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Business

SEC does ‘pretty good job’ fighting insider trading: new chairman

By
Carleton English
Published Sep. 6, 2017, 12:07 a.m. ET

Jay Clayton, the recently appointed chairman of the Securities and Exchange Commission, doesn’t think the Wall Street regulator needs help from Congress to rewrite insider trading rules.

The SEC does a “pretty good job” of fighting insider trading, he said.

Clayton, speaking on a panel Tuesday evening with fellow SEC colleagues at New York University Law School, discussed a range of issues the SEC looks at, including insider trading, cybersecurity, and initial coin offerings.

When asked by an audience member if he thought Congress should clarify insider trading rules, Clayton was careful with his wording.

“I look at it this way,” Clayton said before taking a long pause. “I think we do a pretty good job in this space as I compare it to other jurisdictions.”

Clayton’s caution may have had more to do with his audience than with the perceived opaqueness of insider trading regulations. The moderator was Clayton’s former law professor, and his audience included his predecessor at the SEC, Mary Jo White, as well as securities lawyers from white shoe firms.

“Is there some current uncertainty that would be nice to have cleaned up? Sure,” Clayton admitted.

But after saying he reviewed hypothetical scenarios, Clayton said he was comfortable with the status quo.

“I can’t remember coming up with any that were right on the knife’s edge. In most cases it was pretty clear that you wouldn’t want to engage in that conduct but for the risk of finding yourself in the crosshairs of our agency,” Clayton said.

Later in the panel, Clayton touted another feather in his cap: the SEC’s decision in July to regulate initial coin offerings (ICO) like regular securities.

One audience member challenged Clayton, saying the ICOs look nothing like securities, but Clayton was quick to fire back.

He pointed to the case of a virtual organization called the DAO, which issued virtual tokens last year in an IPO-like process and soon thereafter saw hackers steal a third of investors’ money.

“I don’t see how buying a DAO token was really any different than an LLC interest,” Clayton said, noting that the subscription documents even looked similar.

“Let’s put it this way, if I can’t prove that that’s a security, I can’t prove an LLC interest is a security.” Clayton said.