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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
Can A Bloodied S.E.C. Dust Itself Off Now And Get Moving?
By: Stephen Labaton
New York Times. December 16, 2002
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EXCERPT: When William H. Donaldson enters his cavernous corner office on the sixth floor of the Securities and Exchange Commission early next year, he will head an agency at one of its lowest points since its creation nearly 70 years ago. Lawmakers and White House officials expect Mr. Donaldson to be confirmed as the commission's 27th chairman shortly after Congress convenes in a few weeks. He joins an agency that has been rudderless and plagued by staffing and budgetary problems as it has struggled to keep up with the wave of corporate scandals. Although the agency brought a record number of cases and approved a significant number of new rules in the last year, two divisions - enforcement and compliance inspections - are understaffed and have been unable to open many of the investigations that officials say are necessary. Its corporation finance division cannot keep up with the deluge of company filings. And its market regulation division has spent years trying in vain to persuade the commissioners to adopt rules of enormous consequence to the way stock markets set prices. Both the big and small issues before the S.E.C. in the next few months will have lasting implications for the agency's future and determine whether it can regain the role it has played since the Depression as the enforcer of clean markets and the confidence builder for investors. "This is the year in which the agency defines itself for the next decade," said James D. Cox of the Duke University School of Law, an authority on corporate law and author of a textbook on accounting. "Without gaining public support for its mission, it runs a very substantial risk of being marginalized in Washington. It is already being marginalized outside of Washington by a number of aggressive attorneys general." Signs are emerging of a new direction by the commission. In a speech last week before the American Institute of Certified Public Accountants, Stephen M. Cutler, the director of the enforcement division, advocated bringing more cases against accounting firms, rather than just against the firms' partners, for serious violations. "It is time to adopt a new enforcement model - a new paradigm: one that holds an accounting firm responsible for the actions of its partners; one that reverses the current presumption against suing firms for an audit failure," he said. "The current practice of suing individual auditors without also charging their firms may not adequately reflect, at least in some cases, the role and responsibility of firms in these matters," Mr. Cutler added. Still, it is not known how committed Mr. Donaldson, the former head of the New York Stock Exchange, will be to substantial new regulation. He unsuccessfully fought efforts to hold foreign companies to the same tough accounting standards as domestic ones. And he has been sharply critical of the regulation that prohibits companies from discriminating in the way they disclose information to the marketplace.
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