WHEN: Today, Tuesday, April 7, 2020
WHERE: CNBC's "Squawk Box"
The following is the unofficial transcript of a CNBC EXCLUSIVE SEC Chairman Jay Clayton Speaks and CNBC's Andrew Ross Sorkin on CNBC's "Squawk Box" (M-F 6AM – 9AM) today, Tuesday, April 7th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/04/07/watch-cnbcs-interview-with-sec-chairman-jay-clayton-on-earnings-season-amid-covid-19-outbreak.html.
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: Businesses across the nation, you know, try to navigate the coronavirus pandemic. Investors can expect delayed and -- delayed reports and plenty of – really couching from companies in terms of guidance and other things. Joining us to talk about it in an exclusive interview is SEC Chairman Jay Clayton. Chairman Clayton, thank you for joining us. We are about to get into earnings season. And what should investors expect, in terms of what companies can and cannot say, and what are you telling companies that they should be saying?
JAY CLAYTON: Andrew, thanks for having me on. And we are going into earnings season and investors -- our investors in our markets generally are thirsting for information about our companies. We recognize here that it's a different earnings season. You know, typical earnings season like this you'd have Q1 numbers and you'd be giving investors information about the path you were on, how Q2 and Q3, you know, would trend in a certain direction, based on Q1. Well, you know, that's not where we are. What investors want to know now is where do companies stand in light of the shut-in? How are they operating under the current conditions? And what do they see for the future under current conditions? And then, a path to recovery that is consistent with our health -- our decision to put health and safety first. And that's what investors want to know. And you had a previous guest on who was talking about changing production, changing capital expenditures. That's exactly the kind of information that investors are thirsting for.
ANDREW ROSS SORKIN: Right. Chairman, one of the other questions that investors have is there are going to be a number of businesses that are in negotiations, frankly, with the government when it comes to bailouts, whether it's the airlines, whether it's Boeing, whether it's others. What do you believe is their responsibility in terms of disclosure about those types of negotiations as they're taking place?
JAY CLAYTON: Andrew, you bring up a terrific point. Again, we're in a very different environment. Companies are going to be talking about where they stand, whether they need new capital, their plans going forward. Those plans are sensitive information. I encourage companies to get out there, disclose where they stand and limit the amount of – now it's not possible to limit all sensitive information. You have to be in negotiations, but limit speculation as to where your company stands, as we move forward. And then with respect to things like financing, you know, possible changes in operations, material changes in the way you do your business, practice good corporate hygiene. Announce them as soon as you can. And before you're able to announce them, keep that information as tight as possible. We really need to preserve market integrity through what we all recognize is going to be a choppy period in terms of company information.
ANDREW ROSS SORKIN: Let me ask you a related question about company information. A lot of hedge funds and professional investors are spending their days, as you know, trying to comb through information about drugs and various scientific breakthroughs that may or may not be happening, and there is information flowing across Wall Street about all sorts of projects that are in the works. How should investors deal with that information and, frankly, are public investors, mom and pop, the retail investor that's home at a disadvantage?
JAY CLAYTON: You know, look, information is the lifeblood of our markets. And we have, as I just talked about in response to your last four general questions, we at the SEC try to put in place framework so that information is disseminated to investors as fairly as possible. We want companies to follow good hygiene during this period so that it is. You know, that said, there will be people out there trying to get information about drug trials, trying to get information about therapeutics, trying to do this. We don't want to deter them. You know, we want capital to flow into places where it's going to do the best in responding to this health care crisis. But I just ask everybody in the marketplace, particularly around public companies, to practice good hygiene. It's very, very important.
ANDREW ROSS SORKIN: Separately, and I know you don't want to talk about specific cases, I will talk about a case and we can maybe use it as an example. But it's interesting in this regard. Which is, we talked about Bill Ackman last week. You didn't talk about Bill Ackman, but we eluded to Bill Ackman coming on the program having a very bearish view and bearish take. He probably disclosed that take prior to coming on the air. He's since taken a very bullish view and made disclosures about that view. Is that considered good hygiene, that kind of approach? Or is that not good hygiene, when you see investors when they switch their approach, do you want them to come out publicly and tell everybody?
JAY CLAYTON: Andrew, I started with companies. On investors, and I'll just speak generally, we want market commentary out there. Information is good. But when somebody has a position and they're talking in particular about a particular company, we believe it's appropriate for them to disclose that position. If it's a short position and they're saying that that company is, you know, challenged, tell people you have a short position. If it's a long position and you think a particular company is going to do well, tell people you have a long position. You know, you guys do a good job when you have analysts on flashing up on the screen what their positions are, whether they have a position or not. Particularly in these times, I would encourage anybody who's making comments particularly about specific companies to make that kind of disclosure.
ANDREW ROSS SOKRIN: All right. And the last question I was going to ask you about is buybacks and dividends. Because clearly those seem to be on the table for a lot of companies about whether they're going to continue them. You saw in Jamie Dimon's letter jut yesterday, he sort of walked through various permutations in which he could see the economy going. And in the worst-case scenario, talked about potentially having to suspend the dividend if this were a prolonged and extended crisis. How should companies communicate how they're thinking about their buybacks and dividends in this environment? And would you encourage companies to continue their buyback programs during this crisis? Because there's something – sort of a very perverse idea, which is as the stock is low, this is oddly enough, probably a very good time to buy, but the optics of buying are challenging.
JAY CLAYTON: Well, you started in the right place, which is communication. Communicating to your shareholders how you see the company performing under different scenarios, and then what that means for your capital structure, your liquidity position and your capital needs, that's the kind of communication. Now, what you do in terms of your relative debt to equity ratio and how you handle that and whether your investors are counting on a dividend or not counting on a dividend, you know, that's a company-specific decision. We did see a number of the large banks say they were going to suspend buybacks during this period and preserve that capital. You know, communicate. And then tell people why you're making that decision. Investors want to know why.
ANDREW ROSS SORKIN: Okay. Jay Clayton, Chairman of the SEC, we always appreciate talking to you, especially during turbulent times, and appreciate all the work that you're doing. Thanks very much.
JAY CLAYTON: Andrew, thank you.
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