At the Economic Club of New York, in keynote remarks, Chair Clayton reviewed the Securities and Exchange Commission’s recent initiatives. He highlighted the Commission’s adoption of Regulation Best Interest (Reg BI). Repeating a common theme, Chair Clayton discussed concerns relating to increased reliance on the private capital markets. Clayton noted that, while twenty-five years ago, the public markets dominated the private markets in virtually every measure, today, the private markets outpace the public markets, including in aggregate size. Given the audience, Chair Clayton’s remarks highlighted the inefficiencies of the current regulatory framework for public and private markets and noted that the Commission is addressing both. He cited a number of initiatives undertaken in order to increase the attractiveness of the U.S. public markets. Commenting on exempt offering alternatives, Chair Clayton cited the changes brought about by the JOBS Act, including amended Regulation A, crowdfunding, and general solicitation for Rule 506(c) offerings; however, he noted that these advances added “new patches to an already patchwork regulatory framework that remains rooted in income and wealth tests for investor access.” As suggested by the Commission’s Concept Release on Harmonization of Securities Offering Exemptions, Chair Clayton noted that the Commission was reevaluating the exempt offering framework and assessing the utility of “structured funds” as a means of facilitating Main Street investor access to private investments. Chair Clayton also commented on developments that the Commission was actively monitoring, which include the growth in corporate debt and the risks associated with the increase in corporate debt held outside of banks, including by funds, as well as banks’ exposure to non-banks. Chair Clayton also reiterated the Commission’s work relating to the LIBOR phase out and emphasized that market participants should ensure that any contracts that extend beyond 2021 either reference LIBOR and have effective fallback language or do not reference LIBOR. The Commission, he noted, also is monitoring the impacts of Brexit. See the complete text of the remarks here.
