Jay Clayton on Public vs. Private Markets and Rethinking the Rules

Imagine navigating the deterioration of the mortgage market in 2007 and facilitating the most high-profile transactions of the financial crisis. Then, imagine that it’s March 2020, and you’re leading the SEC as the COVID-19 pandemic upends the global economy.  This week’s guest has chartered these choppy waters and emerged aiming the lessons of the past at our regulatory future. Jay Clayton served as the 32nd Chairman of the U.S. Securities and Exchange Commission and boasts a decades-long career at Sullivan & Cromwell, where he currently is a Senior Policy Advisor and Of Counsel. 

Jay’s career in law stemmed from an interest in business, a route that gave him access to major business decision-making moments. Despite his unexpectedly lengthy tenure at S&C, Jay—whose lineage is dotted with government officials—found himself appointed to lead the SEC by President Trump in 2017. 

In this episode, Jay and Eric dive into the architecture of public and private capital markets and the challenging environment for retail investors. Jay speaks on the principles at the core of the Securities and Exchange Commission, particularly the importance of leveling the information playing field and rethinking the definition of an accredited investor. He reflects on the 2017 ICO craze and the precarious economic situation of the pandemic’s early days. Jay shares insights into how to approach emerging financial products from a regulatory standpoint and the crucial question: Bitcoin…commodity or security? 

• (1:43) – Who is Jay Clayton?
• (2:29) – The early years
• (5:09) – Sullivan & Cromwell 
• (6:35) – Reflections on the financial crisis
• (9:28) – Arriving in Washington
• (13:41) – COVID-19’s interruption
• (15:02) – Rethinking the rules
• (16:33) – Challenges for public companies
• (19:41) – The retail investor is missing out
• (22:45) – How can one qualify as an accredited investor?
• (24:10) – The architecture of the public markets
• (26:22) – New requirements
• (39:11) – What qualifies as a security?
• (31:57) – Bitcoin = commodity
• (33:52) – Predicting the crypto regulatory environment

Eric Satz—entrepreneur, serial investor, lover of hot peppers— is the founder and CEO of Alto. The idea behind Alto was born out of a problem. Eric found a clear need to give people more control over their investments (and investment opportunities) in a simple, streamlined way and created Alto to make these opportunities available to all investors, not just the ultra-wealthy or institutional investors. 

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Podcast episode production by Dante32.