SEC nominee Cox to face Senate panel
By Kevin Drawbaugh
WASHINGTON (Reuters) – Rep. Christopher Cox, the White
House’s pick to head the U.S. Securities and Exchange
Commission, will face tough questions on issues such as stock
option accounting and his record as a private-sector lawyer at
a Senate hearing on Tuesday, congressional aides said.
Controversies about mutual fund governance and hedge fund
regulation are also likely to feature in the Senate hearing,
but ultimately should not pose serious obstacles for Cox or two
Democratic SEC nominees also being reviewed, the aides said.
With Congress and the Bush administration focused on
filling a Supreme Court vacancy, changes at the SEC are being
overshadowed and swift confirmations look probable, they said.
“We look forward to hearing all the nominees’ views,” said
Jesse Jacobs, a spokesman for Maryland Sen. Paul Sarbanes, the
senior Democrat on the banking committee.
Barring controversy, Jacobs said, all three nominations
“could be confirmed by the committee and the full Senate before
the Senate summer recess” in August.
Cox was nominated last month by Bush to take over as the
nation’s top market regulator, replacing William Donaldson, who
resigned on June 30 after two years on the job.
A free-market conservative, Cox has been enthusiastically
endorsed by Republicans and industry groups eager to loosen SEC
rules adopted in a crackdown since the stunning business
scandals that started with the 2001 collapse of Enron Corp.
Democrats and some investor advocates, fearful of a
regulatory roll-back, have expressed concern about Cox.
Lawmakers may try to pin Cox down on a new rule requiring
companies to account for stock options as a business expense.
The Financial Accounting Standards Board rule is opposed by the
high-tech industry. Cox’s home district is a high-tech hotbed.
The California Republican’s 17-year record as a congressman
from the well-to-do Los Angeles suburbs of Orange County will
likely get a hard look. Key among his achievements was a 1995
bill that made it more difficult to sue corporations.
Although long gone from the private sector, the former
securities lawyer may also be asked about work he did in the
1980s for First Pension Corp., a California financial firm
later accused of fraud by the SEC, they said.
Cox has said he knew of no wrongdoing at First Pension. He
was removed as a defendant in a related shareholder lawsuit.
SEC enforcement and policy will get close scrutiny, with
senators keen to hear Cox’s views on demands from corporate
America for relaxation of post-Enron reforms and an easing of
the SEC’s recently aggressive enforcement stance, aides said.
Also, the SEC has been sued by business lobbyists over a
rule requiring mutual fund directors to be more independent of
fund managers. Cox’s views on the matter are not known. Nor is
his stance on an SEC effort to regulate hedge funds.
The banking committee will review Cox’s nomination along
with those of two Democrats: incumbent SEC Commissioner Roel
Campos and SEC staff member Annette Nazareth.
Campos is a businessman and former government prosecutor
from Texas who has been on the SEC for three years. He is being
renominated for a term that would run to June 2010.
Nazareth has been director of the SEC Division of Market
Regulation since 1999. She is being nominated to fill out a
term that would expire in June 2007.
Former SEC Chairman Donaldson’s hard-driving style and his
frequent alliances with two SEC Democrats alienated fellow
Republicans Paul Atkins and Cynthia Glassman, now acting SEC
chairman. This friction is likely to be examined by senators.
Committee Chairman Richard Shelby “looks forward to
Tuesday’s hearing where he will rigorously examine the
qualifications of each nominee,” said Virginia Davis,
spokeswoman for the Alabama Republican senator.