SEC nominee Clayton vows separation from his Wall Street law firm

WASHINGTON (Reuters) - Wall Street attorney Jay Clayton will recuse himself from matters involving Barclays Bank, Deutsche Bank AG and other clients he has recently represented if confirmed to head the U.S. Securities and Exchange Commission under the terms of an ethics agreement disclosed on Wednesday.

The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

Barclays Bank, Deutsche Bank AG, UBS Securities, Royal Bank of Canada, Ally Financial and Pershing Square were among the financial firms listed as Clayton’s clients at Sullivan & Cromwell, according to a form filed with the Office of Government Ethics.

Under the agreement, Clayton will not participate in SEC matters involving the firm for one year. He will also recuse himself from matters involving his former clients for one year after he last provided them legal services.

The SEC currently has only two members - Republican Michael Piwowar and Democrat Kara Stein - and they often disagree about policy matters. Should Clayton be confirmed and then recuse himself, the agency will be left deadlocked until other commissioners are nominated and confirmed. At full force, the SEC has five voting members, including the chair.

Clayton also promised to divest, within 90 days of confirmation, some 176 assets collectively worth millions of dollars. He did not reply to a request for comment.

Clayton and his wife, Gretchen Butler Clayton, reported assets between $52.3 million and $130.4 million. Because nominees for Executive Branch positions report their assets in broad ranges, it is impossible to calculate a nominee’s exact net worth.

He has assets related to his employment at Sullivan & Cromwell worth between $2.5 million and $8.4 million, the OGE form shows. His wife works at Goldman Sachs & Co, and has assets related to her role at the investment bank worth between $1.1 million and $2.8 million. She has said she will resign her job if he is confirmed.

The form also does not detail the specific assets from which Clayton will divest to comply with federal ethics laws. But in his March 3 letter to an ethics officer, Clayton did indicate that he will seek to take advantage of a tax benefit that allows government officials to defer paying capital gains taxes on assets they sell to satisfy ethics requirements, potentially saving him millions of dollars.

As a Wall Street attorney, Clayton has worked on notable deals including the initial public offering of Alibaba Group Holding Ltd. Valeant Pharmaceuticals, the subject of federal investigations related to drug pricing, was listed as one of his clients. Clayton also reported having two corporate clients he could not name due to pending investigations that are not yet public.

The SEC is an independent federal agency tasked with enforcing securities laws and regulating the country’s stock and options exchanges. Agency nominees are reviewed by the U.S. Senate Banking Committee, which is set to hold Clayton’s initial confirmation hearing on March 23.

Reporting By Amanda Becker; Editing by Tom Brown, Bernard Orr