Senator jay walden to be recognized by President Trump to be the head of the securities and Exchange Commission. This is two hours and 25 minutes. The meeting will come to order. This morning we will hear testimony of jay clayton be the head of the securities and Exchange Commission. He has extensive experience in the markets as a highly decorated securities trader. He has helped to inkrecrease th ability of those to invest in the united states. One area na mr. Clayton has said that he will focus on is market formation. The access is the lifeblood of the economy. The jobs act helped to revitalize the primary markets in congress and the s. E. C. Should continue to find ways to help companies to go public to allow the investors the share in their success. Recently, this committee marked up several bipartisan securities bills, and we encourage you, mr. Clayton, if confirmed to help others identify securities area, which could use legislative improvement. The s. E. C. Has a important threepart mission, and maintain fair and orderly markets and facilitate Capital Formation. Each part of the mission is equally important, and should not come at the expense of another. I raise it, because the s. E. C. s mission is critical to every u. S. Citizen and retiree. And investors should participate in the markets on fair foot sog they can pay for the lifes events such as college and save for retirement. We also need to help investors have ip informed material to make inle forred investment decision. I have repeatedly stressed for the u. S. Financial system and its markets to remain the preferred destination for investors throughout the world, and the s. E. C. Has an Important Role to that end. I look forward to hearing more from you on how we can help companies grow, and americans get hired an investors share in the Wealth Creation by these companies. Another important issue is that the s. E. C. Is tasked with ensures that stock market rules and regulations are s appropri given that most of them were promulgated in a time when technology was less advanced. It is important that we serve the needs of the investors, and for the s. E. C. To do retrospect tiff reviews of their own regulations to make sure they are working out as intended and still acceptable. This is in line with the president s own executive orders on regulation. And other reg yu ulators are sut to Economic Growth and regulatory paper reduction act which statutorily demands a review of existing regulations to identify which are outdated, unnecessary or unduly burdensome. And the while, technically, the s. E. C. Is not subject to egripa the predecessor came before the committee and said that she is committed to reviewing the s. E. C. s rules in that fashion, a and a commitment like that is one that many would like to see continue. Additionally, it is important for the s. E. C. To have robust cost benefit analysis, and i have stated this position, and restated the cost benefit analysis in an executive order, and i look forward to hearing from you in these issues as well as what you hope to prioritize at the s. E. C. Congratulations on the nomination, and thank you you and your family for the willingness to serve. I turn it over now to senator brown. Thank you, mr. Chairman. And congratulation, mr. Clayton, on your nomination to be the chair of the securities and Exchange Commission, and i appreciate your willingness to enter Public Service, and we all know the demands it places on you and your beautiful family, and thank you for willing to stand up here. And in the past nomination hearings, even though the technology has changed how the markets work and for example, how do we improve oinvestor protection, and have better Financial Statements, and bring real accountability for misconduct. Candidate trump certainly understood that the American People are tired of the continual news misbehavior on wall street with far too often no consequences or accountability. A year ago candidate trump went to the site of the stand up for the little guy speech in iowa given by and also the home of radar which if you are not over 50, you will not know. And so, he said that he knew the people on wall street, and he would not let them get away with murder. That is candidate trump. The people in the audience would be surprised that he picked the alumni of Goldman Sachs to occupy the top two jobs at treasur treasury, and turned to Goldman Sachs to run the agency, and as he knew, the sacrifice to pay for College Bills and down payment on the homes, they are less trusting of the market and whether it is another flash crash, a billion dollar ponzi scheme, people are not trusting the market with their hard earned savings, and that is what you are working and walking into. We will be debating whether retirement advisers should put their clients interests first, and we bait here whether retirement advisers should put their clients interests first, and it is not hard to see why people feel that way. And in recent years, we have witnessed the Financial Risks of hacking and cyber crime, and Climate Change, and it seems that the list of concerns is growing longer, and the insistence for remove progtections against fraud and abuse grows louder and more sweeping as, as amnesia, and collective amnesia is swept across this body. I hope that we dont spend the next two hours talking about issues that you agree are important only to be ignored if you are confirmed. You have spent your career protecting some of the biggest names in wall street, and the relationships pose a host of conflicts for the position. I am concerned that you may need to recuse yourself too often at a time when we need a strong and independent s. E. C. Chair on the front light of enforcement and not watching from the sidelines. Your record representing banks, and bankers and hedge fund, and executives speaks for itself, but they are well represented among the president s friend, and supporters and advisers and far too many people in all three branches of government. I want to hear today what you will be doing to represent glass workers in lancaster, ohio, and Steel Workers in canton, ohio, and inm oso cases a private equity or hedge fund took control of their company and hastily shipped the jobs over seas. The people with jobs scrape by as the incomes are stagnant and the benefits and the paychecks have grown smaller over the years, because the management is more worried about pleasing wall street, and padding their profits raer thr than care about working people. Meanwhile, executive pay is up, and up, and up, and the workers working near retirement have had the pensions and Health Care Benefits slashed. And that is the disclosure of the corporate disclosure spending, and the fiduciary spending, and the corruption efforts of the Mining Industries, and i could go on and on and on and the special interest influence in this body and the administration, and that is why all of those rules are important. There is a lot of ground to cover. If i dont get through all of my questions here, and i know that the colleagues will do the same, submit them separately for the record. Mr. Chairman, thank you, and mr. Clayton, thank you again for your willingness to serve. Thank you very much, senator brown. And mr. Clayton will you now rise and raise your right hand. Do you swear or affirm that the testimony that you are about to give is the truth, the whole truth and knot obeinothing but so help you god . Thank you. And the one more question, do you agree to appear and testify before any duly constituted committee of the senate . Thank you. You may take your seat. Your written statement is a part of the record in its entirety and again, i give you my congratulations on the nomination, and before you begin your statement to the committee, you may, if you choose introduce the members of your family. I see that you have a beautiful family here with you. Great. I will do that. Thank you, senator. I will start here at this end, and my father Walter Clayton and my mother Catherine Clayton and my wife gretchen and my daughterers haley and jasper, and my son wyatt, and my youngest brother andrew and hi wife michelle are all here for me today. Thank you, and you are fortunate to have a beautiful family and have them with you here today. And mr. Clayton, you may proceed. Thank you very much, senator. Chairman, crapo and ranking members of the committee, im honored to appear before you today as President Trumps nominee to chair the securities and Exchange Commission. I want to thank you and the staff for the time that you have spent with me. I have enjoyed and learned from our meetings. Our Capital Markets have far reaching and profound effects for every american, and make shoog ur that the markets are fair, open, orderly and efficient, and making sure that the investors are protected is the fundamental responsibility of the s. E. C. If confirmed, i will take up this responsibility with energy and purpose. I pledge to work with my fellow commissioners, and the s. E. C. Staff, and this committee and the many others who support, and defend our Capital Markets. And the importance of Government Service was instilled in me from a young age, and six weeks after i was born, my father shipped out to vietnam as a Second Lieutenant and my mother 20 at the time and i moved to her childhood home in likens, pennsylvania. We lived with her parents and four younger brothers. And the lucky for me, my grandfather, pat kerwin, the eighth and last child of coal miners and Public Servant in title and action took a interest in. These experiences much more maine street than wall street made a deep and lasting impression on me. When i entered the ninth grade we moved as a family for the last time to delaware county, pennsylvania. I met new friends mostly through sports. One of those friends who has long been my best friend is my wife gretchen. We met 26 years ago and have been married 25 years. I want to specifically thank gretchen for her encouragement, love and support. As chair of the scc, i will be mindful of my responsibility to my children and their generation. During the course of my 20 plus career as a transactional lawyer its been my privilege to work with leaders in the public and private sector including a landmark transactions such as the Worlds Largest ipo as well as important transaction during the dark financial crisis. When i worked in new york on the laws and markets in new fewer than a dozen countries, france, sweden, switzerland, greece and germany i learned that the worlds Capital Markets are very interconnected and more broadly that america is indeed the greatest country. My work involves counseling a small number of businesses and individuals, my father and mother operated a small logistics business. There were ups and downs and i learned firsthand the machine challenges that small and medium sized businesses faced as well as their importance to the economy. Based on all my experiences nationally and internationally on wall street and maine street i firmly believe that well functioning Capital Markets are important to every american, two, all americans should have the opportunity to participate in and benefit from our Capital Markets on a fair basis, including being provided Accurate Information about what they are buying when they invest and three theres zero room for im committed to weeding out shady fraud, i recognize they under mine the hard earned confidence essential to our Capital Markets. I plenl to you and to the American People that i will show no favoritism to anyone. One last comment. Over 70 years the u. S. Capital markets have been the envy of the world. Our markets have allowed our businesses to grow and create jobs, provided a broad Cross Section of america to grow. Including Pension Funds and retirement assets, in recent years our markets have faced growing competition from abroad. U. S. Listings by non have slowed dramatically and clear that our public Capital Markets are less attractive to markets than in the past. As a result Investment Opportunities for maine Street Investors are more limited. Here i see meaningful room for improvement. I am excited to work with you, my fellow commissioners and the scc staff to pursue those improve. S and in doing so i will always be vigilant to ensure that the commission is steadfast in protecting investors. Thank you for this opportunity. I look forward to sooereceivingr advice. Thank you. I would like to remind the members of the committee we will be work onging on a five minute timeframe and encourage that so all colleagues can get their questioning in and as senators are prone to do you may get a question at the end of the five minutes, if that happens i will allow you to answer but encourage you to be brief in those answers. First, you are highly regarded, some raised concern that your success and former clientds will create conflicts for you and frankly, would you quickly provide us your thoughts on this issue . Yes, snarenator. I will try to be brief. I have been fortunate to have a diverse experience as a transactional lawyer and securities lawyer dealing with a number of participants both nationally and internationally in a number of different settings, securities offerings, mergers, acquisitions and regulatory matters et cetera, i believe the types i worked on which involved problem solving is a strength. As far as the extent of my practice, and whether the recusals that would be required in the potential conflicts will impair my ability to act as chair in Security Exchange commission, i do not believe they will, i have discussed this at length with the office of government ethics, this is not a new issue, theres a protocol in place for dealing with those matters. Most importantly i believe if i am recused that my fellow commissioners will be able to handle the matters ably and to good effect. Thank you very much. And i agree your observation, it seems a persons success in a field we are now asking them to lead in agency could be a criticism, so i