Risk & Compliance

Does the SEC Need ”New Blood”?

A soon-to-be-vacant seat on the Securities and Exchange Commission could be as hotly contested as any federal judgeship.
Stephen TaubJune 1, 2005

The appointment of a successor to outgoing Securities and Exchange Commission commissioner Harvey Goldschmid is already stirring partisan passions.

Goldschmid, one of two Democrats on the five-person commission, has announced that he will leave the SEC this summer to return to teaching at Columbia Law School. In the past, Goldschmid and fellow Democratic commissioner Roel Campos have frequently aligned themselves with the SEC’s Republican chairman, William Donaldson, to push through regulations on hedge fund managers, stock trading, and mutual fund governance. Those positions were opposed by the SEC’s two other Republicans, Paul Atkins and Cynthia Glassman.

Since Goldschmid’s replacement will undoubtedly play a major role in setting policy on future issues — such as the power of investors to nominate directors and make other corporate decisions — the Business Roundtable and the U.S. Chamber of Commerce are airing their positions on the matter.

Commenting on the recommendation by Democratic senators that President Bush appoint SEC director of market regulation Annette Nazareth to the commission, representatives from the two business associations have countered that it’s time for a fresher approach.

“Some people in the business community were hoping the Democratic leadership in the Senate would recommend someone from outside the agency because they feel it is badly in need of new blood,” said Thomas Lehner, director of public policy for the Business Roundtable, according to the Financial Times.

Stanton Anderson, chief legal officer for the U.S. Chamber of Commerce, reportedly commented, “It is our hope that the White House will look elsewhere for potential Democratic nominees.”

The FT observed that Nazareth has a strong working relationship with Donaldson. The newspaper added that a spokesman for Sen. Charles Schumer (D-N.Y.), who played a role in Nazareth’s recommendation, maintained that “this is a reasonable, moderate appointment.”

Some observers have suggested that Donaldson might deliberately keep open Goldschmid’s position, leaving the commission deadlocked. However, former SEC chairman Arthur Levitt, a Democrat, warned that restoring public confidence in our markets is such an important issue that “it would be most unfortunate to have a long-lasting vacancy,” according to the FT.

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