Major U.S. SEC rulemaking may be done for year
WASHINGTON (Reuters) - A U.S. Senate panel will meet this week to consider confirming three top officials for the Securities and Exchange Commission, but it may be too late in this election year for the agency to move on substantive policy decisions.
At stake are issues such as how to toughen regulations for credit rating firms and the U.S. adoption of international accounting standards.
"In the waning years of an administration, the agency's direction from a rulemaking standpoint is usually to maintain the status quo," said David Martin, the SEC's former corporation finance director who is now a partner at the Covington & Burling law firm.
"It's not that they aren't doing their jobs. There are lots of perfectly good things being done; it's just not agenda-setting stuff," he said.
Since February, the SEC has operated with three Republican commissioners -- Paul Atkins, Kathleen Casey and SEC Chairman Christopher Cox. The two Democratic seats are empty. Atkins' term expires Thursday, though he has said he will stay until his successor takes over.
On Tuesday, the Senate Banking Committee will consider two former SEC staffers, Elisse Walter and Luis Aguilar, for the Democratic openings. It will also consider law professor Troy Paredes to fill the Republican spot being vacated by Atkins.
The investor protection agency needs a majority vote from commissioners to float policy proposals and adopt new rules. With Democrats controlling Congress, any controversial policy decisions by an SEC staffed with only Republican commissioners would draw swift criticism.
However, even if the Senate were able to confirm the commissioners as early as this week, the commissioners would need to get up to speed on the issues and might not be prepared for the heavy agenda of rulemaking that Cox has outlined.
A host of issues are on the table, including one to crack down on credit raters like Moody's Corp (MCO.N), McGraw-Hill Cos Inc's Standard & Poor's (MHP.N) and Fimalac SA's (LBCP.PA) Fitch unit, which have been blamed for failing to analyze data thoroughly before assigning top ratings to mortgage-backed securities.
Cox has said the SEC will formally propose new credit rating agency rules June 11. However, everything can change once new commissioners come on board.
Another issue affecting millions of investors is the SEC's desire to rework mutual fund distribution fees, or 12b-1 fees, which are said to no longer serve their original purpose.
In the international arena, the SEC is working on a plan to accept market rules of foreign regulators and make it easier for non-U.S. banks, brokers and exchanges to operate in the United States. And the agency is crafting a road map for the general acceptance of international accounting standards in the United States.
"There are a few nits in the proposal pipeline that might get adopted," said James Cox, professor at Duke Law and no relation to Christopher Cox.
"It might be that SEC will push ahead with mutual recognition for foreign brokers although that, like the (international accounting) issue, is best left for a new administration rather than appearing to be guided by the dead hand of the current SEC chair," he added.
SEC Chairman Cox has said he would wait until there was a full complement of commissioners to tackle high-profile proposals such as giving shareholders increased access to the corporate proxy statement.
All this comes in the last few months of the Bush presidency, which ends in January. Lobbyists for investment banks and fund managers are already looking ahead to a possible Democratic president.
"I very much hope that the Democratic commissioners are confirmed quickly, which will allow the commission to move forward on enforcement matters and other commission business," said Harvey Goldschmid, a former SEC commissioner and now a professor at Columbia University.
(Reporting by Rachelle Younglai, editing by Gerald E. McCormick)
