As SEC Attempts to Provide Greater Darkness to Trading Firms, Maxine Waters Fights Back

By Pam Martens and Russ Martens: October 5, 2020 ~

Jay Clayton

Jay Clayton, Chairman of the SEC

Is the Chair of the Securities and Exchange Commission, Jay Clayton, a watchdog or a lapdog? If you judge him by his actions since taking office on May 4, 2017, it looks like the latter. That was easily predictable given that Clayton had represented 8 of the 10 largest Wall Street banks in the three years prior to taking his seat as Chair of the SEC.

Clayton is also the man who is now attempting to elevate his role to that of the top criminal prosecutor in Wall Street’s home turf of Manhattan, by knocking Geoffrey Berman out of the job. That office is the U.S. Attorney’s Office for the Southern District of New York where there are pending investigations related to both Donald Trump as well as Clayton’s former clients, the big banks on Wall Street.

Congresswoman Maxine Waters

Congresswoman Maxine Waters, Chair of House Financial Services Committee

One person in Congress who has Clayton in her ongoing radar is Congresswoman Maxine Waters, the Chair of the powerful House Financial Services Committee. Waters has sent at least four warning letters to Clayton this year, effectively telling him to knock off his sneaky maneuvers that benefit Wall Street while failing the American people.

The most recent letter came last Friday when Waters warned Clayton that his latest attempted deregulatory move would “suppress shareholder rights, impair shareholder engagement, reduce capital market transparency and decrease investor protection, overall.”

The proposed rule change would impact filings with the SEC known as Form 13-F and 13-f-1 which require institutional investment managers to report their holdings in U.S. stocks if they reach $100 million or more. Quietly, while the public’s attention is diverted by the pandemic, the SEC is proposing to raise the $100 million threshold by 35 times to $3.5 billion. That would allow dozens of hedge funds and foreign actors to slip under the radar.

In her letter, Waters quoted from one public comment letter to the proposed rule change that read: “Withholding information concerning trading of individuals with a high net worth or companies, hedge fund managers etc. allows for unfair advantage in the market. It should be transparent as much as possible. If you change the 100 million cap. rule, you will be going against your own public support of transparency.”

On July 16 Wall Street On Parade reported on how the SEC had violated its own Freedom of Information Act (FOIA) policy in stonewalling us on why the central bank of Israel wasn’t listing the U.S. stocks it owns on its own 13F filing. The central banks of Norway and Switzerland do provide that information, which represented $309.5 billion and $94.2 billion, respectively, in U.S. stock holdings as of March 31, 2020. (See The Central Bank of Israel Doesn’t Want You to Know What U.S. Stocks It Owns; Neither Does the SEC.)

What the 13F filings that we are allowed to see show is that there is a concentrated bubble in big tech names like Alphabet (parent of Google), Amazon, Apple, Facebook and Microsoft. We pointed out that “It’s not in the national security interests of the United States to be in the dark about stock bubbles, as we learned so well in the bust of 2000 and the epic financial crash of 2008.” On August 31 of this year, we explained how the broader S&P 500 index would be negative for the year were it not for the outsized performance of just six big tech names. We reported that year-to-date, through August 26, Amazon was up 81 percent; Apple was up 68.5 percent; Netflix had increased by 66 percent; Facebook had gained 45 percent; Microsoft was up by 38 percent while Alphabet came in at a 17 percent increase.

Wall Street banks are also large institutional holders of stocks and required to make 13F filings. On September 8 we reported the following about JPMorgan Chase:

“According to JPMorgan Chase & Co.’s latest 13F filing for the period ending June 30, 2020, it owns $518 billion in publicly traded stocks and ETFs (Exchange Traded Funds)…Among the big tech holdings of JPMorgan Chase & Co. are the following: $15.3 billion in Microsoft; $11.77 billion in Apple; $10.5 billion in Amazon; $8.5 billion in Alphabet; $3.7 billion in Facebook; and $2.3 billion in Netflix.

“JPMorgan Chase & Co.’s portfolio also includes a number of ETFs that are heavily weighted in the same handful of big tech names. The bank’s portfolio includes $2.9 billion in the iShares Growth ETF, whose largest holdings are Apple, Microsoft, Amazon, Facebook, and Alphabet, making up 38 percent of the ETF as of September 4; $1.58 billion in the iShares Russell 1000 Growth ETF, whose largest holdings are also Apple, Microsoft, Amazon, Facebook and Alphabet – also making up 38 percent of the ETF.

“JPMorgan Chase & Co.’s portfolio also includes $20.9 billion in the SPDR S&P 500 ETF Trust, whose largest five holdings are – wait for it – Apple, Microsoft, Amazon, Facebook and Alphabet – making up a cool 23.28 percent of the ETF which has a market value of $301.7 billion as of September 3.

“The $518 billion does not appear to be the full picture of JPMorgan Chase & Co.’s stock portfolio holdings. The bank notes on its 13F filing that Russell Investments Group, Ltd. is also making a separate filing on its behalf. Try as we might, we could not find that filing on the SEC’s website.”

In a June 25th letter to Clayton, Waters excoriated him for using the pandemic as an opportunity to push through his deregulatory agenda. She noted the following:

“At the beginning of the crisis, I called on all of our financial regulators, including the Securities and Exchange Commission, to immediately halt all rulemakings unrelated to addressing the pandemic. Subsequently in March, I introduced H.R. 6321, a comprehensive bill to protect individuals, families and the economy from COVID-19, including by requiring the financial regulators to temporarily suspend all rulemakings that do not address the impacts of the pandemic. At that time, I also emphasized that it would be unacceptable for any regulator to use this crisis as an excuse to justify rollbacks of important financial regulations that are in place to protect investors and our financial system. However, during these difficult times, the SEC under your leadership has pushed a deregulatory agenda, including rules that would rollback critical investor safeguards, limit shareholder rights, and deprive the market of important information precisely at a time when it is needed most. I again urge you to immediately halt further consideration of the following rulemakings that threaten to leave investors and our markets more vulnerable to financial instability and risk than ever before.”

See earlier letters to Clayton this year here and here.

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