and Wall Street’s biggest banks in particular, while being opposed by all or almost all investor, consumer protection and financial stability advocates is a red flag clearly indicating who he really has been looking out for.
“Demonstrating that, here is a partial list of his anti-investor, pro-Wall Street record:
- He championed the misleadingly labeled “Regulation Best Interest” which failed to require a fiduciary duty putting investors’ best interests first, which protected Wall Street’s business models and profits, not investors.
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He has led the agency’s efforts to expand and push investors into dark, minimally regulated private markets to the detriment of investor-friendly, more transparent public markets with investor protections while bemoaning the shrinking number of public companies, conditions that he has exacerbated by expanding private markets.
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He has attacked investors’ proxy rights, including disenfranchising shareholders from voting on key issues, even though some seek to correct the decades of anti-worker, anti-minorities, and anti-environment corporate policies.
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He has attempted to subordinate investors’ proxy advisory firms to corporate management, removing a critical source of independent advice that shareholders need to make informed proxy decisions, including regarding compensation packages for CEOs and board members.
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He failed to investigate or even show any interest in a reported fraudulent scheme to corrupt the proxy proposals rulemaking process via fake comment letters (which may well have been criminal violations of the mail and wire fraud laws), which he personally relied on in voting for the proposals.
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He has led efforts to limit disclosure to investors, including prominently those related to material environmental, social and governance issues.
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He voted to propose a rule that would limit the effectiveness of the whistleblower program, which has been a $2 billion success story, but which Wall Street and corporate America hate.
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He weakened executive accountability and increased the probability of accounting fraud by removing the required auditors’ attestation of CEO’s reports.
“In addition, while there are a few exceptions, SEC enforcement under Chairman Clayton has been AWOL on Wall Street and corporate boardrooms, focusing instead on those companies and people who are not wealthy, powerful and well-connected.
“Chairman Clayton’s deficient record at the SEC actually doesn’t stop there. In addition to the many anti-investor, pro-Wall Street actions he has taken, there’s also a long list of critical reforms, many required by law, that he has ignored.
“Foremost among them has been his failure to enact limitations on executive compensation for high risk staff at Wall Street’s too-big-to-fail banks. This was required by the Dodd-Frank Act for all employees who could endanger the bank with high-risk, reckless activities. He has also done nothing to enact the required “claw back” rule that would force corporate executives to give up any ill-gotten gains when their company restates their financial statements.
“Chairman Clayton has not tackled the well-known and longstanding conflict-ridden business model of the credit rating agencies, which appear to have once again slapped inflated ratings on questionable credits during the debt-binge of the last 10 years and are now being downgraded at alarming and destabilizing speeds. And, he has refused to affirmatively protect investors from forced arbitration proceedings that are stacked against ripped-off investors and favor Wall Street’s and large corporations’ army of lawyers, even though the Dodd-Frank Act gave the SEC explicit authority to prohibit or limit forced arbitration.
“Finally, even in the one area where one might think the Chairman was in fact on the side of investors, his actions have been half-hearted and inadequate. Regarding market structure, the Chairman refused to enforce the rule that created the Consolidated Audit Trail (CAT), potentially the most powerful and important investor protection tool in the history of SEC. Predictably, the financial industry has spared no expense to kill the CAT and, rather than using all the power and authorities available to him, the Chairman has, among other things, refused to hold SROs accountable for failure to implement the CAT or even meet required deadlines and minimal requirements. As a result, there is no operational CAT today and there likely won’t be one fully functioning for many years, if ever. The foreseeable result is that investors are still getting ripped off every day in rigged markets.
“His other market structure initiatives, such as the Transaction Fee Pilot and upgrading of public market data systems, have also suffered from excessive caution. Regarding the maker-taker pilot, he refused to take the side of investors and recognize the overwhelming evidence showing that legalized kickbacks are harmful for investors and the integrity of the markets. Instead, the SEC took no position, which was the basis for the courts to throw out the rule and hand the industry a devastating victory.
“That’s the record that should be considered if and when Mr. Clayton is considered for another government position.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.
