Dive Brief:
- The Trump administration has named Sullivan & Cromwell Partner Jay Clayton to head the U.S. attorney’s office for the Southern District of New York. He would replace Damian Williams.
- Clayton is an M&A and capital markets specialist who chaired the Securities and Exchange Commission in the first Trump administration. He took an interest in small investor protections but also pushed to give companies more ways to go public in a bid to increase initial public offerings.
- “Jay is a highly respected business leader, counsel, and public servant,” President-elect Donald Trump said in announcing his pick on his Truth Social platform.
Dive Insight:
Clayton is an unusual choice to head SDNY — what’s sometimes called the “sheriff of Wall Street” because of its role policing investment banks and other institutions in the country’s financial center. The typical path for people who head up the office is white-collar criminal prosecution experience, The New York Times has reported, and Clayton wouldn’t bring that to the job.
But he knows capital markets and, while at the SEC, he was credited for taking a consensus-building approach to reform of regulations affecting companies and investors.
He led efforts to boost small investor participation in equity markets, in part by tightening rules around broker-dealers and investment advisers, improving investor disclosures and strengthening enforcement against retail investor scammers.
“There are just a number of products that aren’t appropriate for most retail investors,” Clayton said in 2020 at a financial adviser summit.
He also tried to address a big problem during his term at the agency: a persistently shrinking pipeline of IPOs. For years, startups were overwhelmingly favoring deals with private buyers rather than taking the more arduous approach of going public, a trend that has long-term implications because it means fewer opportunities for small investors to participate in financial gains as young companies grow into large corporations.
“As a general long-term matter … I do wish that companies were looking to access our public capital markets earlier in their life cycle,” Clayton told CNBC in 2019.
Two of the innovations he supported were direct offerings and special-purpose acquisition companies. In a direct offering, companies can go public without involving an intermediary, like an investment bank, and SPACs are the blank-check companies that exploded during the first Trump term.
Trump’s Truth Social went public in a SPAC transaction earlier this year after the SEC scrutinized it over whether rules were bent during its pre-SPAC stage.
As head of the SDNY, Clayton would be expected to be the federal government’s point person on criminal securities prosecutions. In two recent high-profile cases, SDNY went after crypto exchange FTX and its founder Sam Bankman-Fried and Archegos Capital Management and its founder Bill Hwang.
“Jay is an exceptional lawyer and will be an excellent United States attorney,” Geoffrey Berman, who led SDNY during Trump’s first administration, told The New York Times in a statement.
Trump had sought to install Clayton at SDNY toward the end of Berman’s term, but the change in leadership wasn’t completed.
