Risk & Compliance

Cox Pledges Support for Options Rule

SEC chairman nominee also calls vigorous enforcement of securities laws his ''top priority.''
Craig SchneiderJuly 26, 2005

Rep. Christopher Cox, nominated for the chairmanship of the Securities and Exchange Commission, reportedly issued strong support on Tuesday for a new accounting rule requiring companies to treat options as an expense, despite his co-sponsorship of a bill last year that tried to limit the practice.

At a confirmation hearing before the Senate Banking Committee, the California Republican told legislators that if confirmed as chairman, he would put the rule into practice, according to Reuters. “I will ensure that the Securities and Exchange Commission builds upon the record as already established and that the rule is implemented as the markets expect,” he reportedly stated.

Cox’s district outside Los Angeles is home to many high-tech businesses that opposed the expensing rule, in part because of their free-handed issuance of stock options. FASB’s rule requires companies to account for options like other forms of compensation — as an expense against earnings.

The Financial Accounting Standards Board adopted the expensing rule in December, but critics have wondered whether Cox would seek to delay or block it if he took the helm of the SEC. The bill he co-sponsored last year, which passed in the House but was not addressed in the Senate, would have limited options expensing to the top five officers of a company and delayed the rule’s implementation.

In response to a question about the role of the regulators, especially regarding stock options, Cox said the independence of FASB and the SEC “is of vital importance,” Reuters added.

Cox also told confirmation hearing members that his “top priority will be vigorous enforcement of our securities laws,” according to Reuters’ account of his prepared remarks. He pledged “continuity, clarity and consistency in the commission’s rule-making and enforcement responsibilities.”

President Bush nominated Cox last month to take over the securities regulatory watchdog from William Donaldson, who stepped down June 30 after two years as chairman.

The banking committee was also considering the renomination of SEC commissioner Roel Campos and the nomination of SEC staff member Annette Nazareth to fill the seat to be vacated by Harvey Goldschmid. Many observers have noted that Cox’s confirmation hearings would not be too heated because of the White House’s apparent willingness to accept the nominations of Campos and Nazareth, both Democrats. If approved, all three nominations could reportedly go to a vote by the full Senate later this week.

On Monday, a coalition of critics, including Public Citizen, the AFL-CIO, and shareholder activists, attacked Cox’s voting record and questioned his qualifications for the SEC post at a news conference, according to the Los Angeles Times. “He at least deserves a public scrubbing in the nomination process,” said Joan Claybrook, president of Public Citizen. She reportedly maintained that during his 17-year career in the House, Cox sided with the shareholder-advocate position just once in 22 votes.