On June 22, 2020, Assistant Attorney General Makan Delrahim, head of the Antitrust Division at the Department of Justice, and Jay Clayton, Chairman of the Securities and Exchange Commission, signed a Memorandum of Understanding (“MOU”) concerning “Cooperation with Respect to Promoting Competitive Conditions in the Securities Industry.”
Citing the “substantial benefit” to the agencies’ administration of their enforcement missions—a cooperative relationship that inures to the public interest—the MOU provides broad guidelines for their continuing collaboration in the securities market. Most significantly, the MOU lays out the DOJ and SEC’s continued public commitment to coordinate their regulatory and enforcement agendas through regular meetings and information sharing. Specifically, the MOU provides details of certain inter-agency initiatives:
- Biannual Regulatory and Enforcement Review. The MOU establishes that “[t]he agencies will confer at least twice annually . . . to discuss and review law enforcement and regulatory matters related to competitive conditions in securities market . . . .”
- Guidelines for Information Sharing. The MOU further encourages information sharing between the SEC and DOJ by specifying guidelines for exchanging information “potentially relevant to . . . oversight and enforcement responsibilities” and expressly authorizing the “use of nonpublic information shared by the other agency for enforcement investigations and proceedings.”
- Agency Interfaces. The MOU requires that “[e]ach agency shall designate a primary contact person to facilitate communications between and among attorneys, economists, and technical experts of the agencies.”
The DOJ and SEC announced the MOU during a virtual discussion of equity market structure hosted by MIT. While the MOU was tangential to the focus of the event, both Deputy Attorney General Delrahim and Chairman Clayton addressed the significance of the MOU as a mechanism for cementing the coordination of the DOJ and the SEC.
Illustrating that coordination, Chairman Clayton and Brett Redfearn, who heads the SEC’s Division of Trading and Markets, discussed the Antitrust Division’s contribution to the SEC’s rulemaking around access to and pricing of market data, including the effort to formulate a framework for evaluating “exchange fees for market data and connectivity.” (See Webcast at 49:40). Pursuant to the Exchange Act, the SEC has a “compelling regulatory responsibility to analyze concerns about fairness and reasonableness of exchange fees for proprietary data.” Chairman Clayton identified the Antitrust Division as a source for expertise to whom the SEC has and would continue to look to in developing a framework for ensuring that exchange fees are consistent with Exchange Act standards.
After the delivery of prepared remarks, Chairman Clayton and Deputy Attorney General Delrahim were prompted to get more specific about the anticipated focus of their collaboration. (See Webcast at 65:00-68:30).
Takeaways from Deputy Attorney General Delrahim’s Stated Expectations for Collaboration Under the MOU
- Deputy AG Delrahim projected that the agencies would partner on evaluating existing “regulatory infrastructure,” including the Hart-Scott-Rodino program, and explained that the DOJ would engage the SEC on reevaluating certain filing thresholds and “whether or not those have stood the test of time or whether or not we need to make some changes.”
- Deputy AG Delrahim emphasized that the DOJ would continue to look to the SEC for insight on “market infrastructure,” and mentioned, as examples, the DOJ’s reliance on the SEC’s expertise in its review of the London Stock Exchange’s proposed acquisition of Refinitiv and in recent activity in the areas of “foreign exchanges and municipal bonds.”
- Deputy AG Delrahim characterized the MOU as intended to “preserve the relationship we’ve had,” and explained that the DOJ will continue to coordinate with the SEC on the development of “rigorous” antitrust analyses, including with respect to “platforms,” “access to data,” “barriers to entry,” and promotion of “market-based forces.”
Takeaways from Chairman Clayton’s Stated Expectations for Collaboration Under the MOU
- Noting his intention not “to scare anybody,” Chairman Clayton stated that he “hope[d]” the SEC could be “helpful” in spotlighting where “people are misbehaving,” particularly in relation to “classic collusion and things like that.”
- Chairman Clayton expressed that the SEC is well positioned under the MOU to provide the DOJ with an “understanding of the market infrastructure” relevant to the activity of the Antitrust Division in the securities industry.
- Chairman Clayton noted his expectation that the DOJ would continue to play a “very helpful” role in coordinating with the SEC on building the economic analyses necessary to support SEC rulemakings.