WASHINGTON, Feb 22 (Reuters) - 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 commission.
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 Capital.
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.
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 process.
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 companies. (Reporting by Sarah N. Lynch; Editing by Linda Stern and Leslie Adler)