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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
S.E.C. Facing Deeper Trouble
By: Stephen Labaton
NYTimes.com. December 1, 2002
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EXCERPT: WASHINGTON, Nov. 30 - The Securities and Exchange Commission, still reeling from the recent resignation of its chairman, Harvey L. Pitt, and other top officials, is plagued by problems that go deeper than its leadership difficulties and have undermined its ability to police companies and markets, government officials and corporate law experts say. Created in the depths of the Depression, the commission has had a long history of effectiveness that has earned it a reputation as one of the brightest stars in the constellation of federal regulatory agencies. But today, on the anniversary of the collapse of Enron - which began a wave of stunning corporate failures that exposed severe regulatory shortcomings - the commission is struggling to maintain its role as protector of investors against abuses in the marketplace. Although the agency has managed to file a record number of cases this year and has adopted a series of tough rules, officials say the commission's divisions have lost ground in their efforts to keep up with the growth of business and the expansion of stock ownership to a new investor class. Two of the most important units of the 3,100-person commission, its enforcement division and its office of compliance inspections, are understaffed by hundreds of officials, experts say, sharply limiting their effectiveness. Its corporate finance department cannot keep up with the deluge of company filings. Its market regulation division has for years been unable to persuade the agency's five commissioners to adopt rules of enormous consequence to the way the markets set stock prices. And a new accounting board that is supposed to fall into place early next year is beset by budget and staffing difficulties that threaten to undermine its effectiveness. Many of the problems facing the agency, experts say, are traceable to powerful corporate interests on Wall Street and in the accounting profession that continue, both directly and through the help of well-placed allies in Congress, to exert enormous influence on the rule-making process. As a result, the commission's budget has remained relatively small, less than half a billion dollars, and inadequate to the task. A new law called for a spending increase of 77 percent. But officials now fear that any increase will fall far short of its needs because the agency has no leader to fight for its interests and faces a White House that has wavered over its commitment to raise the S.E.C.'s budget and a Republican Congress that has other priorities. "We're in a very bad situation," said Charles A. Bowsher, a former comptroller general of the United States. "It is probably one of the weakest oversight positions at one of the worst possible times." Mr. Bowsher said there were ominous parallels to the problems facing the commission and the difficulties that confronted regulators during the onset of the savings and loan collapses of more than a decade ago, when he led the General Accounting Office. As was the case then, he said, the regulators are sharply underfinanced, face ferocious corporate lobbying interests with friends in Congress who want to weaken the rules, and are often unable to anticipate or prevent major infractions that can wind up costing investors huge sums of money. Mr. Pitt, who has suggested he will remain chairman until the administration finds a replacement, declined requests to discuss his 15-month tenure at the head of the commission. In public appearances, he and senior administration officials portray an agency that has responded strongly to the corporate debacles of the last year by adopting a series of tough regulations and bringing more enforcement cases - against executives of companies ranging from Enron to WorldCom and Sunbeam. "I'm enormously proud of our accomplishments, our regulatory reforms and our enforcement program," Mr. Pitt said in a recent speech at Duke University. "They have been aggressive, creative, well focused and effective."
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