Securities and Exchange Commission chairman Walter “Jay” Clayton stuck largely to prepared remarks Wednesday at Temple University, saying he’s pursuing “harmonization” of regulation over both brokers and investment advisers.
In it, he went after some unscrupulous actors in the industry.
“Some investment professionals may not be entirely straightforward about the existence or scope of their conflicts of interest, or the ways in which they make money from their customer or client’s investment activity,” the SEC chair said. Clayton made his speech to an audience of board members, his employees, including Jeff Boujoukas, head of the local Philadelphia SEC office, professors, and students. Among the first questions was about Bitcoin and other cryptocurrencies, and whether the agency would regulate them.
Comparing cryptocurrencies to laundromat tokens, Clayton said: “It depends on what you use them for. If you trade them, and they change in value, that looks like a security to me.”
He also added to the long-debated merging of rules governing brokers and investment advisers, who are regulated by two separate entities: brokers are overseen by FINRA and investment advisers by the SEC.
“By raising the conduct standard applicable to broker-dealers, we are applying consistent, fiduciary principles across the spectrum of investment advice,” he said in the speech. “In a word: harmonization. Broker-dealers will be, and investment advisers already are, required to act in the investor’s best interests.”
Most Americans fail to understand the difference between brokers and registered investment advisers. Brokers are paid commissions on each trade, and are only required to meet a “suitability” standard; investment advisers are fiduciaries and are often paid an annual fee based on assets.
Asked about the Department of Labor’s fiduciary rule, Clayton said “I don’t think we’re that far apart.”
Clayton said in an interview that he expects a “ good dialogue” with FINRA over the rules. The two agencies work together, but in practice, many government agencies oversee Wall Street and compete for territory. The full test of Clayton’s remarks can be found at the SEC’s website.
Clayton was brought to Temple by former university trustee Alan Cohen, now an SEC senior policy adviser, former Goldman Sachs executive, and undergraduate of Temple.
“Philly always will be my hometown,” said Clayton, citing the city’s loyalty. “We hung with the Eagles for 50 years.” Clayton grew up in Palmyra and then Wallingford, where he graduated from Strath Haven High School and the University of Pennsylvania for undergraduate and law school.