appreciate your commitment the assure that conflicts will not arise and that you will fairly and impartially administer the agency. Mr. Clayton in your Opening Statement you discussed the derth to keep the Capital Markets robust serving as engines for the economy, can you let us know how the acc can aid in this particular process . Yes. I am looking at this from the outside. I very much look forward to discussing this with my fellow commissioners and the scc staff but i will note that easing the onramp to the public Capital Market process, when i say easing the onramp i dont mean easing the regulation that Important Companies face, making it less costly up front to become a Public Company has had an affect on the market. When i go to meetings where a company is considering whether to go public or not one of the first questions asked is this an emerging Growth Company because thats made it easy to become registered Public Companies in this country. Thank you. The equity markets have seen a lot of change in the past few decades including products listed as well as the Technology Behind it and the investors participating in it. Your predecessor as well as the current acting chairman and other commissioners stated theres a need to review the current equity Market Structure and such review should be disciplined and conducted a data driven manner. What are your thoughts of continuing this and what steps does the scc still need to do . Senator, i think it is very apparent that technology continues to change our markets. And that is something that will continue. The markets respond, tech knowled technology responds, we need to currently as far as the specifics of the Market Structure, analysis that the commission has going on now, i do believe that they should continue. I have become thanks to some of the questioning from you and your staff become more familiar with that and i do believe we should continue examining Market Structure Going Forward. Thank you. I just let you know at the conclusion of my five minutes that this is a very important issue to us and we look forward to receiving the input from the scc from its analysis so i encourage you to pursue that very aggressively. Thank you. I will yield back 15 seconds out of my five minutes senator brown. I will take it. Thank you, mr. Chairman. Given this administrations unprecedented business in commercial ep tanglement entanglement and lack of transparency we must focus on conflicts of interest the case to have scc isnt hypothetical in 2002 President Trumps casino business enforcement action over the use of nongap financial data, before the case he sent a letter to the entire commission asking for leniency and then sent a letter to then chair harvey pit for quote unquote being fair. Chairman i would like to submit those documents for the record. Without objection admit to. In a administration replete with billionaires, had multiple conflicts of interests and ethical lapses how would you ensure the sccs independence and matters that affect his personal business, the president s, and other Administration Officials businesses . I will repeat if im lucky enough to be confirmed im commit tod committed to showing no favortism. What team did you communicate with priority being selected as the president s nominee . Members of the Current Trump administration or Transition Team . I was asked for the Transition Team how i got introduce to this, asked by the Transition Team for my thought on the Capital Markets and to improve Capital Formation did not think that i would be sitting here today when i met with them. The possibility of me going into Public Service was raised. I then met with members of the Transition Team who screen candidates and then i met with now President Trump, mr. Priebus and mr. Bannon to be interviewed for a job and nominated. Would you reconstruct not now but submit to the names of the committee and who you met with in the first round . Yes. Do you know if anyone you spoke with has businesses regulated by the fcc . I do not but expect they do . Would you submit that to us also . Yes, to the extent i can yes. Thank you. The president directed the review of Financial Statement and planned quote to do a big number on dodd frank, gary cone former president of goldman saks declared quote were going to attack all aspects of doddfrank, what aspects of doddfrank will you be attacking . I dont have any specific plans for attacks, senator. I do believe that doddfrank should be looked at in particular rules that have been in place as to whether they are achieving their objectives affectively but i have no specific plans for attacking a particular provision of doddfrank, senator. Has anyone you met with talked to you, anyone from the transition or administration you have talked to made suggestions and questioned have they questioned the efficacy and fairness of doddfrank and suggested to you that it needs reform or change . Or repeal . As a general matter, the question of whether doddfrank has been effective is a question that is on the minds of people in the administration based on my interaction with them, yes, i had discussions with them and a particular aspect of it. My interaction with the Administration Since i was nominated has been quite limited do you see your job to help the administration as they have said they want to deregulate wall street or do you see your job following the law and finish writing the rules mandated by congress . Senator, i see my mission as very much the tripart mission of the fcc, investor protection, Capital Formation and efficient markets. Okay. Thank you. Thanks. Thank you. Senator shelby. Thank you. Welcome, mr. Clayton. I believe that the nominee before us today represents what we understand valued this country, an individual who rises from modest means to the pinnacle of his profession and then answers the call of Public Service, a good deed that i can assure you will not go unpunished here, instead of applauding such achievement some will seek to impugn your motivation or ability to serve. I wished it were not true. Following the crash of the u. S. Housing market in 2007, the near collapse of the worldwide Financial System, we had a unique opportunity to study the causes of the cries and come up with a targeted response, regreting regrettably that did not happen. As an attorney you act as an advisor and negotiator, we should all realize this, in so doing, you represent the clients best interest consistent with their own ethical obligations and yours. I believe attorneys should never be judged by the parties that they represent, but rather by the quality of the representation that they provide. In this particular nominee, i believe were fortunate to have one of the nations legal practitioners, he understands corporate structure, Capital Formation, as well as statutory and regulatory requirements that govern those disciplines. The mission as i understand it from many years on the committee, 31 years there, the mission to have u. S. Securities and Exchange Commission is to protect investors, and maintain fair, orderly markets. And sustain Economic Growth in this country. I believe your background, education around experience make you particularly wellqualified and suited to be chairman of the Security Exchanges commission and i look forward to supporting your nomination, having said that i have one question. I have long advocated the need for comprehensive cost benefit analysis for all agency, not just scc if a benefit of a rule or regulation cannot be shown to out weigh its cost, i believe it should not be brought forth. Would you share your on the roll of cost benefit analysis . Thank you. That ynk you. I do believe the rules and regulations, im going to focus on the Security Exchange commission is very important not only quantitatively but qualitatively. I think that we are often looking back after a decade or two decades and saying wow that had profound effects that we didnt realize and some of them turn out to be more costly than we would have imagined. I think rigorously examining the affects of rules and in particular some of their far reaching costs is a very important aspect of the commissions work. Thank you. Mr. Chairman. Thank you. Senator hide camp. Thank you mr. Chairman, welcome to you and your beautiful family. You know you will have to sit through a whole lot of boring questions, so we apologize for that, but the position that your father and has been is important to the working capitalism in the country and critically important that we understand exactly how you intend to administer and participate in that job. I want to just make a couple quick points that relate to some projects that ive been involved in and that ive been working on and that is how the scc relates to Small Businesses, north dakota many startups find challenges getting startup capital and we want to make sure that a bill that senator heller and i were able to get passed last time would require the commission to appoint at least ten individuals across the country to serve on a new Small Business Capital Formation advisory committee. I want your commitment you will make this one of your Top Priorities if youre confirmed. Say yes. [ laughter ] i appreciate the assistance. Capital for Small Business is very important. Okay. And i want to make sure that when youre making these appointments and looking at this that you find people with rural experience, by rural i dont mean a community of a half a million people, thats not rural. I want you to take a look at as we look at Rural Economic Development broadband were going to have more and more opportunities. We are also working on another bill with senator heller supporting the act which would raise the number of investors that could participate, we approve from the this committee a couple weeks ago or last week and just want your commitment that you will work with us to implement that if we are able to get it across the threshold here. Im very happy to work with you anything in the area of Small Business and recognize your comment about rural being really rural not quasirural. Thank you. I only have time for one morer h more issue. After the collapse, no one went to jail, no one seemed to be corral criminal act. I think we need to have a clear understanding as you have said theres zero room for bad actors but i think we continue to see difficulties in prosecuting folks in the white collar area. I want to ask just one simple question and its not simple but its really important, do you believe that executives who act recklessly but not knowingly and as a result cause financial significant harm to our Financial System should be held criminally liable for financial crimes . Senator, let me say this, thats kind of a question for the courts and for the legislature. We clegislate. Whats your standing for executives who in fact act recklessly even though we might not be able to prove they act knowingly . If that is where the law is i will vigorous loi enforce. The scc in the past has weighed in on this and done a number of speeches and discussions about how do you interject a criminal deterrent. Those of us on this dias understand that one of the best deterrents the White Collar Crime and i think too often you can hind behind the knowing, its hard to prove someone actually knew but isnt hard that someone should have known or acted recklessly moving forward an i think we couldply that criminal standard and we would like you guys to be thought leaders on this. I am happy to engage on that topic with my fellow commissioners, i think that individual prosecution i agree with you particularly in the white collar area has a significant affect on behavior. But the difficulty we have is achieving the level of criminal intent. And i think theres way that we can rectify that by lowering the standard but still having the deterrent. Thank you, mr. Chairman. Thank you. Senator corker. Thank you sir, mr. Clayton, thank you for your desire to serve in the public and appreciate the meeting we had in our office and welcome to your family. Since i come from a smaller unit, your tribe with you today we welcome them and glad their participating. We talked a little bit about Public Companies and the fact that there arent Many Companies, near as Many Companies going public today as used to be the case. I wonder if you would expand on that and share why you believe that is the way it is today . Thank you. And i will im more of a picture person than i am a written person, so im going to use my hands, i hope thats okay, but the life cycle of a company is kind of gets started, people have a good idea or are committed to it. Picks up and grows and kind of goes like this and this is the growth phase of a Public Company, youre adding employees and get up in success, my experience is that 20 years ago companies at about this stage would view our u. S. Public capital markts becoming a Public Company on the exchange as an attractive way to raise capital to grow for a variety of reasons including very robust private Capital Markets but also to cost of going public. The choice to go public here is a very hard one. Many companies do not do this anymore. We see it with im hesitant to use examples but one everybody knows, uber is a very growing company that is still a private company all through this phase. And then up here, they may be becoming a Public Company but often times thats not to raise capital. The company is already mature. My view of the world is that i would like to see more Companies Going public here so more people have chance to participate in that growth as investors. And theyre not doing it just to crystallize it because. For a variety because its too costly at this stage to become a Public Company. I think i agree theres numbers of reasons having served on some Public Company boards i cant imagine desiring to be pu public as a first choice but changed dramatically over the last decade or so, the scc functioned in a very partisan way and seems everything is voted on a down party line