As we enter our sixth year of publication, I am reminded of the old curse (or is it a blessing?), “may you live in interesting times.” Before our next edition is published, a new President will be seated in the Oval Office (for the first time in this publication’s history), the work to approve senior administration officials will be well under way, and the beginning of a new focus on the whys and wherefores of federal regulation will be taking shape.
In the financial services world, there has been much speculation about where the new administration is likely to take things. Of course, most of it is just that - speculation. Informed speculation, certainly, being based on what President-elect Trump said in the months leading up to his election, but nevertheless we all know that, given the realities of how our government operates, the best laid plans … A good example of this is in the area of securities regulation. There has been much talk of the new President’s desire to eliminate unnecessary regulation of financial services providers; yet anyone who has ever operated heavy machinery (and our system of government clearly qualifies as heavy machinery) knows that you don’t just stop on a dime and reverse course. Changes of direction must be slow, deliberate, and well planned or you risk disaster. It’s hard to believe that many regulations will disappear overnight (or at all), and it must be remembered that many regulations are written and enforced by non-governmental self-regulatory entities such as FINRA and the NFA. Much has been written about the nomination of noted securities lawyer Jay Clayton to head the SEC. Unlike his predecessor, Mary Jo White, Mr. Clayton is not a litigator with a strong enforcement background, but rather a transactional lawyer who specializes in mergers and acquisitions and capital markets transactions. Some suggest this indicates that the SEC’s current enforcement focus will be watered down in favor of a soft approach that favors corporations and financial services firms. Some commentators have gone so far as to suggest that any lawyer who has represented corporations or financial services firms is, a fortiori, unqualified to head the SEC (although many of those commentators seem to forget that Chair White also represented corporations and financial services firms when she was in private practice). Now it probably is true that the focus of the SEC will shift under the new Chair, but that always happens. It is also quite possible that the raw volume of enforcement actions will decline, and that Chair White’s focus on “broken windows policing” will be pushed to the side. However, it is hard to imagine that the SEC will show any less zeal for major cases and the pursuit of insider trading, fraud and market manipulation cases. (The last time I checked, top shelf M&A and capital markets lawyers hold no greater truck with insider traders, fraudsters and market manipulators than do top shelf litigators.) In the end, the SEC may well become more focused on streamlining regulation and easing the process of raising capital through securities offerings, but that doesn’t mean that the agency will be straying from its mandate. After all, despite the references I have seen to the SEC Chair being the “top cop” of the securities world, the SEC is more than a law enforcement agency. Enforcement may be the Commission’s largest division, but it certainly is not its only division. A quick perusal of the Commission’s home page indicates that its purpose is multi-faceted: “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Moreover, “[i]t is the responsibility of the Commission to interpret and enforce federal securities laws; issue new rules and amend existing rules; oversee the inspection of securities firms, brokers, investment advisers, and ratings agencies; oversee private regulatory organizations in the securities, accounting, and auditing fields; and coordinate U.S. securities regulation with federal, state, and foreign authorities.” In any event, it will be interesting to see whether, and if so, how much, the SEC and financial regulation generally is really transformed under a Trump presidency. As always, only time will tell. And, as always, we will be making every effort to keep you informed every step of the way. Happy New Year.