In the previous post I listed and described the major SEC rulemaking initiatives that have come out since Christopher Cox took charge. It looks like an impressive list, but most of the improvements to financial reporting regulation have been la natural outgrowth of technology enabling more efficient and rapid dissemination of information. In other words, they were rules not born out of creativity or vision, but just ones for which their time had come. The revisions to the executive compensation disclosure rules are, however, a significant exception. If you’re a tree, you’ll give Cox an "A+" for the electronic delivery options that could spare your life.
Speaking of vision, when the SEC eliminated the IFRS-to-GAAP reconciliation requirement in the name of making listings on U.S. exchanges more attractive to foreign companies, I came to realize that Cox’s philosophy of securities regulation is far different than Arthur Levitt’s, the last chair who was around long enough, and was effective enough, to leave a lasting legacy. Levitt’s financial reporting priorities were clearly driven by investor protection objectives. Levitt oversaw and actively promoted major projects to modernize auditor independence rules, level the information playing field by restricting disclosures to selected analysts (Regulation FD), and he also fought the good fight on many fronts against earnings management. If anyone was a prophet of Enron and Worldcom, it was he.
In stark contrast, Cox has presided without nary a whimper over budget and staff cuts (even in the wake of Enron); and worse, a partisan effort has taken place to move any investor protection agenda stage left. Front and center are the interests of financial institutions and those who serve them: in part by relaxing rules that threaten their market dominance, but also, in part, by doing nothing or too little about shareholders’ access to the proxy, registration of hedge funds, and the independence and competence of credit rating agencies.
In my SEC (and FASB for that matter), the only thing that matters is investor protection. Expansion of capital markets, even in the name of giving investors greater investment opportunities, should not even be in the game plan. It’s certainly not in the securities laws administered by the SEC.
So, not being a tree, I give Cox a "C."