and wasnt that way many, many years ago, as chairman i wouldnt think you would want it to be that way, i would like you to share what you would do as chairman to try to get things decided along the basis of whats good for the country, whats good for the scc, whats good for all of us who you are protecting instead of just sort of ideology. I dont want to speculate about why its been that way. Ive seen it i agree with you we want you to speculate though. Okay. Okay. Yeah, people have fund mental disagreements but my job for 20 years has been to reach consensus, people dont do transactions unless they agree to do transactions, i would very much like as chair to have unanimous votes on important matters. But what is it that has caused it to be the way that it is right now. You know youre going into it what is it seriously thats caused it to function on party lines senator, i will speculate, i think its not just the commission, but theres been partisanship is pretty strong right now in washington. Im new to washington but i very much get that sense, but i do believe having talked to a lot of people that the mission of the commission doesnt have to be a partisan mission. What happens when it functions that way is we have a lack of consistency, right . Every time theres a swing in the balance of power the scc and the direction that it takes swings and therefore probably keeps even more people from wanting to go public so ive glad you observed that and hope youre going to change that when you become chairman. I just want to close with this mr. Chairman. I know theres been some criticism of the type of people that mr. Clayton has represented. I used to build Shopping Centers around the country and feel like i know the business pretty well and think if this body decided there was going to be some Shopping Center regulatory body, i think i would be really good because i know the business, and look, i know that you have represented numbers of large clients and my guess is some of them were jerks, okay . And you watched you watched seriously you watched some of your clients do some really jerky things and then you watched some of them do some really great things and my sense is that someone like you who has represented people the broad array of people that you have represented really knows the good actors from the bad actors more so that come from the outside, and i know academics, but im glad youre willing to bring real Life Experience and look forward to your service. Thank you. Senator van holland. [ inaudible ] a lot of bad practices that went on to precipitate that and left a lot of people in the country in foreclosure and holding the bag. Last year Goldman Sachs agreed to a 5 billion settlement in a lawsuit that arose of what happened during the financial meltdown. The acting associate attorney general the Justice Department at the time said and i quote, this resolution referring to the Settlement Agreement holds goldman sax accountable for misconduct of falsely ensuring investors backed by sound mortgages when it knew they were full of mortgages that were likely to fail, unquote. This was a very serious breach of trust with respect to goldmans clients. You mentioned at the outset that you wanted to put an end to shady practices. Would you agree that what goldman did during that period in falsely assuring investors that securities that sold were backed by sound mortgages when it knew they with respect was a shady practice . Senator, i think that settlement speaks for itself. Im not familiar with all of the facts of that matter, but i think the settlement speaks for itself. My understanding was that was a case of selling Mortgage Securities. I did not work on my Mortgage Securities deals for any client that i im very any mortgage security deal for any client priority to financial crisis, it was not part of my practice. Got it so you were not involved in advising with respect to the Financial Instruments that were the subject of the settlement . I want to be very clear, after the financial crisis i did become familiar with Mortgage Backed securities and how they worked. Spent a lot of time trying to understand how they worked and after the crisis i have advised a number of people how those securities were designed to function, but prior to the crisis it was not part of my practice. So to pick up what senator hide camp said, ive heard it many times we think a lot of these Settlement Agreements where nobody is held personally accountable and personally liable did not create the kind of deterrence that we want. So i hope Going Forward the American Public will seek people not just using their investors money but be held personally accountable. Theres disagreements of what happened at the scc and its role. Do you think a stockholder would have an interest in knowing if the company theyre invested in is spending 5 million to elect Hillary Clinton or donald trump, do you think thats something that would be of interest to a stockholder . After all, my understanding is disclosure agreements to the public include salaries paid to the top managers, potential conflict of interests between folks, mentors of the company and others, do you believe that thats something that stockholders should have information about . The touch tone for stockholder information is materialitity, what would a reasonable investor making an investment should know . The issue of political spending disclosure has been talked about in this committee and i think where it stands now is there are a number of companies who make that disclosure making the judgment that it is material to investors or may be and they put it in. Shareholders have access to through the Shareholder Resolution and proxy process to require it if they want. The question of whether it should be mandated is one that im happy to think about, but again my touch tone for these things is materiality. Thank you mr. Chairman, i would say theres a Reputational Risk to a company if it is disclosed if people find out through other means they may have spent a whole lot of money supporting money political candidate or another and thats something that investors should know up front so they can take into account the possibility of that information, so i look forward to continuing that conversation because as you know, there are a number of things mandated by the scc and my view that thats something that would be important to investors but we can followup on that conversation. Thank you. Senator toomey. Thank you, mr. Chairman. Mr. Clayton i want to say im delighted that youre willing to serve. I think youre on outstanding choice based on your background, exper ties, your knowledge, we had a great conversation, im particularly pleased that you have some experience overseas, it gives you a comparative basis to base a judgment about regu r regulations, and im not saying that because youre a pennsylvanian, but doesnt hurt. U. S. Capital markets have been the envy of the world, deepest broadest most accessible markets every but that our lead is diminishing, theres no question by metrics its become too costly for Many Companies to go public, issuers of securities. I just want to drill down a little bit where does the cost come from, the cost is complying with the regulations . Is that the principal cost . Yes, senator, i believe that regulations broadly is the principal cost. Right. So thats what has changed. Certainly its changed and we see a corresponding reduction in public issuance, big ipos, i would argue other adoption of new technologies as well, so i really hope that youre going to focus on that and i know you are. I want to make another point, any also the case that over the last certainly number of decades weve had a dramatic transformation of the ownership of companies democksation if you will if you go back 60, 70, 80 years, im pretty sure its a small percentage of wealthy that owned companies, today people who own stock in companies are very often ordinary americans who own it through their pensions, 401 k plans, the universities in endowments and are a huge huge share of ownership, isnt that true . It is true and changing the Company Shareholder dynamic. Right. And if a company has excess cash an doesnt believe it can generate a market return on that cash, isnt it a reasonable thing for the company to consider returning some of that cash to these ordinary americans in the form of dividends or buybacks, isnt that a perfectly reasonable consideration . Senator, it is a perfectly reasonable consideration, yes, and i think some of our greatest investors say if you cant use the cash wisely, give it back. Which is actually good for the ordinary americans who own those stocks. One of my criticisms of the scc in recent years is it has not done a good job on the Capital Formation of its mission and i think we have passed good legislation the jobs act being one such case and and i think they have implemented rules that are way too cumbersome, thinking of crowd funding, reggae, a very simple form that got very complex in the regulations. I look how Little American companies are using some of these new toechnologies, i woul tribute it to the regulations, i would just ask would you be willing to work with us to review some of the rules implementing the legislation with an eye towards facilitating the use of these reforms as it was intended by congress . Yes, senator. I am i know its difficult to write a regulation and as we talked about know all of its affects and sometimes i think it takes too long because you worry about all of those affects. At some point you have to move forward. After you move forward you have to examine whether you got it right. And thats the way i look at these things. Its not im done out the door. We tried to do it as well as we could. Lets look back and see if we got it right. I think thats a very sensible approach i look forward to working with you on it and i think im finished within my timeline. Yes. Senator thank you ranking chair, and thank you for taking time to visit with me and your candor, its wonderful to see your family here with you as well. During our conversation if you recall we talked about the fact that im from nevada and at the time to have foreclosure crisis was the attorney general and took a number of Enforcement Actions to protect the home owners in my state and you were very candid during that time an when we met we talked about this and you specifically dismissed the affectiveness of companies on the ground that prosecutors unfairly take money from Share Holders without holdsing individuals responsible and want to followup on those comments and have some questions as well. In fact in a speech just before he left the department of justice, attorney general holder described current law saying quote the buck still stops nowhere, responsibility remains so diffuse and top executives so insulated that any misconduct could be considered a symptom of the institutions culture, so my question to you is do we need to change the law that individuals you want to go after arent insulate from the accou accountability . Okay. Thank you and just on my view on Company Accountability and individual account aability. The profits should be disgorged. There should be deterrence at the Company Level but shareholders do bear those cost and we have to keep that in mind and i also said which i if you rememberly firmly believe that as we work all of us Work Together that will be in my mind. And so then i appreciate that and goes back to i think what my colleague senator hide camp was getting to when she was talking about mens rea, ill talk about strict liability. And again it was attorney general holder suggested that Congress Change the law to provide for strict liability, in other words executives should be liable for misconduct that occurs under their watch whether or not they had intent or knowledge of the wrong doing. Do you agree with that proposal . Again, its not for me to make the law, its me to enforce the law. I dont understand the exact contours of that exact proposal. Can you say it again . Sure. So as i think this is what we talked about and a new realm and i absolutely get it this is an enforcement mechanism that you are going to have authority over and these are decisions you are going to have to make, so it just comes down to the issue of strict liability. In other words, can executives or do you believe executives should be held liable for misconduct that occurs under their watch whether or not they had the initial intent to do it or knowledge of wrong doing whether it was reckless or disregard do you agree there should be strict liability. Mens rea, strikes me as a big step. Okay. Is this something that you intend to look into i guess my concern is the enforcement side of this. And your lack of ability or familiarity with it. As you step into this position, thats a key piece of oversight. Im just curious your thoughts on how you intend to familiarize yourself with the enforcement side of the job. Let me try and answer your question as quickly as i can. In all aspects of this job if confirmed im going to have to rely extensively on the very good people at the scc both the Division Directors and the staff. I have a lot of respect for the people at the scc that ive interacted with including the enforcement staff and i do have more familiarity with prosecutors working with prosecutors and in particular investigations than most transactional lawyers and i hope to bring that experience to bear. Thank you. Mr. Calculalayton i see my time. Thank you again, i appreciate your willingness again to step up for Public Service. Thank you. Senator kennedy. Thank you, mr. Chairman. Mr. Clayton. How are you . Well, thank you. Im over here, im in the cheap seats. In the cheap seats. You went to penn. Penn. And undergrad. Cambridge. Cambridge. What did you sudden . Economics. I think i met wyatt. Did he look you in the eye . Yeah. Im jasper. Okay. Im haley. All right. Why did they did they give you instructions about how to behave and not make faces and stuff today . You dont have to answer that. Let me ask you and sullivan and cromwell, its a big place blue chip clients one of the premier firms in the world. You dont get to pick your clients, do you . If youre a lawyer there and a client comes in and says im in trouble and says i need help you dont like say well i dont like the color of your suit, go away . Generally not. Okay. How long have you been at sullivan and cromwell . Over 20 years. Would you consider yourself an expert . Like senator corker, since youre going to be running the scc i would like you to know about the scc law. Are you familiar with the gentleman by the name of Allen Stanford during the bill the ponzi scheme . I am. At one point in 2008 he was listed on the forbes top 400 or whatever, he had a net worth of 2. 