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| 2003
News and Press Releases |
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HEADLINE:
Big Board Overhaul Plan Faulted
By: Stephen Labaton
The New York Times. November 21, 2003
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EXCERPT: Republican and Democratic senators pressed the head of the Securities and Exchange Commission on Thursday to consider significantly revising the New York Stock Exchange's recent overhaul proposal by either making the exchange's regulatory apparatus more independent or taking it over entirely. The exchange announced this week that its members had overwhelmingly approved a plan to reorganize its governance and regulatory structures, and the commission is expected to decide next month whether to approve it. Under the plan, a smaller and more independent board would oversee the regulation of the exchange. The board would also appoint a chief regulatory officer, who would not report to the chief executive of the exchange. Appearing before the Senate banking panel this morning, the S.E.C. chairman, William H. Donaldson, was questioned hard by the lawmakers about whether the new structure would work, particularly since the board overseeing the regulatory machinery of the exchange would be up for election annually by the members who were being regulated. Mr. Donaldson, himself a former chairman of the Big Board, said he could not pass judgment on the exchange's reorganization plan since it was now before the commission and he wanted to consider any public comments that might be filed in the next few weeks. But his remarks suggested that he largely supported the plan, which was prepared by the interim head of the exchange, John S. Reed, and that he did not believe that the exchange's regulatory apparatus should either be assumed by the commission or run by some other independent body. Mr. Donaldson said the plan was set up so that "every possible safeguard has been given" to assure that the operations side of the exchange "will have absolutely nothing to do with the regulatory function and will not be compromised." He also said that if the plan did not work, the exchange's board members would be able to change it. But only one Democratic senator, Charles E. Schumer of New York, voiced support for the exchange's plan. He said that the plan had "struck the right balance" and that much of the criticism of it had come from rival trading exchanges seeking to use the Big Board's problems to their own competitive advantage. Other members of the committee were skeptical of the plan. Some, including the committee chairman, Richard C. Shelby of Alabama, and the ranking Democrat, Paul S. Sarbanes, raised questions about it. Mr. Sarbanes pressed Mr. Donaldson to consider having the commission take over direct regulatory oversight of the exchange, a notion Mr. Donaldson tried to reject. Two Republicans, Jim Bunning of Kentucky and John E. Sununu of New Hampshire, were critical of the whole notion of self-regulation. "It seems to me in most cases that self-regulation does not work, that self-regulation does not work whether it be mutual fund self-regulation, whether it be New York Stock Exchange self-regulation, whether it be the Federal Home Loan Bank self-regulation, whether it be Freddie and Fannie Mae self-regulation," Mr. Bunning said.
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