President-elect Trump to Nominate Jay Clayton Securities and Exchange Commission Chairman -- Update

By Dave Michaels And Liz Hoffman

WASHINGTON -- Donald Trump's nomination of veteran Wall Street lawyer Jay Clayton to chair the Securities and Exchange Commission ends a streak of aggressive regulators and litigators overseeing the country's top markets cop.

Mr. Clayton, whose clients have included Goldman Sachs Group Inc. and Barclays Plc, adds another figure with deep financial-industry ties to President-elect Trump's incoming administration. Mr. Clayton's experience as a partner at Sullivan & Cromwell on big stock and bond deals -- including the 2014 initial public offering of Alibaba Group Holding Ltd. -- signals Republicans prefer an SEC chairman who is attuned to the needs of Wall Street firms that grease the markets where companies go to raise capital.

In one of his few public statements on policy, Mr. Clayton oversaw a 2011 New York bar association report attacking the Obama-era SEC and Justice Department for "zealous" enforcement of laws intended to prevent American corporate bribery of foreign officials. The paper concluded they were "causing lasting harm to the competitiveness of U.S. regulated companies and the U.S. capital markets."

Mr. Clayton's background is in stark contrast to that of current Chairman Mary Jo White, a former prosecutor who presided as the SEC collected record amounts of penalties and disgorged profits from wrongdoers. Many Republicans generally liked Ms. White personally but thought her agency's fines punished shareholders. Mr. Clayton also will be pressed by congressional Republicans to pare back red tape that affects fundraising, CEO compensation, and other activities.

"Jay Clayton is a highly talented expert on many aspects of financial and regulatory law," Mr. Trump said Wednesday in an announcement of the choice, "and he will ensure our financial institutions can thrive and create jobs while playing by the rules at the same time."

"We need to undo many regulations which have stifled investment in American businesses, and restore oversight of the financial industry in a way that does not harm American workers," Mr. Trump added, signaling changes he expects from the agency's new leadership.

Mr. Clayton's background is a throwback to past SEC chairmen who were named before the financial crisis and came directly from Wall Street, such as Bill Clinton-appointee Arthur Levitt, or William Donaldson, who served under George W. Bush.

Mr. Clayton's resume quickly attracted opposition from Senate Democrats, who have noted that Mr. Trump's tough criticism of Goldman and other banks during his campaign seems to have melted away.

"It's hard to see how an attorney who's spent his career helping Wall Street beat the rap will keep President-elect Trump's promise to stop big banks and hedge funds from 'getting away with murder,' " Sen. Sherrod Brown (D., Ohio) said in a statement, alluding to one of Mr. Trump's populist campaign-trail pledges. "I look forward to hearing how Mr. Clayton will protect retirees and savers from being exploited, demand real accountability from the financial institutions the SEC oversees, and work to prevent another financial crisis," he added. Mr. Brown is the top Democrat on the Senate Banking Committee, which will consider the Clayton nomination.

Mr. Clayton would become the latest Trump appointee with strong ties to Goldman Sachs, joining former Goldman executive Steven Mnuchin, Mr. Trump's choice for Treasury secretary, and former Goldman President Gary Cohn, who will run the National Economic Council.

Mr. Clayton represented Goldman when it received a $5 billion investment from billionaire Warren Buffett's company during the peak of the credit crisis in September 2008, according to his biography on Sullivan's website. He has also represented Goldman in connection with other investments and acquisitions, according to the law firm. Sullivan & Cromwell is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm, though Mr. Clayton's focus has largely been around capital markets.

His past legal work also raises potential conflicts of interest. Mr. Clayton could be forced by government ethics rules to recuse himself from SEC matters that specifically affect his lengthy roster of past clients. Ms. White was hampered by similar constraints during her first years in office, related to clients she served at her New York law firm following her career as a prosecutor.

Unlike some of its competitors, Sullivan & Cromwell doesn't have a reputation for feeding the SEC's revolving door. More of its alumni land in corporate roles than in top government jobs.

Mr. Clayton is a lifer at Sullivan & Cromwell, which he joined as an associate after graduating from the University of Pennsylvania Law School in 1993, where he was a competitive rugby and soccer player, according to a classmate, Mark Greene, now the head of the corporate department at Cravath, Swaine & Moore LLP.

Softspoken and low-key, Mr. Clayton is also an avid golfer, a member of several exclusive clubs including Philadelphia Cricket Club and the Baltusrol Golf Club in Springfield, N.J.

Mr. Clayton's clients have included many firms that struggled through the financial crisis, including Ally Financial Inc. The auto lender, previously part of General Motors Co., sold several overseas assets to repay the U.S. government, which injected $17.2 billion into Ally as part of the bailout of the auto industry.

Ally chief executive Jeffrey Brown remembers that Mr. Clayton remained calm even when dealings with regulators became tense during the bank's long road to repaying the funds.

"He is one of the most level-headed people I have ever worked with in my career," Mr. Brown said in an interview. "He doesn't seek the spotlight."

Mr. Clayton also played a key role in other financial-crisis matters related to Bear Stearns's sale to J.P. Morgan Chase & Co., Wachovia Corp.'s sale to Wells Fargo & Co. and troubles facing Lehman Brothers.

"He is incredibly well-versed in the regulatory environment in this country," Mr. Greene, the former classmate, said, adding he doesn't consider Mr. Clayton a political person. "He cares deeply about getting things right and is a big proponent of a free-market economy."

Mr. Greene said he doesn't think the appointment of a deal lawyer will change the nature of SEC enforcement, but instead will "bring a fresh perspective."

--Sara Randazzo, Emily Glazer, and Rachel Louise Ensign contributed to this article.

Write to Dave Michaels at dave.michaels@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

January 04, 2017 16:04 ET (21:04 GMT)

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