2 billion. Now hes got in the number, prison number 35010783. He frauded about 7,800 investors, 2,000 of them were from louisiana. Sipc denied coverage of them. Scc sued the sipc, i think a federal judge threw it out. I was disappointed. I wrote it out to be precise, what do you intend to do for investors that lose cash and failed brokerage or victims of a ponzi scheme like this financial scheme the one i talk about in the event they need to return to the sipc which was created to help them . Senator, i am familiar with the stanford matter, and people like Allen Stanford and other fraudsters who we can name need to be dealt with sternly severely, et cetera. As far as their victims and the sipc, i am familiar with this issue and that there is a line at where the sipc has denied coverage and in particular in the instances that fraud coverage doesnt extend that far. I am familiar with that being an issue. I look forward to working with you and others on wa we do about the victims of people like Allen Stanford. Okay. Thats fair enough. Thats fair enough. Let me use my last minute to make an observation. I think this is a really important nomination. Im impressed with your credentials. I think the president has chosen well. I think theres a lot of agnger in my state and across the country, the problem is as they see it too many undeserving at the top getting bailouts and at the bottom getting handouts and the folks stuck in the middle getting stuck with the bill. Their tuition has gone up, taxes has gone up and ill tell you what hasnt gone up is their income. I believe in sufficient marks, i believe in supporting Capital Formation, but also lived long enough to understand human nature. Some people cheat. They cheat in all walks of life and cheat in all professions but when people cheat and securities matters, a lot of people get hurt. I hope you will be mindful of that and i know you will be. Im out of time. Thank you. Its nice to meet your wife. Thank you. Senator. Senator donnelly . Thank you, mr. Chairman. Were honored to have you here and to your whole family, thank you for being here. I was fortunate, we met in my office and i just want to read you a little bit about an article in the indy star, recently about a worker losing his job, the jobs are going to mexico. He did his job great. Hes presently training whats called team monterey, and what team monterey is are the mexican workers who have come to indiana to take tlearn the skills to ta jobs away and let me tell you about john feltner, the individual here, his 21yearold son austin because he knows his dad is going to lose his job, his 21yearold son has taken off time studying criminal justice to work at a pizza shop to help his family raise money, his daughter is still in school at indiana state. Her plans were to become a vet. Its an eightyear track, she looked up and says its not doable. Now gone to a fouryear Program Nursing which is a great thing, but like your dream was to become a lawyer, you had a wonderful grand dad to take you around. Her dream is to be a vet but that is over now because shes trying to keep the family together. This is the real world consequence of what happens on wall street and what you are going to be responsible to try to make sure it doesnt happen. My state in my town of coke mow at the time of the economic collapse the plant went from 5,000 people to less than 100 went to 22 . That was county wide. Thats the real world affect of what happens. And ive got 2,100 workers who have just been fired from carrier to buy for a 16 billion for a stock buyback, because that would help them make a few more pennies to pay back a stock buyback. The real world is 2,100 families who have no idea how theyre going to cover their mortgage next month or send their kids to school, so you know we talked about all those things and i want to know your general insight and experience, advising and counseling clients on stock buybacks. And senator, as we talked about in your office, im not familiar with indiana, but penn pesylvania is just like cousin so us. Redding, pa is a place im very familiar with. Look, this is the issue of jobs going overseas, and how thats related to the operation of a company what choices the management makes is a difficult i dont like these results any more than you do. I mean i dont like it at all. Stock buybacks, there are times when stock buybacks make sense, that is clear. Company has excess cash, they dont know what to do with it, not a good place to put it they should return it to the shareholders, as far as whether thats always the case and whether they are using the money in the way we would like to see them use the money, i agree with you there are a range of outcomes and there are a range of consequences and there are a lot that as a citizen i dont like. As far as the scc goes, im happy to talk about that as well. And i wish i had an hour with you i really do, but this was clearly not a case of excess cash. This was firing workers to pick up the difference in their wage from going to mexico so they could give it to wall street Hedge Fund Speculators and what happened in 2008 and 2009, credit agencies abandoned ship and sold their reputation for a few extra bucks ridiculous insane collateralized debt obligations and that it was all allowed to go on and if it was stopped, those 5,000 people at the chrysler transmission plant wouldnt have lost their jobs, and so youre the sheriff besides being a great dad you now have the opportunity to be a sheriff and we are very, very hopeful you can fill that role. Thank you. And as i my families are counting on you to do that. As i said to you i very much believe if dwrogrowth looks lik this in america thats a lot better than growth in america looking like this, because this is really bad for every day americans. And what you do will help to determine that. Thank you. Thank you. Senator hiller. Mr. Chairman thank you for holding the hearing and good to see you, i welcome your family also. Its good to see everybody here an by the way congratulations on the nomination and this process. Thank you. I worked the securities industry for a few years, got my securities license, i worked on the civic stock exchange, became an institutional broker, worked in the third mark but subsequently a few years later i became secretary of state of nevada and ended up regulating the securities industry for our state and had real working relationships with the industry and saw some real bad players. I think senator kennedy talked about a few of them. And my colleague from indiana talked about a few of them and its usually the states that really dig up some of these issues and some of the problems even if its a Major Trading firm like Merrill Lynch and back when i was secretary of state, i guess my question for you is your commitment to working with these states working not all security regulators are in a particular office, i think theres only a half a dozen or so in secretary of States Office but every state does have regulators. And theres kind of been a back and forth. I just want to get your feel for working with these states on some of these issues in helping regulate their industries. I am very interested in working with the state securities commissions and the many others who have jurisdiction over the securities markets, including you know state law enforcement, the department of justice, you know, the scc. To your point, it is also my experience that the bad actors, they have been bad for a long time. And until theyre caught. And you know early on detection would be much better than later. And where that comes from, if it comes from the states or it comes from selfregulatory organizations, comes from state law enforcement, im all for it. The word that comes to mind is restitution, earlier first of all, less damage but the larger the chance of restoring these individuals that have been defrauded. Do you have any views on that . Yes, i do. It has been it is very disappointing when you have these types of individuals that the people who bear the brunt of it are ordinary investors. If you have an Allen Stanford or bernhard madoff, i do think some of the reforms around custody and tracing will help prevent that, so that is my view. And we should be looking to appoint earlier. We should be looking better and more efficient ways to monitor those individual Financial Advisors and brokers. In my office when we were chatting back in january i talked about a new regulation called industry guide seven, that was proposed regulations that would effect Mining Industry in the state of nevada. Im appreciative of chairman crapo and senator tester also working with me on this particular issue. All were trying to can is align the exposure requirements with Global Standards so that our domestic mines have economic competitiveness and were afraid that were going to lose that. What all im asking from you is if i could get your commitment that youll work with this committee, that youll work with my office as we take a look at some of these new regulations, make the necessary changes that i think are needed to keep our Mining Industries across this country competitive. Yes, senator, i do look forward to working with this committee and the staff on disclosure and the disclosure has followed where the market is. The Mining Industry makes sense, i think the staff just put out for comment another industry guide that hadnt been updated in some time. So i understand the point and look forward to working with you. Mr. Clayton, thank you. My times run out. Thank you for being here. Thank you, senator. Senator warren. Thank you mr. Chairman. Its good to see you again mr. Clayton. A big part of the job of chairman of sec is enforcement. A cop on the beat on wall street. You said in your testimony today that you intend to enforce the law strictly and i very much agree with that goal. But im concerned that you wont be able to achieve it. It is clear that the sec will play a Critical Role until deciding the sec chair will play a Critical Role in deciding what the enforcement position of the sec will be. And in recent history they have favored weaker enforcement while democrat commissioners have sought tougher enforcement. The chair is often the deciding vote, and of course if the chair cant vote and the remaining sec commissioners split along party lines, then major Enforcement Actions dont go forward and serious wrongdoing may go unpunished. So its important to think about how often the s. E. C. Could be caught in such a deadlock. Under the president s executive order for ethics, the first two years of your tenure as s. E. C. Chairman, youd have to recuse yourself from participating in any matter involve a former client of yours. Thats about half of your term as chair. So based on your personal client disclosures for half of your tenure as s. E. C. Chair, you would not be able to vote 10 to force the law against several big banks including Goldman Sachs, deutsche bank, barclays and ubs, is that right. Yes, senator, the way thank you. Those banks have repeatedly violated securities laws in the past few years, but if they violate securities laws again, in your first two years as s. E. C. Chairman, you cant vote to punish them and i think thats a problem. But, its just the tip of the iceberg. Your recusial would not be limited to just your own former clients. The ethics executive order also requires you to recuse yourself for two years from any manner in which your former law firm, sullivan and cromwell, represents a party. Now, sullivan and cromwell is a leading new York Law Firm with a very long list of wall street clients. So for half of your term as sec chair, you would not be able to vote to punish any corporation or bank that uses sullivan and cromwell as their lawyer, is that right . I i believe thats a fair summary, senator. Thank you. More potential cases with a deadlock and no enforcement and thats a problem. And even beyond sullivan and cromwells already long list of wall street clients, any reasonably Strategic Company that wanted to try to avoid an s. E. C. Enforcement action could simply hire sullivan and cromwell to represent them before the agency and then you couldnt vote for enforcement against that company, is that right mr. Clayton . Im not sure about that, senator. Well, you do know the rule that if if they are represented by sullivan and cromwell in front of the agency, then youre going to be banned from being able to vote against them. Theyre represented by sullivan and cromwell i will not be able to participate, but that does not mean thats my point. So more cases that you could not participate in, meaning more cases potentially here with a deadlock and no enforcement. I think thats another problem. So its important to think about how often as we go through this if President Trump wanted to make sure that the s. E. C. Would have a hard time in going after his wall street friends, it seems to me you would be the perfect s. E. C. Chair. You cant vote to punish some of the biggest names on wall street, that means those cases would be at least more likely to end up in deadlock, which means those companies could skate free. And i just want to point out, this is not a theoretical problem. Recusals were a very big issue for the outgoing s. E. C. Chair Mary Jo White. Like you she came from a major wall street law firm and in her short time heading up the s. E. C. She had to recuse herself in at least 48 Enforcement Matters because of conflicts involving her former clients, her former law firm, and her husbands clients and law firm. At least 48 cases in which she couldnt vote to punish a big company because the other commissioners were often split on Enforcement Matters, chair whites recusals led the commission to deadlock time and time again. Which meant the corporations that may have broken the law were able to get off easier. Your recusal problems seem to be even more severe than chair whites. With you as s. E. C. Chair, it looks like wall street can breathe a little easier knowing that you wont be voting against them. And theres likely to be weaker enforcement. So heres my question. Can you explain why, out of all the people who could have been selected to head the s. E. C. , you are the right person for this job . Thank you. And i want to i want to say that the question the question of whether im recused from a matter doesnt mean that there will be deadlock. I do i do believe that the current mr. Clayton, i dont understand that. If theres not a majority to go forward on an enforcement action, if the other commissioners split 22, that is a deadlock. 