Risk & Compliance

A COO for the SEC?

Hiring an operating chief is among numerous pieces of advice for the regulatory agency from its old "friend," the U.S. Chamber of Commerce.
Kate PlourdFebruary 11, 2009

The United States Chamber of Commerce, never an enthusiastic supporter of government regulation of business, today advised that the Securities and Exchange Commission should make vast changes in its management structure.

Seven of 23 recommendations in the chamber’s report on the commission’s efficiency and effectiveness, conducted by former SEC secretary Jonathan Katz, address issues related to organizational structure and management shortcomings.

The most drastic suggested change is the creation a chief operating officer position to oversee daily proceedings at the regulatory agency. According to the report, this would enable the chairman to perform CEO-type responsibilities and would make SEC operations more consistent.

At a Chamber of Commerce panel discussion held Wednesday to discuss the report, two former SEC commissioners, Harvey Pitt and Paul Atkins, endorsed the idea of improving the commission’s management and operations. Pitt was chairman from 2001 to 2003, and Atkins a commissioner from 2002 until mid-2008.

“The SEC has never been a particularly well-managed place,” said Pitt. “It’s not that it isn’t a great agency, but management always pays attention to the particular critical issues of the day.”

Atkins and Pitt agreed that while hire a COO is a good idea, it would be hard to implement and could spawn turf wars in an agency already wrought with tension.

“Most people who would fill [a COO] function would, instead of limiting their perspective to true management, start to invade substance,” said Pitt. “If they don’t invade substance, they’ll be accused of invading substance by the staff.”

Panelists, who also included Nasdaq general counsel Ed Knight and former Fidelity general counsel Eric Roiter, agreed that the SEC needs to expand its staff’s breadth of expertise by hiring more economists and capital market experts, which also was recomended in the report.

“While the commission has a wonderful legal staff, it’s over-lawyered, and there aren’t enough people with a market background,” said Pitt.

The report also provided recommendations for improving the process of issuing exemptive orders and the process by which self regulatory agencies such as FINRA file proposed rule changes with the SEC. It also proposed that to improve the process by which it gives informal guidance, the SEC create a web-based system of compliance and disclosure interpretations to replace staff legal bulletins, FAQs, summaries of staff letters, small entity complaint guides, and interpretative letters.

David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness, said he hand delivered the report on Tuesday to new SEC chairman Mary Schapiro and the other commissioners. The SEC did not immediately respond to a request for comment.