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SEC chairman non-committal on dual-class, cybersecurity, fiduciary rule-making

SEC Chairman Jay Clayton

SEC Chairman Jay Clayton opined on the topics of dual-class share structures, cybersecurity disclosures, broker-dealers and advisers, and proxy-voting procedures at the Council of Institutional Investors' conference in Washington on Monday.

Former Securities and Exchange Commission Chairwoman Elisse Walter interviewed Mr. Clayton at the conference and asked him whether dual-class structures were something he felt the Securities and Exchange Commission would address formally or informally.

Mr. Clayton said that he was not putting it at the "front of the agenda for something (the SEC) should weigh in on." He added that he's "not persuaded by absolutists on either end" of the dual-class share issue and that "governance by indexation" or excluding companies from indexes because of their voting share structures does not "sit really well with (him) at the moment."

On the issue of cybersecurity, Mr. Clayton did not say whether there would be rule-making on how companies should respond to cybersecurity incidents, but he did say that staff would be focusing on how public companies disclose cybersecurity risks and breaches after the SEC voted unanimously last month to issue interpretative guidance on corporate cybersecurity disclosure.

One of the difficulties with writing specific rules on cybersecurity disclosures, Mr. Clayton said, is "whether something is material really ... is a facts-and-circumstances determination, and it can vary from industry to industry, company to company."

"In some companies a particular intrusion may be a clearly material matter, while in others, not at all," he said.

Cybersecurity is also "an area that is so significantly impacted by other disclosure requirements whether they're consumer disclosure requirements or law enforcement requirements," Mr. Clayton observed. "It is an area where I would say really good lawyering and good corporate governance is necessary."

Ms. Walter also asked Mr. Clayton to explain more about the SEC's initiative to address the different standards of conduct for investment advisers and broker-dealers.

Mr. Clayton said it has become "increasingly apparent" to him during his 10-month tenure that more needs to be done to bring "consistency or harmony." He pointed out that for a defined contribution investor with a balance of $50,000 or $100,000, an annuity and a few stock investments, there are at least five regulators that oversee the client-adviser relationship there — the Department of Labor, the SEC, the Financial Regulatory Authority, the state securities regulator and the state insurance regulator.

Mr. Clayton said that he hopes the SEC is able to put out a proposal that brings more consistency to the issue. He declined to provide a timeline for a proposal.

Asked by Ms. Walter whether there should be "federal regulation or greater oversight of proxy-advisory firms," Mr. Clayton said that he has "not formed a definitive view of whether we should have SEC regulation of proxy-advisory firms."