Regulation, cybersecurity and possible conflicts of interest. This is 2 and a half hours. [inaudible conversations]. [inaudible conversations] [inaudible conversations] we will come to order. We will hear testimony on the nomination of jay clayton the chairman of the United States securities and Exchange Commission. Mr. Clayton has extensive experience in our Financial Markets is a highly regarded securities lawyer. For decades he has helped Companies Access our Capital Markets. Increase their ability to invest in the United States and growth and create jobs. One area in which he has already indicated he will focus is Capital Formation. Capital markets drive innovation and job creation and axis is the lifeblood of our economy. The jobs act helped revitalize the primary markets in both congress and should allow companies to the public and allow investors to share in their success. Recently this committee marked several bipartisan securities bills and encourage you mr. Clayton, if conference to help us identify other securities areas which could help, can use legislative improvement. The sec has certain missions. Each part is equally important and should not come at the expense of the other. I raise this because the secs mission is critical to every us citizen and retiree. Investors should be able to participate civic and paperlike events such as college and save for retirement. We also need to help investors make sure they have Material Information to make informed investment decisions. I have repeatedly stressed the need for the us Financial System and its markets and their preferred dedication of investors. Other regulators are subject to the economic group. We need to identify which are unnecessary or unduly burdensome while technically it is in the subject, she was committed to review the rules in that fashi fashion. Its one that many would like to see continue. Additionally it is important to have robust costbenefit analysis and the president echoed this in the executive order. Congratulations on your nomination and thank you and your family for your willingness to serve and now i turn over to senator brown. Congratulations on your nomination. All of us know some of the demand so thank you for your willingness to stand up and be here. We discussed a number of points that are still relevant today. How do we strengthen the violations of the wall an law ag the accountability for misconduct. About a year ago he went to iowa for a stand up for the little guy is the speech. He promised the people he knew the people in wall street and he wouldnt let wall street get away with murder. They occupy the treasury and turned to Goldman Sachs. The sacrifice for the College Bills or down payment on a home are more skeptical and less trusting and whether it is another crash of a billion dollar policy scheme people worry about trusting the market with their hardearned evening. Its at the time we are debating whether Retirement Advisors should put their clients first and its hard not to see why people feel that way. Ordinary fears were not enough we learned the risk of hacking and cyber crimes in the Climate Change it seems the list grows longer for remaining fraud and abuse is sweeping as collective amnesia is swept across this body. I hope we dont spend the next two hours discussing issues only to see them ignored if you are confirmed. You spent your career protecting some of the biggest names in debate host conflicts in this position. I am concerned to resolve of the time we need a strong chair on the front line of enforcement and not watching from the sidelines. You are representing bankers and hedge fund is. But those people are already well represented among the president s supporters, advisors and far too many people in all three branches of government. I want to hear what you do to represent the workers in canton ohio. In some cases the hedge fund took control of the company and shipped factory jobs overseas. People continue to scrape by as their paychecks are smaller over the years because the management cares more about policing wall street and their bottom lines than by doing right by the people. Executive pay keeps going up and up. Workers nearing retirement have held their benefits slashed and thats why they pay ratio rule and the fiduciary role of the anticorruption efforts allowing Natural Resources in the industries i could go on and on of the special interests and influence in this body and the administration thats why all those rules are so important. Its a lot of ground to cover i dont get to all of my questions and i will submit questions separately for the record. Thank you for your willingness to serve. Serve. Please rise and raise your hand. Do you swear or affirm the testimony you are about to give us the truth, the whole truth and nothing but the truth, so help you god . Do you agree to appear and testify before any duly constituted committee in the senate . You may take your seat. Your statement will be made a part of the record in its entirety and again i give you my congratulations on your nomination. Before you begin your statement to the committee, you may if you choose introduce the members of your family. I see you have a beautiful family with you. I will do that, thank you, senator. I will start with my father, my mother kathy, my wife, gretchen, my daughter haley, my son wyatt, my youngest brother and his wife michelle are all here for me today. You