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Speaker 1: Our academics making a comeback on the Securities and Exchange

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Speaker 1: Commission after nearly twenty five years of being dominated by

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Speaker 1: commissioners from law firms in the federal government. According to

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Speaker 1: a Bloomberg Vienna analysis, more than half the commission's twenty

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Speaker 1: four members appointed since left big law partnerships, congressional staffs,

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Speaker 1: or other US government posts. But the latest nominees, Hester Pierce,

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Speaker 1: a senior fellow at George Mason University r Cadis Center,

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Speaker 1: and Robert Jackson, Professor Columbia Law School, would put to

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Speaker 1: academics on the five person commission. Our guest is an

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Speaker 1: expert in securities law, Professor John Coffee of Columbia Law School. Jack,

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Speaker 1: why don't you start by telling us about your fellow

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Speaker 1: Columbia Law professor Robert Jackson. Well, I am a great

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Speaker 1: admirer of Robert Jackson. For a young person, he's had

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Speaker 1: quite a range of experience. He started out as an

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Speaker 1: investment banker. He worked for several years at the Walk

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Speaker 1: Lipton firm doing corporate law and mergers and actors. And

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Speaker 1: he's been a professor at Columbia Law School for seven

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Speaker 1: or so years. And he's a very experienced empirical social science.

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Speaker 1: He's done a lot of studies on hedge fun activism, litigation,

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Speaker 1: and topics like that, which are very objective. So he

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Speaker 1: is a case of someone who has had at least

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Speaker 1: experienced as an academic Hester Pierce, I'm not sure I

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Speaker 1: would qualify her as a law professor. She worked originally

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Speaker 1: as a congressional staffer to the Republican side of the

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Speaker 1: Senate Finance Committee, and that has been the pattern of

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Speaker 1: really even more recent appointments to the SEC. They work

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Speaker 1: either for the Democratic or Republican chairman of the relevant

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Speaker 1: Senate committee, the Senate Finance Committee that has jurisdiction over

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Speaker 1: the SEC. From that perspective, they certainly do understand the

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Speaker 1: political nuances, but they may not have had the same

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Speaker 1: experience doing transactions and seeing how the securities law system

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Speaker 1: actually works in practice. Well, Jack um ms Pierce is

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Speaker 1: uh has come out publicly against the Department of Labor's

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Speaker 1: fiduciary rule that keeps getting postponed and might eventually get implemented. UH,

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Speaker 1: and I know the SEC has been looking at what

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Speaker 1: they should be doing in that area. What can we

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Speaker 1: expect from her um if she gets confirmed? Well, let

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Speaker 1: me um put it this way. What I expect for

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Speaker 1: the future of the SEC. We're going to have an

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Speaker 1: increasingly polarized body with the new Chairman, Jay Clayton, in

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Speaker 1: the center, and how he's going to respond to the

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Speaker 1: struggle from both sides to get his vote will be

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Speaker 1: the real drama at the SEC. As you mentioned, there's

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Speaker 1: the fiduciary Duty rule, where a prospective Commissioner Pierce has

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Speaker 1: taken a strong position against it. I don't know Rob

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Speaker 1: Jackson's position, but I wouldn't be surprised if he would

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Speaker 1: support the Department of Labor's rule, and certainly a Karri Stein,

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Speaker 1: the other Democratic commissioner, does support it. So both sides

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Speaker 1: are going to be struggling to convince Chairman Jay Clayton,

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Speaker 1: who was brand new in the job but is reputed

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Speaker 1: to be more of a pragmatist than an ideologue, as

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Speaker 1: to why the rule is either good or bad. An

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Speaker 1: even better example would be a pending fight over whether

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Speaker 1: the Commission should permit companies to put a mandatory arbitration

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Speaker 1: provision into their corporate charter. If they do that, it

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Speaker 1: would simply make impossible any class action or any derivative

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Speaker 1: action and within the litigation threat under which a lot

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Speaker 1: of public companies today are subject, perhaps desirably so on

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Speaker 1: that topic, one Republican commissioner has already endorsed the proposal,

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Speaker 1: and it's just something that I think Hester Pierce might

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Speaker 1: be attracted to, which would present again this Republican Democratic

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Speaker 1: struggle to commence. Jay Clayton ass Chairman, Which way to go? Jack?

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Speaker 1: The Trump administration followed the tradition of nominating a bipartisan duo.

