S. HRG. 115–9 NOMINATION OF JAY CLAYTON HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED FIFTEENTH CONGRESS FIRST SESSION ON THE NOMINATION OF JAY CLAYTON, OF NEW YORK, TO BE A MEMBER OF THE SECURITIES AND EXCHANGE COMMISSION MARCH 23, 2017 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.fdsys.gov/ U.S. GOVERNMENT PUBLISHING OFFICE 24–998 PDF WASHINGTON : 2017 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 12:32 May 01, 2017 Jkt 046629 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 L:\HEARINGS 2017\03-23 NOMINATION OF CLAYTON\HEARING\24988.TXT JASON COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS MIKE CRAPO, Idaho, Chairman RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio BOB CORKER, Tennessee JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey DEAN HELLER, Nevada JON TESTER, Montana TIM SCOTT, South Carolina MARK R. WARNER, Virginia BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada GREGG RICHARD, Staff Director MARK POWDEN, Democratic Staff Director ELAD ROISMAN, Chief Counsel BRANDON BEALL, Professional Staff Member GRAHAM STEELE, Democratic Chief Counsel LAURA SWANSON, Democratic Deputy Staff Director ELISHA TUKU, Democratic Senior Counsel DAWN RATLIFF, Chief Clerk SHELVIN SIMMONS, IT Director CAMERON RICKER, Hearing Clerk JIM CROWELL, Editor (II) VerDate Nov 24 2008 12:32 May 01, 2017 Jkt 046629 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 L:\HEARINGS 2017\03-23 NOMINATION OF CLAYTON\HEARING\24988.TXT JASON CONTENTS THURSDAY, MARCH 23, 2017 Page Opening statement of Chairman Crapo ................................................................. 1 Prepared statement .......................................................................................... 45 Opening statements, comments, or prepared statements of: Senator Brown .................................................................................................. 2 Senator Warner Prepared statement ................................................................................... 45 NOMINEE Jay Clayton, of New York, to be a member of the Securities and Exchange Commission ........................................................................................................... 4 Prepared statement .......................................................................................... 46 Biographical sketch of nominee ....................................................................... 48 Responses to written questions of: Senator Heller ........................................................................................... 64 Senator Sasse ............................................................................................ 66 Senator Cotton ........................................................................................... 75 Senator Perdue .......................................................................................... 76 Senator Tillis ............................................................................................. 78 Senator Brown ........................................................................................... 82 Senator Reed .............................................................................................. 90 Senator Menendez ..................................................................................... 92 Senator Tester ........................................................................................... 99 Senator Warner ......................................................................................... 102 Senator Warren ......................................................................................... 107 Senator Donnelly ....................................................................................... 112 Senator Schatz ........................................................................................... 113 Senator Van Hollen ................................................................................... 115 Senator Cortez Masto ................................................................................ 117 Senators Heitkamp and Heller ................................................................ 124 Senators Heitkamp, Tester, and Donnelly .............................................. 125 ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD SEC Settlement Order for Trump Hotels & Casino Resorts, Inc., dated Janu- ary 16, 2002 .......................................................................................................... 127 Correspondence from The Trump Organization to The Honorable Harvey L. Pitt, The Honorable Isaac C. Hunt, Jr., and The Honorable Laura S. Unger, dated December 14, 2001 ........................................................................ 136 Correspondence from The Trump Organization to The Honorable Harvey L. Pitt, dated January 28, 2002 .......................................................................... 137 (III) VerDate Nov 24 2008 12:32 May 01, 2017 Jkt 046629 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 L:\HEARINGS 2017\03-23 NOMINATION OF CLAYTON\HEARING\24988.TXT JASON VerDate Nov 24 2008 12:32 May 01, 2017 Jkt 046629 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 L:\HEARINGS 2017\03-23 NOMINATION OF CLAYTON\HEARING\24988.TXT JASON NOMINATION OF JAY CLAYTON, OF NEW YORK, TO BE A MEMBER OF THE SECURI- TIES AND EXCHANGE COMMISSION THURSDAY, MARCH 23, 2017 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 9:33 a.m., in room SD–538, Dirksen Sen- ate Office Building, Hon. Mike Crapo, Chairman of the Committee, presiding. OPENING STATEMENT OF CHAIRMAN MIKE CRAPO Chairman CRAPO. This hearing will come to order. This morning, we will hear testimony on the nomination of Jay Clayton to be Chairman of the United States Securities and Ex- change Commission. Mr. Clayton has extensive expertise in our financial markets as a highly regarded securities lawyer. For decades he has helped companies access our capital markets, increase their ability to in- vest in the United States, and grow and create jobs. One area on which Mr. Clayton has already indicated he will focus is capital formation. Capital markets drive innovation and job creation, and access is the lifeblood of our economy. The JOBS Act helped revitalize the primary markets, and both Congress and the SEC should continue to find ways to help compa- nies go public and allow their investors to share in their success. Recently, this Committee marked up several bipartisan securities bills, and we encourage you, Mr. Clayton, if confirmed, to help us identify other securities areas which could use legislative improve- ment. The SEC has an important three-part mission: protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Each part of the mission is equally important and should not come at the expense of another. I raise this because the SEC’s mission is critical to every U.S. citizen and retiree. Investors should be able to participate in our markets, on fair footing, so that they can pay for life events such as college and save for retirement. We also need to help investors make sure they have material in- formation to make informed investment decisions. I have repeat- edly stressed the need for the U.S. financial system and its mar- kets to remain the preferred destination for investors throughout the world, and the SEC has an important role to that end. I look forward to hearing more from you on how we can help companies (1) VerDate Nov 24 2008 12:32 May 01, 2017 Jkt 046629 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 L:\HEARINGS 2017\03-23 NOMINATION OF CLAYTON\HEARING\24988.TXT JASON 2 grow, Americans get hired, and investors share in the wealth cre- ation by these companies. Another important issue that the SEC is tasked with is ensuring that the stock market rules and regulations are still appropriate, given that most of them were promulgated in a time where tech- nology was much less advanced. It is imperative that these rules serve the needs of companies and investors. In that vein, it is important for the SEC to do retrospective re- views of its own regulations to ensure they are working out as in- tended and are still acceptable. This is in line with the President’s own Executive orders on regulation. Other regulators are subject to EGRPRA, the Economic Growth and Regulatory Paperwork Reduction Act, which statutorily man- dates a review and an evaluation of existing regulations in order to identify which are outdated, unnecessary, or unduly burden- some. While technically the SEC is not subject to EGRPRA, your prede- cessor, Chair White, indicated before this Committee that she was ‘‘very much committed to reviewing [the SEC’s] rules in that fash- ion.’’ A commitment like that is one that many would like to see continue. Additionally, it is important for the SEC to have robust cost-ben- efit analysis. I have long stated this position, and our President re- cently echoed the importance of cost-benefit