WASHINGTON Feb 22 Jay Clayton, the deal-making
lawyer President Donald Trump has chosen to lead the U.S.
Securities and Exchange Commission, is expected to move swiftly
after his confirmation to start smoothing the path for
businesses seeking to raise money.
He has already laid out a capital formation agenda to Trump
surrogates who interviewed him, a source familiar with the
process said. And he has expressed interest in tackling some
regulations involving accounting and compliance procedures that
financial industry players say get in the way of deals and
initial public offerings.
Clayton could sit before the Senate Banking Committee for
his confirmation hearing as soon as March 2, according to the
source, who spoke with Reuters over the weekend.
Once he is confirmed by the full Senate, he will be able to
direct the SEC to write new rules, issue guidance or provide
exemptive relief from some regulations.
“I think Clayton is someone who can take capital formation
issues by the horns and hopefully make progress,” said Tom
Quaadman, executive vice president for the U.S. Chamber of
Commerce Center for Capital Markets Competitiveness.
Clayton will not have carte blanche at the commission, which
at full force has five voting members, including two of the
minority party. There are currently three vacancies on the
Senate Democrats, among others, will be watching to make
sure that certain post-crisis-era rules are not unwound too
much. Clayton himself thinks the SEC needs to continue to be on
the lookout for financial fraud, the source said.
Wall Street financiers have blamed certain post-crisis
disclosure rules and regulations adopted in the wake of major
accounting scandals in the early 2000s for contributing to an
ongoing IPO drought. There were only 105 IPOS in 2016, the
lowest since 2009, and they raised less than $19 billion, the
lowest since 2003, according to research from Renaissance
To be sure, various factors affect the IPO market. Investors
have shown a greater interest in buying up private equity, and
companies have sold themselves to other companies instead of
going public. Volatile stock prices also affect market
conditions, so changes in rules might not result in a flood of
the IPO pipeline.
AN EASIER PATH TO IPO
Some areas are ripe for Clayton and the SEC to tackle
quickly, several lawyers who practice before the agency or who
have worked there told Reuters over the last two weeks.
One step would be to ease rules governing how companies can
"test the waters" by talking to potential investors ahead of an
IPO. That helps companies decide whether to proceed and gives
them some idea of where to go for funding, before they spend
hundreds of thousands of dollars on paperwork.
Current and former SEC lawyers also said the regulator
should spur what are known as mini-IPOS under "Regulation A" -
offerings up to $50 million. The SEC could raise that threshold
to entice more companies to go public through that fast track
Clayton also is interested in looking at accounting and
compliance rules that could be costly for mid-sized companies,
according to the source who is familiar with his thinking.
Outside auditors of companies worth more than $75 million
have to assess their internal reporting controls. While raising
that number would take an act of Congress, the SEC could exempt
more mid-sized companies through regulatory actions, said
Standish Fleming, a managing member of life science venture
company Forward Ventures.
The SEC already is looking at ways to make disclosures more
useful to investors, such as allowing companies to use
hyperlinks in their filings instead of having to resubmit old
data. Another improvement that would be welcome by businesses
would be to focus reporting rules to a company's specific
industries, said Keir Gumbs, a former SEC attorney and now a
partner at Covington & Burling LLP who advises Fortune 500
(Reporting by Sarah N. Lynch; Editing by Linda Stern and Leslie