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Speaker 1: There had been speculation earlier this year that only a

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Speaker 1: Republican would be nominated. So is there likely to be

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Speaker 1: any opposition to their nominations? Well, I think this went

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Speaker 1: through because the President decided to go with the nominee

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Speaker 1: given him by the Senate Majority Leader, Chuck Schumer, who

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Speaker 1: got the choice from the Democratic side of the Senate.

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Speaker 1: It is true that the statute says only that the

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Speaker 1: sec can't have more than three members from the President's party,

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Speaker 1: but you see, it's possible to appoint independence, and I

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Speaker 1: think that Chairman Clayton is himself an independent, which could

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Speaker 1: mean that it would be possible to add another Republican.

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Speaker 1: What this really shows is that on this one occasion,

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Speaker 1: the President and his staff decided would be better to

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Speaker 1: stick with the usual division between Republicans and Democrats three

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Speaker 1: to two for the majority party. Uh and uh. Had

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Speaker 1: he not done that, I think we would have had

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Speaker 1: total warfare at a time when the President needs a

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Speaker 1: little bit of constructive by parsianship if he wants to

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Speaker 1: get proposals like his tax program through Congress. Well, Jack,

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Speaker 1: you mentioned earlier that you know you back this to

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Speaker 1: be a very polarized SEC now, with the two Republicans

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Speaker 1: and the two Democrats arguing strongly to try to sway

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Speaker 1: the independent chairman. But on something like the you know,

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Speaker 1: the fiduciary rule where say, you know, you had d

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Speaker 1: the Department of Labor Act rather than the SEC during

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Speaker 1: the Obama administration. Um, you know, and and the SEC

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Speaker 1: really hasn't taken action. Is this going to be a

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Speaker 1: recipe for some amount of inaction perhaps on the part

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Speaker 1: of the SEC on various hot button issues. I think

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Speaker 1: that there is probably a majority in Congress that doesn't

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Speaker 1: like that fiduciary duty rule. It is strongly bitterly opposed

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Speaker 1: by the financial services industry, and I think that probably

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Speaker 1: the Republican side of the SEC including the Chairman is

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Speaker 1: not going to run to endorse it and will seek

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Speaker 1: to delay it. The Chairman himself has asked for a

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Speaker 1: sort of a broad list of comments from the public.

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Speaker 1: Public is being given a number of weeks to send

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Speaker 1: in their comments. Theli so far has been pretty enthusiastic

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Speaker 1: about the rule, which says that the broker has to

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Speaker 1: be a loyal produciary to the client. The other position,

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Speaker 1: which Hester Pierce has strongly endorsed, is that every customer

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Speaker 1: should make his own choice. Uh. Trouble as you don't

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Speaker 1: really know what your what your broker is doing until

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Speaker 1: you find out much later. So this will be a

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Speaker 1: topic of a great deal of public discussion because it's

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Speaker 1: popular with the public. But I would not expect that

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Speaker 1: the Commission will be able to get behind the rule.

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Speaker 1: And how it's been it's been since that it's had

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Speaker 1: been authorized to come up with that rule. Well, there's

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Speaker 1: no question that they passed Congresses did give the Department

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Speaker 1: of Labor the power to do this for at least

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Speaker 1: accounts that deal with a riska or pension plans or

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Speaker 1: other what i'll call retirement savings assets. That's all the

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Speaker 1: rule addresses are those assets that are in the status

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Speaker 1: of being an a risk of and or other kinds

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Speaker 1: of fal one K plans that are covered by the

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Speaker 1: Department of Labors are risk the statute. So Jack just

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Speaker 1: finally to sum up. Will this sec be any more

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Speaker 1: contentious this commission than past ones? I think it could

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Speaker 1: be at least as contentious, But we do have an

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Speaker 1: unknown as to how the chairman will behave What does

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Speaker 1: he want to do. Does he want to have progress

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Speaker 1: on some issues and hold back others to avoid open warfare,

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Speaker 1: or does he want to play sort of the loyal

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Speaker 1: support for the Republican position. I have a feeling he'd

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Speaker 1: probably like to get some things accomplished, and that will

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Speaker 1: require some give and take in some attempt to get

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Speaker 1: the commission on the same page. It's always a pleasure

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Speaker 1: to have you on. That's John Coffey. He is a

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Speaker 1: professor and a professor of securities law and white collar

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Speaker 1: criminal law at Columbia Law School. He has indeed written

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Speaker 1: the book on Securities Law