TheCorporateCounsel.net

Just read the newsletter for the ABA’s Committee on Federal Regulation of Securities – and kudos to Stan Keller for addressing SEC Commissioner Paul Atkin’s recent comments regarding the value of the SEC Staff’s informal guidance. In two recent speeches – one on April 4th and the other on April 27th – Commissioner Atkins expressed concern over the Commission continuing to allow the SEC Staff to set policy and effectively engage in rulemaking through interpretations, particularly focusing in areas other than Corp Fin.

In the Corp Fin context, Stan states the bottom line more artfully than I ever could: “The system of staff interpretation has worked well for many years and contributed to the SEC’s stature as a preeminent regulatory agency. We would all lose, and the quality of securities regulation would suffer, if this process were impeded or diminished.”

More than ever before, the community needs guidance from the SEC as we all try to deal with a lifetime of change condensed into a scant few years. The Commission is dealing with major changes on all fronts – not just Corp Fin matters – and there is no way that five Commissioners (with their miniscule staff) could keep up with the workflow that a thousand plus staffers struggle with today!

Imagine that the SEC used Commissioner Atkin’s model and the Administration failed to fill Commissioner slots as they open up; a not uncommon occurrence. It wasn’t that long ago that going to a Commission meeting meant watching Arthur Levitt and Steve Wallman in a two-man debate – as they comprised the entire Commission for a period of six months (for trivia buffs, see this timeline of Commissioners). Keep those telephone interps coming!

Trends in Securities Litigation

A member recently asked where to find studies regarding securities litigation trends. There are several of these every year, here are two of the latest that are in our “Securities Litigation” Practice Area:

– PricewaterhouseCoopers’ “2004 Securities Litigation Study”

– Cornerstone Research’s “2004 Class Action Securities Case Filings: A Year in Review”

Chairman Donaldson Testifies on Commission Disagreements

Yesterday, Chairman Donaldson testified before the Senate Banking Committee on market structure. During his testimony, he was asked quite a few questions about how the five Commissioners were getting along. Here is an excerpt from a Financial Times article:

“William Donaldson was yesterday forced to defend his leadership of the Securities and Exchange Commission after US lawmakers raised concerns about divisions inside the regulator.

Mr Donaldson, Republican chairman of the SEC, insisted he always strove for consensus at the regulator during its policy making. Republican lawmakers highlighted how Mr Donaldson had relied on the support of the two Democratic commissioners at the SEC to get controversial reforms approved.

The latest example came in April when Paul Atkins and Cynthia Glassman – the other two Republican commissioners at the SEC – voted against changes to stock trading rules.

Richard Shelby, Republican chairman of the Senate banking committee, said some people were “troubled” by how the changes were pushed through by three votes to two, because of concerns that the lack of consensus undermined the regulator’s credibility.

Senator Mike Crapo, another Republican member of the committee, said he found the divisions inside the SEC on contentious policy making “disturbing”.

Regulations to supervise hedge funds and improve governance at mutual funds have also been pushed through by Mr Donaldson and the two Democratic commissioners.

Mr Donaldson said almost 3,000 votes had taken place at the SEC under his leadership and 98 per cent were unanimous. He compared his record favourably to Harvey Pitt, his predecessor as SEC chairman, when he said 99 per cent of votes were unanimous.”