Tearing down the house

President Trump signed an executive order in early February to review parts of the Dodd-Frank Act.

Trump, who had labeled the law a “disaster,” also said “we’re going to be doing a big number on Dodd-Frank.”

The Securities and Exchange Commission’s agenda has been dominated by the implementation of the act’s widespread reforms, which saw private equity firms dragged into its net.

For example, in 2011, firms with more than $150 million in assets were required to register with the agency. This meant they were subject to examinations by the SEC and required to file reports about the size and strategy of their funds, conflicts of interest, disciplinary history and the identities of any key gatekeepers including auditors or prime brokers.

Now, subject to Senate approval, Jay Clayton will be charged with unraveling the Act and setting a new agenda as head of the SEC.

Former Sullivan & Cromwell lawyer Clayton, who counted Goldman Sachs and Oaktree Capital among his previous clients, said under his stewardship the regulator would focus on promoting growth.

It’s widely believed this will translate into looser regulations for companies, allowing them to raise cash more easily.

While the scope of the rollback was still uncertain as this magazine went to press, little had changed on the ground. Indeed, in its list of priorities for 2017, the agency’s Office of Compliance, Inspections and Examinations reiterates its commitment to continue examining private fund advisors and scrutinizing managers of public pension money.

Other areas on the SEC’s watch are not expected to change under the new leader.

It would be politically difficult for Congress to eliminate rewards for whistleblowers, for example, while the enforcement division will continue to investigate and prosecute fraud cases no matter who is in charge.

Of course, Clayton’s prospective appointment, while it may be good for private equity, did not win universal approval. “It’s hard to see how an attorney who’s spent his career helping Wall Street beat the rap will keep… Trump’s promise to ‘stop big banks and hedge funds from getting away with murder,’” Ohio Senator Sherrod Brown, who sits on the banking committee, said.

Brown’s remarks are a reminder that, even if the regulators won’t be watching, the public, press and – especially – LPs will. ?