are fortunate to have such a beautiful family with you. You may proceed. Thank you very much, senator. Chairman and Ranking Member brown and members of the committee, i am honored to appear before you today as President Trumps nominee to chair the Securities Exchange commission. I want to thank you and your staff for the time you spend with me. I have enjoyed and learned from our meetings. Our Capital Markets have profound effects making sure the markets are fair, efficient and ensuring investors are protected is the fundamental responsibility of the sec. If confirmed, i will take up this responsibility with energy and purpose. I pledge to work with my fellow commissioners, the sec staff, this committee, and the others that support and defend the Capital Markets. The importance of Government Service was instilled in me at a young age jury of six weeks afteto six weeksafter i was borr shipped out to vietnam as a Second Lieutenant and my mother, 20 at the time, and i moved to her home in lancaster pennsylvania. We lived with her parents and younger brothers and lucky for me, my grandfather had t the eighth and last child of coal miners and a perpetual Public Servants both entitled and in actionin title and inaction toon me. We were great friends for 20 years. Remarkably for as far back as i can remember he took me to township meetings, state closing and estate sales. These experiences much more mainstream and wall street made a deep and lasting impression on me. In the ninth grade, we moved as a family for the last time to pennsylvania. I met a new friends mostly through sports. One of those friends who has long been my best friend is my life. We met 36 years ago and have been married for 25 years. I want to thank her for her encouragement, love and support. As the chair of the sec i will be mindful of my responsibility to my children and their generation. During the course of my 20 plus career as a transaction lawyer its been my privilege to work with leaders in the public and private sector including the landmark transactions such as the Worlds Largest ipo as well as transactions during the darkest days of the financial crisis. For my five years living and working in europe when i lived on madison involving the law and the markets no fewer than a dozen countries including france, sweden, turkey, switzerland, italy, us and germany i learned of the worlds Capital Markets are very interconnected and more broadly america is indeed the greatest country. My work has included counseling a number of smallbusiness individuals. During my college and postgraduate years my mother and father operated a small warehouse logistics business. I worked with them on various projects including lease negotiations, Inventory System design and establishing a plan for their employees. There were ups and downs and i learned firsthand the many challenges that small and mediumsized Business Space as well as their importance in the economy. Based on all of my experiences, nationally and internationally on wall street and main street, i firmly believe that one well functioning Capital Markets are important to ask the american. Number two, all americans should have the opportunity to participate in and benefit from our Capital Markets on a fair basis including being provided Accurate Information about what they are buying when they invest and there is zero room for bad actors in the capital market. I am committed to ruling out any fraud and shady practices in the Financial System. I recognize the bad actors undermine the hardearned confidence that is essential for the operation of our Capital Markets. I pledge to you and the American People i will show no favoritism to anyone. One last comment. For over 70 years the Capital Markets have been the envy of the world. Theyve allowed businesses to grow and create jobs. The markets provided broad crosssection with the opportunity to invest in growth including for Pension Funds and retirement assets. In recent years the markets faced growing competition from abroad. The listings have slowed dramatically. More significantly, it is clear the public Capital Markets are less attractive to business than in the past and as a result of the developments, Investment Opportunities for main Street Investors are more limited. Here, i see room for improveme improvement. Im excited to work with you, my fellow commissioners and staff to pursue those improvement and in doing so, i will always be vigilant to ensure the commission is steadfast and protecting investors. Thank you for this opportunity. I look forward to receiving your advice and answering questions. Thank you for your statement and before i begin, i would like to remind the members of the committee that we will be working on a fiveminute timeframe for each segment and i encourage the members to honor that so that all of our colleagues have an opportunity to get their questions in. As the senators are prone to do you make it a question at the end of the five minutes and if that happens, i will allow you to answer that i would encourage you to be brief in your answers. First, you are a highly regarded attorney that has received recognition for your expertise in the field. Some raised concerns that your success and former clients will create conflicts for you. Frankly could you provide your thoughts on this issue . I will try to be brief. I have been fortunate to have a diverse experience as a transaction