SEC Chairman Jay Clayton said the agency has returned more than $3 billion to harmed investors since he became head of the agency three years ago.

The SEC has also obtained $11 billion in disgorgement, he told an audience of securities attorneys during a virtual panel discussion yesterday sponsored by the Institute for Law and Economics at the University of Pennsylvania Carey Law School.

Clayton said his principle for enforcement starts with asking “how would a long-term, retail investor want us to allocate our resources? With that lens, we settled on getting harmed retail investors their money back as promptly as practicable,” he said.

The agency regulates markets that impact some 50 million retail investor households. “Time and again, our teams in our Office of Compliance Inspections and Examinations and our Enforcement Division have worked hard to save investors from paying fees that they did not know about and should not have been charged,” Clayton said.

“One of the questions I always encourage Main Street investors to ask is, ‘How much of my money is going to work for me, and how much is being used to pay fees and expenses?’ Just think for a moment about the cost to a single investor of paying an extra 150 basis points in fees over 25 years on $100,000 invested in a retirement account. ... Some back of the envelope math gives a difference of over $100,000 in lost gains over that time period for that single investor.” he said.

In many ways, Clayton’s presentation sounded like his swan song. President Donald Trump has announced he plans to nominate Clayton as U.S. attorney for the Southern District of New York, arguably the most prominent prosecutorial position outside of Washington, D.C. Clayton has told SEC staffers that he will stay at the agency until he is confirmed.

“While I was fortunate to have more litigation and investigative experience than you would expect from a corporate lawyer, I had not managed an enforcement program of any size, much yet one of over 1,400 professionals distributed across 12 offices,” Clayton said.

It’s unclear what enforcement priorities Clayton’s successor would pursue, but for the past three years the agency has focused on some of the broker-dealer world’s more eggregious and costly conflicts of interest, including 12b-1 fees. “Our share-class selection disclosure initiative alone will result in nearly $140 million going back to investors, and it can be expected to save investors that amount many times over going forward,” he said.

Clayton said the agency also focuses on pursuing matters that have “lasting, positive impact for investors broadly,” such as deterring or eliminating widespread inappropriate practices, and instilling confidence in the integrity and fairness of securities markets.

In that vein, he said, initiatives such as Regulation Best Interest and Form CRS established a new, heightened standard of conduct for broker-dealers when dealing with retail customers and an investor-oriented uniform disclosure form for broker-dealers and investment advisors. The views and experience of enforcement “played an important role in these groundbreaking developments,” Clayton said.

He also said he’s proud of the work the agency has done to protect investors in the area of initial coin offerings (ICOs). “To call the ICO activity of late 2016 and 2017 a mess would be kind. Apparently at the time, intoxicated or distracted by an admittedly powerful technology, many market participants, both investors and, much more concerning, certain market professionals, accepted form over substance and pursued profit over responsibility,” he said.

One study has estimated that the amount raised in token offerings was $7 billion in 2017 and nearly $20 billion in 2018, and that it dropped to $4.1 billion in the first 10 months of 2019. By mid-2018, 86% of the prior year’s leading ICOs were trading below their offering price, with nearly a third of those ICOs having lost substantially all their value.

The SEC responded quickly, Clayton said, forming a cyber unit and issuing an investigative report confirming the application of securities laws to blockchain technology and bringing enforcement actions to restore order while leaving room for technology to drive cost savings, Clayton said.

The agency also “demonstrated its nimble nature in response to the effects of Covid-19,” including trading suspensions for three dozen companies, in light of questions regarding their operations, Clayton said.