updated 3:54 PM CET, Nov 28, 2020

Departures announced of Treasury's 'Chip' Harter, SEC's Jay Clayton

U.S. Treasury Building in Washington U.S. Treasury Building in Washington

Lafayette G. "Chip" Harter, deputy assistant Treasury secretary for international tax affairs since 2017, is to leave his post at the end of this month, according to press reports.

Also set to leave his post, by year's end, is Security and Exchange Commission Jay Clayton, the SEC confirmed in a statement this week.

Spokespeople for American expat organizations said the announced departures were likely to be the first of an expected exodus of government officials from Washington between now and the end of the year, ahead of the arrival of a new administration in Washington in January. 

At least one U.S. publication said people "closely watching" recent talks aimed at establishing new global standards for taxing the digital economy, currently being led by the Brussels-based Organization for Economic Cooperation and Development – in which Harter had been involved, on behalf of the U.S. – noted that Harter had been expected to "exit after the election, even if Trump had been re-elected".

Just who is likely to replace him, the publication added, remains "up in the air right now", as the Biden administration "has a lot of slots to fill". 

The Treasury Department didn't respond this week to a request for confirmation or details about Harter's departure. However, BloombergTax.com reported on Monday that he had "confirmed" to its journalists that he would be "leaving at the end of this month".

In expat American circles, Harter is known for having taken a firm line in Europe with respect to such controversial FATCA enforcement requirements as the need for Taxpayer Identification Numbers from banks for all their "American" account-holders, including those who have lived their entire lives abroad as citizens of other countries and who would have to enter the U.S. tax system on order to obtain a TIN, which many don't want to do.

In March, for instance, he responded to Terhi Järvikare, head of Finland's Ministry of Finance's Tax Department – who had written to him while Finland was still in place as president of the EU Council (which ended at the end of 2019) to express concern over the struggles Europe's accidental Americans in particular were increasingly having in keeping their bank accounts in the countries in which they were citizens and had lived all their lives, owing to FATCA – by saying that it was "critical" for compliance reasons "that the U.S. TINs of U.S. taxpayers" be provided to the U.S. by the banks.    

Some expats with overseas small businesses, meanwhile, who have been badly affected by President Trump's Tax Cuts and Jobs Act, also know Harter as, as one put it, "the senior Treasury official who refused to grant small businesses an exemption from the Transition/GILTI taxes", which were introduced by the TCJA. 

Harter came to the Treasury from PwC, the accountancy firm, where he had been for 18 years, prior to which he had also spent 18 years at Baker McKenzie. 

Clayton: ' One of SEC's
longest-serving chairs'

As for Clayton, his departure after more than three-and-a-half years at the SEC's helm made him one of the agency's "longest-serving chairs," according to an SEC statement issued earlier this week, in addition to presiding over an SEC that during his tenure paid around US$565m to whistleblowers, including the largest single award in the SEC's whistleblower program, of US$114m.  

Summing up his legacy, the New York Times noted that he had largely succeeded in his vow to make "individual investors his focus", including "cracking down on cryptocurrency frauds" and expressing skepticism about disclosure rules for SPACs, the "blank-check investment funds hot on Wall Street" that have prompted critics to suggest they may hurt ordinary investors at the expense of the "savvy deal makers running them". 

Enforcement also "increased on his watch", the NYT noted.

Some critics, though, including Democratic lawmakers and investor advocates quoted in U.S. media reports, argued that Clayton actually could have done more than he did for ordinary investors, citing a major piece of legislation that was developed during Clayton's tenure, the new broker investment advice standard known as Regulation Best Interest. 

As reported, that legislation came into force on June 30, hours after the Consumer Federation of America (CFA) issued a highly-critical assessment of the new regime, arguing that it combined "a vague and undefined ‘best interest’ standard with minimal restrictions on incentives that encourage and reward harmful advice", and that it was "likely to mislead" investors "by the new regulation’s 'best interest' label into expecting protections the rule does not deliver".

Added CFA director of Investor Protection Barbara Roper: "It’s a toxic combination. Investors and retirement savers deserve real protections, not this sham, which was drafted to preserve industry profits not protect investors.”

Wrapping up its assessment of the Clayton years, meanwhile, the New York Times predicted that going forward, "like other [U.S.] financial regulators, the [SEC] is likely to get tougher under president-elect Joe Biden".

Among the names the Times said were being floated to succeed Clayton were those of Gary Gensler, an Obama-era financial regulator, and Preet Bharara, who led the Southern District during the Obama administration.