securities lawyer dealing with a number of participants in the Capital Markets both nationally and internationally in a number of different settings, securities offerings, mergers and acquisitions, regulatory matters etc. I believe that its a strength and i also believe the type of matters i worked on which involved problemsolving is a strength. As far as the extent of my practice and whether the refusals that would be required for the potential conflicts will impair my ability to act as the chair of the Securities Exchange commission i do not believe they will do so. Ive discussed this at length with the Ethics Office and the government ethics. This isnt a new issue. There is a protocol in place for dealing with those matters and i believe i if ibm refused my felw commissioners will be able to handle the matter is a bully a bully wit with good effect. It seems surprising to me a persons success in the field we are asking them to lead an agency could be criticism so i appreciate your criticism to ensure conflicts will not arise into the you will administer the agency. In your statement you discussed the offerings and the need to keep the Capital Markets robust serving as vengeance for the economy. Can you let us know any thoughts on how they can aid in this process . I very much look forward to discussing this with my commissioners and staff, but i will know that using the on ramp in the process if i say using the on ramp i dont mean just easing the important regulations Public Companies face. I need making it less costly upfront to become a Public Company has had an effect on the market. When i go to meetings where a company is considering whether to go public or not one of the first questions asked is is this an emerging Growth Company because that has made it easier for them to become registered Public Companies in this count country. The equity markets have seen a lot of change in the past few decades including in terms of the products listed as well as the Technology Behind it and investors participating in it. The predecessor and acting chair man stated that there is the need to review the current equity Market Structure and such review should be conducted in a datadriven matter. What are your thoughts on continuing the Market Structure and whats that do they still need to do quite i think it is apparent technology continues to change the market and that is something that will continue. The markets respond, technology responds. I believe we need to engage in a constant assessment of whether the markets are operating efficiently and for all investors. As far as the Market Structure analysis that the commission has going on now i do believe they should continue. I have become thanks to some of the questioning from you and your staff more familiar with matt and i do believe we should continue the Market Structure in going forward. Just to let you know at the conclusion of my five minutes this is an important issue to us and we look forward to receiving the input from the analysis and deliberations so i would encourage you to pursue that aggressively. I will yield about 15 seconds. Given the administrations on the precedented entanglements and demonstrated lack of interest and transparency we must focus on the potential conflicts of interest that this creates. This is a hypothetical. In 2002, the casino business settled on an enforcement action over the use of the Financial Data and before the case settled he sent a letter to the entire commission asking for leniency following the settlement he sent a thank you note to the then chair man for personally talking to him and being fair. I want to submit those documents for the record. My question is in the replete with billionaires many of whom weve learned in confirmation hearings ha have multiple confls of interest and ethical lapses, how would you ensure the independence of the matters that affect his personal business and other Administration Officials business . As i said in my opening statement, and i will repeat if i am lucky enough to be confirmed, i am committed to showing no favoritism to anyone in this position. Was members of the Trump Administration did you communicate with prior to being selected as the nominee . Members of the administration or Transition Team, i was asked by the Transition Team how i got introduced to the process and i was asked for the thoughts on my Capital Markets for things that could be done to improve the Capital Formation and that was several members of the team to do that. I did not think i would be sitting here today when i met with them. The possibility of me going into Public Service was raised and i then met with members of the Transition Team that screen the candidates and then i met with now President Trump to be interviewed for the job and was later nominated. What you reconstruct the names of people you can reconstruct and look at your notes that you met with in the first round if you could possibly do that . Where their business is regulated by the sec and what you submit that to us . To the extent i can, yes. There was a review of the financial regulations stating that he planned to do a big number on dodd frank and the former president of Goldman Sachs and the Economic Council declared we are going to attack all aspects of dodd frank. What will you be attacking . I dont have any specific plans for attack. I do believe that dodd frank should be looked at and in particular rul