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Clayton Charts Path Forward with Key Principles, Says Regulatory Architecture is Sound

SEC Chairman Jay Clayton in his first public speech reiterated the agency’s mission and its alignment with the long-term interests of the “Main Street investor.” The speech covered several guiding principles and action areas, including investor education, capital formation and enforcement and examinations. Clayton appeared to advocate a conservative approach to rulemaking, noting the SEC’s “sound” historic approach to regulation. “It is abundantly clear that wholesale changes to the Commission’s fundamental regulatory approach would not make sense,” he said. He called for the agency to “review its rules retrospectively” with input from investors and others and to be “introspective and self-critical” in that regard.

Going forward, Clayton said the SEC would focus on improved investor education and disclosures, among other areas. He acknowledged the growth in technological innovation, stating that the SEC is “adapting machine learning and artificial intelligence to new functions, such as analyzing regulatory filings.” Clayton’s take on cybersecurity appeared to break with recent views that the topic would become a major enforcement priority. Clayton acknowledged the seriousness of cyber threats but urged caution regarding“punishing responsible companies who nevertheless are victims of sophisticated cyber penetrations.” He added that the SEC needs to bring “proportionality” and adopt a broad perspective in the area of cybersecurity. Clayton also stressed a need for clarity and consistency with respect to the DOL Fiduciary Rule, and said he hoped the SEC could work with the Department of Labor in a way that best serves the long-term interests of investors.