4 and if youre recused that leaves four commissioners, two democrats, two republicans, republicans have consistently gone for weaker enforcement, democrats for stronger enforcement. You come here today saying im going to stronger enforcement. Youre not going to stronger enforcement if you cant vote. Im not sure about that characterization, but i do know that the characterization of a deadlock . No, the characterization of who goes for more enforcement. Take a look at the data on that. Okay. But what i would like to say is that i i believe that on Enforcement Matters, on Enforcement Matters, the commission is almost always unanimous on Enforcement Matters. I think you want to check your numbers on that, mr. Clayton. Okay. And you want to check what has just happened. We have experience on this. You know, im going to yield because i recognize the chair has been very indulgent in letting me go over. But i want to underline the point that holding wall street firms accountable is a major job of the s. E. C. s mission, and the s. E. C. Chair needs to be able to participate in those Enforcement Actions, to be the cop on the beat for the American People, not on the sidelines, when former clients and wall street firms are able to skate free. And i think that raise a very serious concern about your nomination to be senator rounds. Thank you. Thank you, mr. Chairman. Sir, id like to just begin by id like to just kind of follow up on the questioning here just a little bit. I thought some of the questions that were being asked required a little bit longer answer than just a yes or a no. Id like to give anne opportunity to, perhaps, elaborate a little bit. With regard to the issue of a split vote, a split vote in the case of an enforcement action could possibly come as the result as to whether or not there should be an enforcement action in the first place. Would that be a fair statement . Yes. And in that particular case, then, it would be a matter of making a determination yes or no and in this country most cases we dont decide on a split vote whether theyre guilty or not and then make the assumption that theyre simply guilty because theres a split vote involved in it, fair enough . I think thats fair. How much time do you think as the chairman of the securities and Exchange Commission do you think you would spend in terms of breaking ties on the determination of right or wrong on the part of a company on the part of a company whos being brought before . Compared to the rest of the job . I would not expect that it would be any meaningful amount of time, senator. What if there were parts of the and recognizing that were all limited by the amount of time that we have to share, if there were parts of the previous questions that were asked to you that you didnt feel like you had the opportunity because of the time constraints, would you like to share a little bit of information to perhaps clarify or expand on your answers . Thank you. As i said in my Opening Statement, i have zero tolerance for bad actors. Im not only saying that here, i will say it to the enforcement staff at the s. E. C. I will say it to my fellow commissioners. I do believe, as ive said before, that individual accountability is extremely important not only to get rid of bad actors but it sets a tone for the industry. Much of the enforcement activity of the commission, as i understand it, is driven by the Enforcement Division and the oversight of the Enforcement Division. I have every confidence that that will continue and that any rue cues recusals i have to do will not impact that. Are you a republican . No, im an independent, sir. Seems to me that the suggestion was that republicans are lack are lax on enforcement. As an independent, would you see republicans as being lax on enforcement . No, that was that was i do not see it that way. I think sometimes people of different parties may have different enforcement priorities, but i would not say that republicans are lack on enforcement. Would you see your role in terms of being the an independent and being a nominated for this particular position, to be an arbiter, perhaps, in terms of finding Common Ground with regards to issues of enforcement and with the layout of penalties that are appropriate for organizations that are found to be in violation of the law or the rules . Yes, senator. And if i wanted to say what i thought my if i had to pick a single strength that i believe i would bring to this position in that regard, it does go back to what i what i said at the beginning in that being a transactional lawyer, build a consensus is what youre is what your job is. People have different views. They want to get to a place thats happy for everyone, and thats very much what my job has been and i want to continue to do that if im confirmed. Thank you. Anything else you womaned to add wanted to add to that at all . No. I thank you for the time. Thank you mr. Chairman. Thank you. Senator menendez. Mr. Clayton congratulations on your nomination. Since you and i met in february theres been quite a bit of activity at the s. E. C. Of particular concern to me as acting chair are efforts to scale back the authority of the commissions Enforcement Division. He unilaterally reopened the common period on a congressionally mandated rulemaking disclosure of ceo to worker pay ratio. So i want to focus first on the enforcement and then turn to the other matter. In 2009 former sec chair shapiro gave enforcement staff subpoena power. Before this only the commission had the power. This empowered senior enforcement attorneys to quickly escalate informal inquiries to formal investigations ultimately strengthening the commissions ability to investigate corporate misconduct. When we met and discussed enforcement issues, you said that bad actors have cost this country billions, and i couldnt agree more with you. In my view the sec function best with a strong Enforcement Division that stays ahead of the markets. Unfortunately, acting chair has taken steps to curb the Enforcement Authority by revoke the subpoena authority from 20 enforcement officials and limiting it only to the Enforcement Division director. Thats a major reversal from post crisis policy designed to assist the commission in going after bad actors that ravaged investors and our economy at large. So i want to get some quick answers to these questions. In your opinion, do you think that the s. E. C. s enforcement staff has abused its authority since the delegation of subpoena authority in 2009 . Senator i have no i have no idea whether they have abused their subpoena authority. Well youre a practitioner before them. Do you have a sense they have abused their authority for the last eight years . Senator, in my experience, which as far as, you know, on the defense side is very limited so take it with that. I have not seen an abuse of subpoena authority by the s. E. C. Were you consult the at all on these policy changes as the potential new chair . No, i was not. Do you agree with this policy change . I dont know. I will i will have to discuss this with both commissioners and with the enforcement staff let me ask you this. Taking away subpoena power from senior enforcement attorneys better protect investors and deter misconduct . I dont know the answer to that question. Really. No, because the ab just the proposition that taking away subpoena powers from those line entities that are engaged in investigating misconduct and limiting it to only one person and then having to go through a whole process, it seems to me that were going to largely deter and delay investigations. I think i think those are good questions. Well, theyre questions, im looking for good answers. I know. My good questions dont mean much if i dont get good answers. I would hope to hear from you that what was happening before in terms of spreading the authority was the Better Process of making sure that we build on the successes of empowerment. At the end of the day we need an s. E. C. And a chair who is going to be a cop at the beat. Because what we had at one time was they were asleep at the switch and that gave us the successes that all americans had to pay for. I had another concern about acting chairs unilateral decision to open a new public common period on the rule requiring Public Companies to disclose the ratio of their total cea compensation to medium worker pay, a rule adopted built Commission Nearly 18 months ago, a year and a half ago. In addition to obstructing the implementation of a congressionally mandated rule, one that i authored in dodd frank, and diverting Staff Resources and time seemingly only to justify the personal ideological views of one person, this action actively ignores the tens of thousands of comments from investors and Investment Managers expressing the view that this information is material and important to be shareholders evaluation of executive compensation. In fact yesterday a coalition of 100 investors and investor organizations representing 3 trillion in assets under management wrote to the acting chair expressing support for the ceo to work pay ratio rule and urge the sec to maintain the current Effective Date for disclosure. So my question is, do you agree with the acting chairs unilateral decision to open a new public common period on the rule and, if so, why . Senator, i the acting chair is the acting chair, thats a decision for him to make. Yeah, but youre going to be if confirmed the new chair. I want to know do you think would you do that . Would you have done that . I do not know enough about the thats not acceptable. What do you mean you dont know . You dont know about ceo pay work raises this say major issue thats been debated out there for some time. It has been debated for some time. Its a congressionally made for some time. So youll be the next chair if confirmed to ultimately undo that seems to me to tell me you dont know, you dont know is not acceptable. Thats not what im saying. Im saying that i dont know what motivated chairman im asking you what you would do. Would you have done that . If you were the chair sitting there right now, would you have done that . I cant answer that question because i dont have the benefit of the interaction with the staff that the chair had and the history with the rule that he had. The history with the rule its already been done for 18 months. Im sorry, mr. Clayton but those answers arent acceptable. Thank you, mr. Chairman. Thank you. Senator tillis. Thank you, mr. Chair. Mr. Clayton thank you for being here. I sometimes go on to these committees and it reminds me of a far side comic the caption read the floggings will continue until morale improves. So i think you for your patience. I want to ask you a question the primary mission for the s. E. C. Is protecting investors, maintain markets and to facilitate Capital Formation. Do you have any sense over how well the secs done over the last eight years or the last 20 years . You pick your time horizon. Senator, i think on the on the let me focus on the question of Capital Formation, if you dont mind. I do believe that over the last 20 years, particularly in the area of our public Capital Markets, we could have done better. Could have done better. That spans a couple of administrations. What were the highs and lows just briefly because i want to keep my time and ive got a couple other questions i want to ask. In particular, i believe, for mediumsize companies, companies that are in their growth phase, it has been polar we have made it more difficult and less relatively attractive for them to be Public Companies. I think that almost what do we have to do to get on a positive trajectory . You know what . We have to reduce the burdens of becoming a Public Company so that its more attractive. That was going to be another question i ask you. Why do you think it is we have i was trying to get the number in front of me so that im accurate. But just comparing hold on one second. Theres onethird fewer Public Companies today than 20 years ago. Is that healthy or unhealthy . I i believe that that statistic should be telling us something, and i think whats it telling us . I think its telling us that our public Capital Markets are less attractive and our public Capital Markets, i believe, are a much they are they are much more effective for the main street investor than other forms of investing. Is it fair to say that if we dont come up with a way to with proper regulatory oversight, i worked in the banking industry, i was a partner at price water house cooper so i work with a number of different Financial Institutions bang of america probably being the one i spent the