New Commissioner Could Help Clayton's SEC Agenda

Sep 17, 2018

Kyle DeYoung comments on the arrival of Commissioner Elad Roisman to fill the U.S. Securities and Exchange Commission’s lone vacancy, which likely bolsters Chairman Jay Clayton’s agenda on certain deregulatory items, experts say, and could provide a critical voice to cryptocurrency matters facing the SEC. Read the article (registration may be required) here: https://www.law360.com/securities/articles/1083359/new-commissioner-could-help-clayton-s-sec-agenda.

Excerpts from “New Commissioner Could Help Clayton's SEC Agenda,” Law360, September 17, 2018:


“From a high level, I think [Roisman] is certainly going to be a supporter of Clayton’s agenda,” said Cadwalader Wickersham & Taft LLP partner Kyle DeYoung, a former senior counsel to the SEC director of enforcement. “Proposal by proposal, I think you have to wait and see.”

DeYoung said it’s likely that the SEC will now have a majority of commissioners who are sensitive to how corporate penalties could impact shareholders. “You have a clear majority now who is going to be concerned about overreach on ‘regulation by enforcement’ and a clear majority who is going to be focused on making sure the penalties are fair in that innocent shareholders aren’t adversely affected,” DeYoung said, speaking of Clayton, Peirce and Roisman.

The rise of cryptocurrency-based securities is another topic before the SEC that involves tension between potential fraud and legitimate opportunities for capital formation. Roisman in his confirmation hearings said that, in order for the U.S. capital markets to remain strong, the SEC must “examine and re-examine its rules” governing new investments and technologies such as initial coin offerings and blockchain. In terms of a potential bitcoin ETF, DeYoung said that matter likely “falls in the chairman’s lap. Until you have Clayton, you don’t really have a major change on that.”

Roisman will also play a key role in how the agency acts regarding its Regulation Best Interest proposal, which is designed to hold brokers to a higher standard of transparency and care if they are giving advice to retail investors. The proposal notably requires brokers and advisers to disclose potential conflicts of interest in which the broker or adviser is paid by an investment company to promote a financial product that may not be in the best interest of a client. Given the criticism that Regulation Best Interest has received from Republicans and Democrats, DeYoung said it’s going to be hard for Roisman to “thread the needle.” But DeYoung added it’s important to wait and see what kind of proposal emerges once public comments are sorted out.

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