Expect Securities and Exchange Commission Chairman Christopher Cox to make faster progress in key areas, like the move toward international financial reporting standards, now that the regulator is once again at full strength. Last week, the SEC filled the last of two empty commissioner seats.
Officially now, five commissioners (including Cox) can do their work without criticism from Congress that their political-party make-up was lopsided while the SEC awaited confirmations of candidates.
Democrat Luis Aguilar, a securities lawyer, was sworn in last Thursday to replace Roel Campos, who left the SEC nearly one year ago. Republican Troy Paredes, who most recently taught securities regulation and corporate governance at Washington University School of Law, was sworn in the next day. He replaces the spot left open by Paul Atkins in June. They will both sit in on Monday’s roundtable on IFRS, according to an SEC spokesman.
The pressure for U.S. companies to use IFRS rather than GAAP as their accounting language in the near future is one of many agenda items that Cox could address before the Bush administration finishes its final year. In the meantime, Cox has had to deal with glacial actions by his former congressional peers and the president to confirm the new commissioners. The nominations were stalled during the past several months amid 200 other empty political posts.
The new additions join Democrat Elisse Walter, who began her job in mid-July, and Republican Kathleen Casey, who has been a commissioner since 2006. The commission has traditionally been made up of two Democrats and two Republicans, chaired by someone appointed from the sitting president’s political party.
Troy Paredes (right) is sworn in by SEC Chairman Christopher Cox.
Among the issues facing the new commissioners are the SEC’s future in light of Treasury Secretary Henry Paulson’s call to transform the U.S. financial regulatory system; investors’ rights regarding director nominations; and data-tagging of financial statements. They will also look at the regulation of credit rating agencies, which have come under fire over the past year following the subprime mortgage meltdown. At his confirmation hearing before a Senate Committee two months ago, Paredes said more attention should be given to the conflicts of interest within the ratings agencies, along with the possibility that they should have to disclose the accuracy of previously issued ratings.
Paredes was one of four candidates considered for replacing Atkins, who ended his second term earlier this summer. At Washington University in St. Louis, Paredes has focused on securities regulation and corporate governance. He has done research on executive compensation, hedge, funds, investor behavior, and the role of psychology on corporate decision-making.
For at least one of the votes surely to come across his desk soon, Paredes has done his homework. He has written about XBRL — also known as “interactive data” technology — and its likelihood of making financial statements more transparent. In June, the SEC proposed a rule that would require companies to file data-tagged statements as early as next year.
Before becoming a professor, Paredes worked at law firms Irell & Manella LLP, Steptoe & Johnson LLP, and O’Melveny & Meyers LLP.
As for Aguilar, the SEC’s world will be familiar. In addition to serving on the corporate side of securities law, he worked inside the commission from 1979 to 1982 in its Atlanta office as a staff attorney. Later, he served as general counsel for investment management company Invesco. He has also worked at law firm Alston & Bird and, most recently, McKenna, Long & Aldridge LLP, where he dealt with corporate and business law and corporate finance issues.
Aguilar (left) is sworn in by longtime friend Chief Judge Matthew Simmons of the Atlanta Superior Court.
Aguilar, who has a master of law degree in taxation from Emory University, was in the running for commissioner for practically a year. Sen. Harry Reid forwarded his name along with Walter’s to the president last November. Some investors criticized Aguilar’s nomination because he questioned whether the “burdensome cost”of following the Sarbanes-Oxley Act properly matched its benefits four years ago. That criticism may be moot for now as the SEC staff works on a cost-benefit study of the internal-control provision of Sarbox for smaller companies.