most time with, but is it fair to say that if we dont come up with a way to improve Capital Formation that were hurting the little guy . Because Capital Formation creates jobs, is that right . I agree with that. At every level. At every level. So the one thing, its not a matter of going willynilly approximately i was a partner at pw back in the 90s, i saw the bust, i saw the very real regulatory exposure that enron gave light to, it had to be fixed. Im not against all regulations, im against regulations that prevent the little guy from getting a job. And i think if we dont form capital, we dont create jobs and we dont grow our economy. We dont reduce the tax burden. Theres a right size to regulations just like theres lean manufacturing techniques and lean process techniques that the private sector uses. And i hope that youll go in there and look at this organization and right size the regulations, come up with schemes that promote capitalization. There are a lot of people in this congress that want to just beat down job creators and employers, and i just decided on the fly and im glad my staffs able to respond to my request, but take a look at Goldman Sachs. They want to demonize them, thats an easy thing to do. An institution thats committed to let me look at the general numbers here. They had 36,500 employees. Theres probably a lot of little guys in there. Theyve contributed billions of dollars to nonprofits. Theyve got a commitment to producing 150 billion between now and 2025, that are either Capital Formation, for nonprofits, or directly in a nonprofit. Demonizing employers that look out for the little guy isnt helping the little guy. And ive heard them looking out for the little guy, i was a little guy. When i was 19 years old i wasnt in college. Weve got to look out for the little guy and weve got to stop demonizing businesses that have to be held accountable. You find a bad actor, everybody things that i Like Pharmaceuticals. I Like Pharmaceuticals who are responsible. Ones that are bad, i like to see them go to jail. Any Financial Services executive or anybody in a Financial Services business that acts badly needs to suffer the consequences. But if we just let the American People think that theyre all bad, you are hurting the little guy, and i hope youll go to the sec, promote responsible Capital Formation and do a good job. And i think that you will and jasper and wyatt and haley, think your dads going to do a great job. Thank you, senator. Senator schatz. There are 20 regulations mandated by dodd frank that the sec has not yet drafted or finalized, thats more than 20 of the law which was passed seven years ago. The acting chairman has publicly stated that the sec will halt all work on dodd frank related rules. What would be the legal basis for not finalizing rules that are required under a statute . Rules required under a statute . Rules required under a statute rule making should go forward with respect to rules required under a statute. And at what point does a delay become a refusal to implement the law . I think that depends on the context i dont think theres a specific well im giving you this context. A sevenyearold law, the rules not yet implemented the chairman refusing to move forward on implementation of the rules. That sounds like a refusal to implement the law, as opposed to the normal sort of administrative procedures act, stumbling and bumbling. Im not sure i would characterize it that way, but i understand your point. But im asking what you think. Again, as as i said with senator menendez, in terms of a specific rulemaking, i dont have the benefit of the interaction with the staff and comment letters and what the prior but when and i hope i do, became chairman, assessing the rulemaking calendar, prioritizing and moving forward is something i very much intend to do. Do you think they have a authority to implement a rule required by the law. I think rule making required by law should go forward. Thank you. I want to ask sort of an uncomfortable question and you and i had a good conversation, i also have young kids, were both in Public Service, theres a lot of travel, we appreciate it. Your dads doing fine. You guys are doing better than he is because im sure this is a little boring for you. They always do. Yeah. But thank you for that. I appreciate the conversation you had with senator warren regarding recusals and conflicts of interest, but theres another aspect of this. Take Mary Jo Whites situation who recently returned to the firm she left to join the s. E. C. While at the s. E. C. She had to recuse herself from dozens of actions as you would. This made is harder for the s. E. C. To carry out its mission, but now that shes back at her old firm it raises questions that she never really severed ties to former colleagues, friends, and clients and thats not because shes doing anything nefarious, its because of human nature. Its only human to think about the next phase of your career and naturally we know that future options are shaped by current actions. And for a financial regulator its especially problematical. This leads me to sort of a challenging question to ask, and i in no way mean to impugn your personal integrity but i have to ask. Is it fair to say that you have friends and colleagues at companies and institutions that are subject to the s. E. C. s oversight. Yes, and it is a fair question and, yes, i do. Is it fair to say that you will consider returning to sullivan and cromwell after your term is finished . On that, this is a huge change for me and my family. And im committed to doing this. As far as, you know, whether my term whether my term is hopefully a full term, a lots going to change, if thats if thats the case. Even if its i mean, your whole life changes when you when do you Something Like this. I am severing all ties to the firm, im divesting myself of all the financial assets, you know, and i know having done some changes in my life that when you do a change your perspective on just about everything changes. Maybe some a little bit, maybe some a lot. I guess what im hearing is that you dont preclude the possibility of any professional opportunity that may present itself after you serve as chair of the commission . Im not going to preclude it. I dont think thats an appropriate i dont think thats an appropriate precedent to set. Okay. You know, that said, i am committed to this job. Sure. I understand. And i think from the standpoint of not this panel or the people in this audience or even the people watching on cspan but from the standpoint of the regular person, its not unreasonable to worry about someone who comes from industry whose social network, whose professional network whose friendships are within that industry to be put in charge of being the cop on the beat, its not purely a matter of whether theres a square conflict and whether you do the recusals properly but whether they influence your thinking in your own life and about the decisions before you. Thank you mr. Chairman. Senator purdue. Thank you mr. Chairman and mr. Clayton thank you for your forbearance and willingness to step out in midcareer do Something Like this. As a past Public Company ceo, i have had a personal relationship with the sec and i find it on balance to be a very supportive and constructive agency. So lets put that on the record. Having said that, im very concerned that the economic miracle of our lifetime, the last 70 years, in my humble opinion has been based on innovation, Capital Formation and the rule of law. And i think we outcompete everybody in the world with regard to the totality of what that means. Im concerned that right now in the last since 2000 we had eight years of republican president and eight years of democrat president so this is not a partisan question. But our number of ipos, initial Public Offerings has gone from an average of 450 in the decade before to somewhere under 200 now, close to 150. Thats a significant change over a long period of time. It seems to me systemic, it represents, i think, some things that are troubling with regard to our current financial situation. This is my second question. I want to come back to your usa 10k. You can speak to the fact that the reduction in Public Offering and also to the number of Public Companies we have today were whats causing that, what do you think the sec can do to help us become more competitive with the rest of the world. I agree with you. I believe that the reduction in number of companies which say function of fewer companies becoming public is a problem for our Capital Markets. The public the ability to invest in a Public Company is one of the most efficient ways for a main street investor to invest. You know, the price is there, our equity markets have become very efficient. You can invest, you can divest, very easy. Its very important. It has who chooses to become a Public Company . Management of the company. When they come to make that choice as to where theyre going to raise capital or how theyre going to incentivize their employees or other things that are important when you make these decisions, they look at the landscape now and very often say, its just too burdensome. And thats i think thats a problem. You think that puts us at a competitive disadvantage with other countries . I think it puts us at a competitive disadvantage with other countries, i think and in particular it puts us at a competitive disadvantage in terms of something uniquely american, the participation in the Capital Markets. What im concerned about the private markets are also a very efficient way to raise money, but it only allows a certain percentage of investors to play because the blocks of investment are so much larger, the risk per dollar of investment is so much greater, and frankly its not as liquid. People cant get in and out as quickly as they can in the public market. So im one thats paying attention to this as having run a Public Company and a private company, im very concerned about that imbalance right now, particularly with regard to Global Investment in the capital around the world. You wrote an article, i think you cowrote it usa 10k. In there you make a lot of comments, one that really speaks to my heart, is one of the reasons i got involved in running for the senate is im concerned about our current financial situation. You talk about complexity risk in the current state of affairs. Can you just speak to that briefly . I have a problem with regulations that are unnecessarily complex. A real a real problem with it because it leads to a lot of things. One is its very costly to address them up front. The second is, it creates loopholes. No one wants loopholes. Complexity lasts, and, third, it creates an opportunity for gotcha. Thats not what we meant, we meant this. My view on regulation is to the extent practicable, and you cant do this in all cases but to the extent practicable, reducing complexity, accelerator are very important. If people know the rules, they can operate more efficiently. Thank you. Mr. Chairman, you know the number one thing that im looking for in this nomination is somebody that can help the sec create and maintain a level Playing Field. And i think with your background you have all the skills and personal integrity to do just that and i applaud you again for being willing to step out and take on this responsibility. Thank you mr. Chairman. Thank you. Senator warner. Thank you. Good morning mr. Clayton. Ive got a couple things i want to bounce around here so ill try to be fast in my questions if you could try to be somewhat fast in your answers. Ive been very interested in the emerging challenges around cybersecurity. To me, it was fairly remarkable that yahoo, for example, had a 500 million user breach and yet did not feel that was material enough to file in the quarterly sec filing and now i dont just pick on yahoo, the remarkable stat is theres 900 publicly traded Companies Less than 100 over the last decade plus have ever reported any kind of cyberbreach or violation as material information. You know, as more as more Companies Get more and more often threatened by this type of activity and more intellectual property is subject to this kind of attack, do you think the sec ought to take a fresh look at reporting around the whole threat of cybersecurity . Senator, let me let me give you my personal view and i think it answers your question. I dont think that the American Public were down to the american investing public, particularly outside of particularly the ordinary investor has as great an appreciation for the cyberrisks that our businesses face today. I would hope we have some Bipartisan Legislation that would at least require someone on the board to have some level of cyberexperience. To me, the whole question of materiality, if yahoo had 500 million and some question the breach exceeded 1 billion, how thats not material, it would be it is just beyond belief. I think it would be inappropriate for me to comment on a specific case or specific matter. What i want to say, as i look across the landscape of discussion and understanding of cyberthreats, and their possible impact on companies, i question whether the disclosure is where it should be. I appreciate that. One of the hearings we had one time was we i think he may have touched on this. Rbc capital brought in a chart that showed this is around equity Market Structure. They showed 839 different fee schedules that were composed of 3,722 separate fee variables. In effect, there was an ability for the Market Makers to, bespoke transactions, really gear toward people who are going to make the Biggest Commission off of this. It was not by any means a level Playing Field in answer senator purdues questions. One of the things that we pushed very hard the former chair, but we have not seen it, is to move forward on a make or take pilot so we can try to bring more clarity to make sure that all bidders in the market are going to get a fair shake. If confirmed, would you pledge to continue to work with