Bush picks conservative to head SEC
WASHINGTON (AP) – President Bush chose California Rep. Christopher Cox on Thursday to run the Securities and Exchange Commission, assigning him the delicate regulatory dance of protecting investors’ rights while not stifling business. Cox, a conservative 16-year veteran of the House, would replace William Donaldson, a Republican who turned out to be a firm regulator and often clashed with GOP business allies during his 21/2 years at the helm.
The White House announcement came one day after Donaldson, 74, said he would leave at the end of this month.
Business groups, which view some SEC regulations as overly burdensome and would like to see them loosened or overturned, welcomed Bush’s pick. Advocates for individual investors voiced concerns that Cox might do just as business hopes.
The SEC position is subject to Senate confirmation, a process that left Cox bruised once before.
He was in line for an appointment to the U.S. Court of Appeals in 2001 when Democrats temporarily gained control of the Senate. Facing opposition from at least one of his home state’s two Democratic senators, Cox realized he faced a difficult fight to win confirmation to the bench without a guarantee of success. He withdrew his name.
Senate Minority Leader Harry Reid, D-Nev., who praised Donaldson’s activist stance, said he hoped Cox’s confirmation hearing would shed light on the direction the nominee would take the SEC. Cox will have “big shoes to fill,” in his bid to replace Donaldson, Reid said.
The agency, which is responsible for protecting investors and maintaining the integrity of the securities markets, has come under heightened attention since a wave of corporate scandals in recent years – including Worldcom, Enron and Tyco – rocked Wall Street and shook investors’ confidence. Donaldson was brought on board to restore that confidence.
“Bill Donaldson has set high standards for American business and the SEC,” Bush said, noting that the agency filed more than 1,700 enforcement action’s under Donaldson’s tenure. “Chris Cox is the right man to carry on this important work.”
Cox, 52, a member of the House Republican leadership, has a wide-ranging background, from foreign policy and economic issues to homeland security. Before Congress, Cox was a corporate finance lawyer in private practice and served as a senior counsel in the Reagan White House.
Bush, who is pushing an overhaul of Social Security that would allow workers to set up personal investment accounts, also pointed out that an increasing percentage of American households are investors in the nation’s financial markets.
“I’ve given Chris a clear mission: to continue to strengthen the public trust in our markets so the American economy can continue to grow and create jobs,” Bush said.
Cox pledged to stand up for “clear and consistently enforced rules” at the commission. “Those rules have to govern every market participant equally, big and small,” he said.
In the House, Cox supported the Sarbanes-Oxley Act of 2002, Congress’ response to the corporate accounting fiascos. The law ordered the most far-reaching changes in corporate accountability since the Depression, imposing stiff new rules on companies and their top executives.
The SEC has played a lead role in implementing the law. A provision requiring stronger internal financial controls at companies has raised howls of protests from corporations. Although Donaldson did give small businesses and foreign companies more time to comply with the provision, known as Section 404, there’s pressure to loosen them further.
“Chris Cox is a great choice to lead the SEC,” said John Engler, president of the National Association of Manufacturers. “We look forward to working with him as the SEC crafts guidance for companies to comply with Sarbanes-Oxley, especially Section 404.”
Marc Lackritz, president of the Securities Industry Association, said his industry also looks forward to working with Cox on efforts “to enhance investor protection while providing relief from burdensome, costly and unnecessary regulation.”
The SEC under Donaldson has, among other things, adopted rules requiring mutual fund boards to have chairmen who are independent from the companies managing the funds and called for hedge fund managers to register with the agency. Businesses don’t like the provisions.
Under another provision, known as the “trade-through” rule, stock brokers will be required to accept the best quoted price for any transaction, no matter which market it came from. The rule is not due to take effect until 2006.
These are among “a long list of things that the business community would like to see overturned or watered down,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “Cox’s history is a cause of concern.”
Specifically, she pointed to Cox’s role in legislation – which became law over President Clinton’s veto – that made it easier for companies to defend against securities fraud lawsuits. Opponents said the bill rolled back investors’ rights.
James Cox, a specialist in securities law at Duke University, said Cox generally has not been an advocate for investors rights. “I haven’t seen him be a proponent for strengthening the responsibilities of management to shareholders, except for the months following the Enron collapse when there was a rush to step to the microphones,” he said.
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AP Special Correspondent Dave Espo contributed to this story
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