Many of the same recommendations keep emerging from report after report -- no matter how nonpartisan or partisan the group.That happened just this week, on some level, with macro comments Treasury Secretary Henry Paulson made in opening a conference on international market competition, as well as with the six pointed recommendations the U.S. Chamber of Commerce offered to Congress and the investment community.
On the face of it, none of the suggestions outlined in the chamber’s report -- which include ending quarterly earnings guidance, retooling the mission and powers of the Securities and Exchange Commission, limiting the accounting industry’s exposure to litigation and upping the country’s retirement savings -- appears to be all that outlandish. But I’m always a bit leery where the chamber’s interests, which are those of the country’s biggest business lobby, are concerned.
The restructuring of the SEC is a section of the report that I’ve read a few times, and essentially suggests that the agency be reorganized to better mirror the capital markets. Currently, the SEC has divisions for market regulation (overseeing broker-dealers and exchanges), investment management (overseeing investment companies and advisers) with minimal overlap.
The chamber suggesting that creating three new divisions -- one overseeing market professionals; another overseeing markets, exchanges and self-regulatory organizations; and a third overseeing securities products, such as derivatives and mutual funds -- would be beneficial, and that the SEC's inspections division should be incorporated into other divisions. Finally, the panel recommended that the SEC's office of international affairs be upgraded to a division.
Of course, the question over just how valid the complaint is that the United States is losing its competitive edge to foreign markets, remains. There’s a very valid argument to be made that overseas markets having become more competitive in recent years is through no fault of America’s.
Changes for the Sarbanes-Oxley Act’s internal control provisions are on the way, and the SEC has continued to take a closer look at the more flexible regulatory approach of its British counterpart. And nearly every think tank and lobbying group seems to agree with the validity of recommendations made by the blue-ribbon committee led by Harvard University law professor Hal Scott, which released its own report in November.
The chamber is smart in that its defined recommendations could all be implemented within a year’s time. But, as I said, I’m always a bit leery wherever the chamber is concerned. The goal of the SEC is still to find a way to strike a balance between investor protection and the oversight of financial firms -- and if tipped any way at all, that balance should always lean towards investors. No matter how polished the proposal, just because Enron and WorldCom appear to be in the past, doesn’t mean the very real regulation they spurred should be forgotten.
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