November 26, 2008

Another One Bites the Dust: SEC’s Chief Accountant to Leave

Yesterday, SEC Chief Accountant Conrad Hewitt announced that he will leave the SEC in January. This is a day after Alexander Cohen announced he would leave as Deputy Chief of Staff. And a week after General Counsel Brian Cartwright announced his departure plans – and two weeks from Corp Fin John White’s announcement.

While it’s not unusual for these positions to be filled by a new Chairman (other than the Corp Fin Director, who typically doesn’t “rotate” with a new Administration), it’s a little unusual for these departure announcements to come so close to each other. Looks like President-elect Obama will need to pick a new SEC Chair soon, so that these positions can be filled in short-order during these trying times.

Why is SEC Chairman Cox a Short-Timer?

It’s been widely reported that SEC Chairman Chris Cox will leave office soon himself, even though his five-year term doesn’t expire until June 2010. Some members have asked: “What if Cox didn’t want to leave office? Does the President have the authority to fire an SEC chair?”

The answer is “no.” The law with respect to independent – so-called “alphabet” – agencies is that the SEC Commissioners including the Chair are appointed for a specific term and can only be removed “for cause.” However, the President can tap someone else as Chair – and have an existing Chair serve as a “mere” Commissioner instead. This setup is supposed to insulate those agencies from political pressure. Historically though, the SEC Chair has tendered a resignation when a new party comes into power.

CFIUS Issues Final Regulations

Last week, the Department of the Treasury’s Committee on Foreign Investment in the United States (known as “CFIUS”) issued final regulations governing national security reviews of foreign investments in US companies. The new regulations – issued to implement amendments adopted by the “Foreign Investment and National Security Act of 2007” – largely track the proposed regulations issued in April – and are the most significant changes to the CFIUS rules since their adoption in ‘91.

The new rules encourage parties to consult with CFIUS in advance of filing formal notification (an existing CFIUS “best practice”). Significantly, the new rules do not define “national security,” or what constitutes “control” by a foreign investor; nor do they provide special rules for sovereign wealth funds. CFIUS retains the flexibility to review each transaction on a case-by-case basis.

We have posted memos analyzing the new regulations in our “National Security” Practice Area.

– Broc Romanek