us on that type of pilot . In my opening remarks i noted that in our interactions i was really glad to meet with you. I learned things. This is a case where i have learned something in the interim thanks to your questions. The equity Market Structure working group at the commission is doing i think is doing a good job of bringing the fact that theres a great deal of complexity. We dont know whether it is as efficient as it should be or as fair as it should be. And i do want to work on i would like that. Seeing that structure, seeing this chart, to me it looked like it was a total ability to game the system that really allowed Market Makers to give to a preferred broker and frankly was by no means it was no means the kind of level Playing Field that i think we all want. I want to get in my last question here. I know that you have represented valiant and persian square. There was potential Insider Trading in conjunction with the allergen bid in 2014. The federal judge in california ordered both persian square and valiant to make additional disclosures on their shareholder documents. In a sense, it seemed like they were almost begging the sec to take on a case around this issue around Insider Trading. I also believe that one of the challenges i think senator donnelly raised this issue around longterm versus shortterm. There is a role for activist investors. In the united states, we still have under 13d what i think is a very antiquated tenday reporting people. Somebody can aggregate that stock. Then you have ten days for an alliance, coinvestors, aggregate stock without the level of disclosure that the the uk is down two. You have to report this in two days. Hong kong has a requirement of instantaneous disclosure. To me, 13d and the ability for these investors to aggregate shares and provide an aggressive activist type sometimes play well. But i dont think we are serving our market or investors well. Do you have any comments on 13d and how we might be able to get this information faster out and this notion of whether you think the sec ought to take a look at that judges decision in the persian square case . I tried to get a lot in there. Thats a lot. Quickly, please. On the question of activist investors and the benefits that they bring to the market and some of the questions that people have raised about their activities, thats going to be an ongoing debate. I understand that the contours of the debate. And i look forward to working on it. 13d, i also understand that debate in terms of you want to incentivize people who see something wrong with the company to come in and say, youre not doing a good job. On other hand, you dont want to give them an unfair advantage. In particular, i understand your question about whatever we want to call it, domino affect, group affect. Thank you. Senator reed . Thank you very much, mr. Chairman. I apologize. My tardiness, i was leading along with senator mccain a hearing simultaneously with the supreme allied commander in europe. Im sorry. He is probably more important. Its not. Welcome to you. Welcome to your family. I want to salute your fathers service in vietnam. Thank you, sir, very much. You have said in your Public Statement theres zero room for bad actors in our Capital Markets. I am 100 committed to rooting out shady practices in our Financial System. One of your predecessors wrote that one of the reasons why theres inhibition is because the authority obtained civil monetary penalties, theyre capped at a relatively low level given some of the behaviors and some of the resources. Would you be sympathetic to statutory raising these penalty thresholds . Senator grassley and i are working on such a proposal. Senator, actually, i have to confess, this is the first time ive been asked the question about the penalties. Im very willing to take a look at the issue and work with you and give you my views after ive been better educated on it. One of the things that most people you dont have to be a financial analyst. Just somebody back in rhode island reading the newspaper. When you have a company that settles for admits no right or wrong, they didnt do anything wrong and they settle for money which is a fraction of what they were suggested they got through the behavior, people get cynical and skeptical. I would urge you very much to look at that. Following up on senator warners question about Cyber Security, we also have a proposal, senator collins, myself and senator warner have a legislative proposal that would require a publically traded board to have at least one person on the board who is a Cyber Security expert. And if not, in their disclosures explain why they dont need it because of steps they have taken. Let me emphasize, it does not require companies to take any action other than just provide this disclosure. Would you be sympathetic with that legislation . Senator, as i said, i believe in materiality being the touchstone. That said, there are areas where i believe guidance to corporations in terms of what their disclosure should be is appropriate. I think Cyber Security is an area where ive said previously, i dont think theres enough disclosure. In terms of whether theres oversight at the board level that has a comprehension for cybersecurity issues, i believe that is something that investors that investors should know. Whether companies have thought about the issues, whether its a particular expertise of the board or not, i agree its something companies should know. Its a very important part of operating a Significant Company. Any Significant Company has cyber risk issues. Thats not just the traditional sort of Financial Company nowadays. The ability to interfere with operations through the internet is significant. Yes. Let me ask a question about Climate Change. Its interesting, black rock, one of the Worlds Largest asset managers, have just indicated that they would expect companies such as miners, real estate companies, wood, have a demonstrated fluency in how climate risk affect theirs business and how a Given Company will address it, which raises a similar issue. Should these companies that are exposed to Climate Risks be required to make disclosures in their publically filed documents . I know the sec has issued guidance in this area. In particular, not on the impact of Climate Change on businesses but potential regulations and other activities. Let me say this. Companies Public Companies should be very mindful of that guidance as they are crafting their disclosure. This is a footnote. An interesting time when the secretary of defense seems to be the most fervent believer in the Climate Change and the director doesnt believe that at all placing companies in a position of who do you believe. I believe the secretary of defense. Lets stop there. Final point, we talked about in our office, which is intentions is one, resources are another. Resources will affect your behavior. As i observed, one of the impressions i had in the runup to the collapse was the sec had good intentions but they didnt have the budget to go out there and wall street knew it. So they knew that there was a lot of behavior that might have been in the murky area. The likelihood of it being discovered, two being prosecuted or anyone held accountable is virtually nil because the resources werent available. Right now, the sec is operating on a cr of 1. 6 billion. They asked for 1. 7 billion. Looking at the skinny budget domestic agencies are being decimated. What happens when you are presented with a budget which you think is absolutely inadequate for the technology, for the enforcement personnel . I think that will translate into wall street generically speaking into the sense that theres no sheriff. In terms of using resources, im very interested in using resources as effectively as possible in the area of enforcement. As i have said and i do look forward to discussing this with the staff at the sec and prosecutors who i know and will if confirmed cooperate with, i do believe that individual accountability has a greater deterrent affect across the system than corporate accountability. I look forward to pursuing that. On the question of budget and resources, i know lots of instances where new ceos have had to go into a particular situation. They wish they had more money. They wish they had less money. One of the things i would have to do is get up to speed very quickly on the areas of acute need versus less need and act accordingly. Thats what i can tell you. Thank you. Thank you, senator reed. Mr. Clayton, that concludes our first round. We have had a couple of senators ask for a second round. So we will do that for i think we have three senators who have asked to do so. I will forego my second. I will probably make wrapup comments at the end. Lets start the second round. Thank you, mr. Chairman. I appreciate your indulgence. I know senator warren does. I have to go to agriculture after this for the confirmation hearing for the secretary designee there. Again, thank you for thank you for answering the questions that you have so far. Youve clearly thought a lot about the foreign corrupt practices act. How would you advise a client interested in complying with the act if that client was weighing going into business with a politically connected family known to be corrupt and tied to the Iranian Revolutionary guard . You know thats not just a what if. Thats a real case. I think that is a real case. Im going to not comment on a real case. Im going to comment on the question of how do you advise a client who is subject to the foreign corrupt practices act who may be entering into business in a country wellknown for corruption. I think you are to tell that client to think long and hard about whether you want to have the potential exposure to not just the foreign corrupt practices act but thankfully now, which was not the case five, seven years ago, similar oversight and enforcement from other oecd countries. And in fact, there are some jurisdictions where in the vast majority of the cases it may make sense just not to participate. Im sure you know that the president was involved in that situation. In 2012 he said the fcpa is a horrible law that should be changed because it puts u. S. Business at a huge disadvantage. Im not asking you. I know you have had similar kinds of thoughts. But i just i think all of us want you to understand how important it is with the president like no other in terms of Family Investments and in terms of the president s family has gone overseas to do more investing while u. S. Taxpayers have paid to protect his family when they are overseas and how those raise questions not for this hearing but that you need to be particularly vigilant because he is your boss. I understand you have a fixed term, but he is your boss. And he is continues to appear to be making money from around the world. Im hopeful the standard will be high. We should send a message that american businesses we shouldnt be sending the message american businesses can be so successful partnering with corrupt entities. Its bad for our moral standing in the world. Its bad for developing countries. Its bad for investors. I would just ask to make that statement. Let me ask another question. I dont think ive heard anybody in main street ohio complain about the lack of ipos crimping their investment choices. What they want to know is that we are doing what we can to prevent the bus that can endanger their savings and retirement to make sure the system is not rigged against them. Ive been troubled for last three or four years of the collective amnesia on this committee and in this senate about what happened in 2007, eight and nine. I think most americans share that concern and wonder about the collective amnesia of too many of our policyholders. My question is this. What do you tell people saving and investing about a market where companies can stay private for longer, can limit shareholder Voting Rights . Were seeing that in a number of prominent u. S. Companies. And where they can make it harder for even large institutions to submit proposals for shareholder votes. Let me try and take those. In terms of let me go back to your first statement. In terms of whether having fewer Public Companies, i do think it is i think its a problem. And i do think its a problem thats not wellknown. If you have fewer Public Company getting on the growth phase and these are all here, thats fewer returns for people who participate in the public markets. People who participate in the private markets are capturing those returns. I do want to see more Public Companies. In terms of your other questions around amnesia, i can tell you that i dont have amnesia. I worry about where the risks are today. The risks in 2007, 2008 were in one aspect of our economy and it got away from us, very much got away from us. And we didnt know. I worry about where those risks are housed today and making sure we dont have a repeat of that situation. Go back thank you for answering the collective amnesia part. You said you want i said they stay private longer. You answered that well enough. More and more companies limiting shareholder Voting Rights, more and more companies are not really particularly welcoming of submitting resolutions by even major institutional shareholders. On the Voting Rights and governance issue of companies, two things. Its well disclosed and well understood thats where we are. The ability of companies to come to the market with governance structure like that is does it make sense. I also believe its a function of whats the supply of Public Companies coming to the market . My sense i could be completely off on this. Because i havent tested it with experts and things like that. But my sense is that the ability of theres so much thirst for Public Companies that its easier for a company to set a particular set of governance requirements that it may have been in the past. Thats not a good thing . I dont know if its a good thing or a bad thing. But i think thats a change in the balance. Thank you. Senator