President-elect Donald Trump has made his choice about who will be filling Mary Jo White's shoes. Trump's pick, Jay Clayton, defies the early predictions and seems to be more unknown to the media than any SEC chair in well more than a decade.

Donald Trump President-Elect of the United States

Meanwhile, Trump still has two other SEC Commissioner seats to fill (one Republican and one Democrat). And the next SEC chair will also have to find chiefs for four of the regulatory agency's six principal groups: corporation finance, enforcement, economic and risk analysis, and trading and markets. (David Grim, head of the investment management division, and Marc Wyatt, head of the Office of Compliance Inspections and Enforcement, are both still there, at least for now.)

Clayton's nomination seems to come mostly as a surprise, with news only leaking this week. Just two weeks ago ex-U.S. attorney Debra Wong Yang was widely seen as Trump's top pick for leading the SEC. And in November, when current SEC chair White revealed plans to step down when Obama leaves office, rumored contenders to replace White included Proskauer attorney Ralph Ferrara, hedge fundster Anthony Scaramucci (a Trump advisor), Representative Scott Garrett (R-New Jersey), former SEC commissioner Paul Atkins (reportedly an advisor to the Trump transition team), and former SEC commissioner Daniel Gallagher. Clayton's name did not come up.

Clayton, like Trump himself, is a New Yorker. Clayton is a partner at the law firm Sullivan & Cromwell, an alumnus of both UPenn (twice) and Cambridge. He pitches himself as a specialist in "public and private mergers and acquisitions transactions, capital markets offerings, regulatory and enforcement proceedings," and more. Among many other deals, he advised Bear Stearns on the sale to J.P. Morgan, Goldman Sachs on TARP, Barclays on buying up the fallen Lehman Brothers' assets, and Oaktree on its IPO. He's recently co-authored Wharton papers on cyber threats (per the FT, Clayton quoted Bob Dylan) and on why the U.S. needs its own national 10-K.

MarketWatch reports that Clayton "has such a small public presence that major wire services don't even have a photograph of him." Contrast Clayton with: current chair White, a former high profile U.S. attorney who in private practice years ago defended a journalist from a lawsuit from none other than Donald Trump; White's predecessor, Mary Schapiro, who had previously led Finra; Schapiro's predecessor, Chris Cox, a former 17-year Congressman; and Cox's predecessor, William Donaldson, a Nixon administration alumnus who led the NYSE and Aetna.

MarketWatch also points out that Clayton chaired a New York City Bar Association committee that drafted a paper detailing concerns about the impact of the Foreign Corrupt Practices Act.

Business Insider writes that Clayton "has a history of defending big banks," an angle that is already agitating public interest group folks like Bart Naylor of Public Citizen and Dennis Kelleher of Better Markets.

Yet Clayton does not seem to have much of a connection to asset management.

"He's not really from our world," one SEC alum tells MFWire, noting that Clayton's interest and experience mostly lies with another SEC division, corporation finance.

That insider expects Clayton's confirmation process to take a back seat to cabinet levels, perhaps meaning that the SEC chair nominee might not be confirmed until March or April. And then Clayton (or whoever ends taking up the SEC chair spot) will have some key hiring to do to fill those leadership positions atop corporation finance, economic risk and analysis, enforcement, and trading and markets.

"I would imagine that Marc Wyatt [in charge of OCIE] and Dave Grim (in charge of investment management) are sticking around for a while," the SEC alum predicts.

InvestmentNews muses that Clayton "could shift the agency's emphasis more toward helping firms raise capital and away from rulemaking and enforcement."

Meanwhile, Trump will also have to pick two more SEC commissioners, to fill the seats vacated in 2015 by Democrat Luis Aguilar and Republican David Gallagher (the same Gallagher previously listed as a contender to succeed White). The rumor is that Trump will renominate Hester Peirce (appointed by President Obama but still unconfirmed) to the vacant Republican spot on the commission. Lisa Fairfax, a Democrat, was nominated by Obama for the other vacant seat on the commission.

"What does a new commission mean for investment management? It's a little early to know," the SEC alum says. 

Edited by: Neil Anderson, Managing Editor


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