cortez masto. Thank you for the indulgence. Mr. Clayton, i know its been a long morning. I appreciate you being here and the answers to your questions. Have two quick ones for you. One has to do with the forced arbitration clauses. Doddfrank gave the ability to reign in forced arbitration clauses. The sec never studied the issue. If confirmed, will you commit to reigning in the use of forced arbitration clauses . Im not going to prejudge and committee to that issue. Its actually i will tell you its an issue that i dont know a great deal about. I will say that i will commit to working with you and working with the staff to learn more about it. Thank you. Second question, number of my colleagues today have covered how your substantial recusals may impede the work of the sec. My specific interest is in transparency. I believe that government doesnt do enough of being transparent enough to the taxpayer to understand what is taking place. In commission hearings, in any type of process or procedure. While i certainly dont want market moving information to be disclosed before its ripe, i think the public should know when you or any commissioner has recused yourself once an enforcement matter is settled. Will you commit to report to the public instances when you have recused yourself and what triggered the recusal once that enforcement matter has been settled . I think there are two parts to your question. Let me say there are three parts to your question. I do agree with transparency. There are situations, as you know as a prosecutor, where, for example, you dont disclose an Ongoing Investigation until its over. In terms of recusal, i think they have a policy. I look forward to working on that. As far as the particular reason for recusal, if its not i will need to look into it. But there are its the first time ive thought about it. There are things going through my mind like whats the duty to a client, those types of things . But i will look into whether the specific reasons for recusal is something that should be disclosed. Thank you. Let me just couch this. Most states, in particular nevada, have open meeting laws. They require any type of action taken by a commissioner to be put on the record for the public to understand. I completely agree with you that during a pending investigation you want to protect the integrity of the investigation, whether civil or criminal. My question to you was at the my question to you was at the end of the matter, once its settled and done, at that point in time would you be willing to even change a policy if its different than what im asking you is to identify if you recused yourself on that particular matter and then why you had to recuse yourself. I am very open to having that dialogue with the sec ethics officer and the people at the sec who have experience with this. Its not a new issue, finding out whats been done in the past and discussing it with you. Thank you. I appreciate that. Thank you for the answers to the questions today. Thank you. Senator warren . Thank you, mr. Chairman. Thank you for letting us have an extra round here. Mr. Clayton, last december president elect trumps Transition Team announced carl icahn would be special adviser to the issue on regulatory reform. Mr. Icahn is a longtime activist investor withholdings of more than 16 billion. He has Massive Holdings in Public Companies like cvr energy an oil refinery and herbal life supplement manufacturer. As far as we can tell, he has not divested any of these investments despite his role in this administration shaping regulatory policy that affects the companies that he is invested in. About two weeks after mr. Icahn was named to the position, you were nominated to lead the sec. According to news reports, mr. Icahn helped president elect trump choose you. Thats troubling for a number of reasons, especially considering the sec is actively investigating herbal life, one of mr. Icahns largest investments. Have you had any conversations or other communications with mr. Icahn since the election on november 8 . The news reports that carl icahn had i dont know i have no knowledge i just ask after i was after my nomination was announced, i had a bit of heads up it was going to be announced. After it was announced, i got a call to ask me to meet with carl icahn. And i met with him. So you met with carl icahn not before you were nominated but after you were nominated . Correct. And can you tell us what you talked about . We talked about mr. Icahns view on the importance of activist investors and how they, through their methods, drive performance of Public Companies. Let me guess. He thinks activist investors are good things and should be encouraged . I think he thinks that they do well for markets. Yeah. Did he talk about any of his investments . No. So he just talked generally about his view. And talked about his view about how the sec should no. No real specifics. He just wanted to give you his general view on activist investors knowing you were the nominee . Correct. That was the only conversation you had with him or with his people . That conversation . That was the only time ive spoken with mr. Icahn or his people. That was the only topic of the conversation when you met . He congratulated me. Fair enough. We talked about people we knew in common. Its the first time i met him. If you were confirmed, do you agree it would be inappropriate for to you have any conversations with mr. Icahns about the sec regulatory or enforcement plans, given his massive financial interests in various sec decisions . If im confirmed and im in the seat of the chairman of the sec, i think its important to talk to participants in the markets of all types. Including those that there are massive Ongoing Investigations . That is something that needs to be navigated very carefully. If theres a massive Ongoing Investigation, thats why we have counsel and protocol. It may be its completely inappropriate to talk to somebody. What i want to say is, receiving information about what participants in our Capital Markets think about them from all different types of people is an important part of the job. But to your point, senator, i agree, if theres an Ongoing Investigation and the appearance of impropriety or even the appearance of impropriety, it may be inappropriate to have that kind of meeting. I would like you to upgrade that may be inappropriate to you believe it is inappropriate. Im not going to totally prejudge it. But i get your point. I feel totally a lot happier if you would totally prejudge this is inappropriate. Let me go on from there a little bit. In february, mr. Icahn purchased a stake in Bristol Meyers squibb. He purchased this months after he was appointed as a special adviser to the president for regulatory policy. Let me do this as quickly as i can. I just want to ask you generally, can federal governments regulatory decision affect the value of holdings in a drug company like Bristol Meyers squibb . Yes, senator. Good. And can the value of those shares be affected by fda policies . Yes. Good. And patent decisions . Yes. And medicare and medicaid decisions . Yeah. Good. Because of course they could. Mr. Icahn is helping dictate Trump Administration policy at the same time that he is buying stock in this company. It is almost impossible to imagine how he would not have some inside information about how these policies would affect a company like Bristol Meyers. Mr. Clayton, if mr. Icahn had inside information about federal regulatory policy affecting Bristol Meyers and he chose to purchase shares in the Company Based on that information, is that potentially a violation of securities laws . As we both know in general. As we both know, the question of the scope of the securities laws around Insider Trading is its a very facts and circumstances analysis. If he had inside information it depends on where it came from, what duty. How about came from the fact he was appointed by the president to get this information and actually to create this inside information. I think were assuming a lot. I dont think we are assuming a lot, mr. Clayton. I appreciate that you want to be fair here. I know i need to stop because im over my time. The chair has been very indulgent here. We are talking about an administration that has conflicted everywhere. Its very difficult to determine whether someone is actually working in the interests of the American People or theyre just lining their own pockets or doing some secret blend of the two. The American People should not be on guess about that. When carl icahn is influencing policy that will affect companies and then he is investing in those companies, buying and selling in those companies, that creates a conflict of interest that just its just beyond what were even talking about everywhere else. I just want to make the point that were going to have to count on you. The American People are going to have to count on you. I want to hear that you are clear that this is not right, that this will be investigated, that theres not going to be chummy conversations and that we will see some real enforcement of the law on Insider Trading. I do not understand how we can have someone who continues to trade in a market and is influencing regulatory policy simultaneously. I want to hear the chair of the sec say he is going to look into this and i hope put a stop to it. I will stop there. Thank you, mr. Chairman. Mr. Clayton, that concludes the questioning. I do want to make a couple of comments and supplement the record on one issue. Im glad you are here, senator warren. It relates to something you said earlier that i want to supplement. In your first round of questioning you indicated that you believe that the republican commissioners were more lenient in Enforcement Actions than the democratic appointees. To the commission. I just have some information here from two articles back in october of 2016 in which reuters in one case and law 360 analyzed all of the Enforcement Actions of the sec from mary joe whites tenure, a threeyear period of time. There were 1400 defendants over 400 cases. The conclusion of that analysis was that over that threeyear period of time, the commission was unanimous in virtually all of them. There were only four of those 414 cases in which there was a single negative vote from one commissioner. I just wanted to make it clear i didnt want to let your allegation that republican nominees are lenient stand without at least a response. Im glad you would i know you would like to make a response as well. Thats right. I havent prepared for this. I want to say i think we have a New York Times analysis showing in the 48 cases where Mary Jo White recused herself the republicans wanted less enforcement. Im not familiar with that article. You are welcome to the democrats wanted more enforcement. We can continue to talk about this issue. We will do so. Mr. Clayton, thank you again for your willingness to serve and participating in this hearing here today. I have just one announcement for our members. That is that the questions for the record which will be submitted and we ask you to respond to promptly, mr. Clayton, are due by the end of business on monday. Once again, thank you for being here. That concludes our business. The hearing is adjourned. This weekend on American History tv on cspan 3, this saturday on lectures in history, Shepard University professor on stereo types of americans living in appalachia and how these stereo types changed over time. Far from the ruthless inbred savages the mountaineer possessed quote an easy uneffected bearing and unconscious manners of the well bred. Sunday at 6 00 p. M. Eastern on american artifacts, seen wror curator leads through the world war i memorial. The. They were known as the harlem hell fighters of the rattle snakes and were fighting along the river and established their reputation there as incredible fighters. At 6 30, the National Constitutional centers president and ceo Jeffrey Rosen and historians talk about prohibition, reasons for the movement and its repeal. But they had a year to kind of reorient. And of course amazingly because the way the amendment was written you could purchase as much alcohol as you wanted in that year before and could you store it. So they did very good sales leading up to prohibition and a lot of basements became very full. And at 8 00 on the presidency. Former nixon Administration Officials discussing the 37th president s close white house years. He said it in that in the east room speech. Its only a beginning always, that this was that this whole post president ial period is an exam particular of the nixon dedication and patriotism. P par dedication and patriotism. La pa dedication and patriotism. R parn dedication and patriotism. Parti dedication and patriotism. Artic dedication and patriotism. Rticu dedication and patriotism. Ticul dedication and patriotism. Icula dedication and patriotism. Ar of dedication and patriotism. R of dedication and patriotism. Of tn and patriotism. For a complete schedule go to cspan. Org. Sunday night on afterwards, university of pennsylvania professor lisa servon talks about traditional banking in her boom the unbanking of america. I wrote the book in a nutshell because i could not understand originally why, if alternative Financial Services like check cashers and payday lenders were so bad for people, why so many people were using them. And in the course of my research which took a few years, i learned that banks werent really serving the low and increasingly the middle class. And i also realized that there were good alternatives coming on board so i kind of wanted to tell that whole story. Watch afterwards sunday night at 9 00 eastern on cspan 2s book tv. Senator John Barrasso gave remarks on funding challenges. He talked to the association of american highway and transportation officials in washington, d. C. For just under 10 minutes. All right, im honored to introduce Committee Chairman john
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