The SEC's Christopher Cox on Executive Pay and More
The SEC's chief accountant, Conrad Hewitt, recently urged that "something ... be done" to limit the exposure of the Big Four accounting firms to liability. Do you support capping legal damage awards against accounting firms that fail to uncover fraud in corporate audits?
I haven't spoken to that. What I have said is that the discussion of liability limits for accounting firms is for the Congress, not the SEC. The SEC, and certainly the chairman, have not made such a recommendation to the Congress. The SEC has many authorities, but that is not one of them, so we are sticking to our responsibilities here.
Do you believe the Public Securities Litigation Reform Act was strong enough, or would you support further reforms in this area?
I believed at the time, and the ensuing decade of experience under the law has borne this out, that the law struck an appropriate balance between promoting sound litigation and preventing fraud against shareholders.
Now that you have another vantage point, do you feel any of your positions or votes while a congressman were mistakes or ill-informed?
It requires a lot of humility to consider that question. We should all be humble with using hindsight. A couple of times I pressed the wrong button; I would surely change those votes. But if I go back and think about the votes I've cast, if I'd changed my vote, I would have fixed one problem and caused another. On the big issues, on general principles, I still strongly believe in economic growth through lower taxes, and a whole lot of things I don't have anything to do with as commissioner.
In 1995, you were named in investor lawsuits against First Pension Corp. You had done legal work for the company, which later failed, and its principals were convicted of fraud. Although you were later dropped from the lawsuit, did the experience affect your thinking?
Fortunately, with that experience, the system worked reasonably quickly. But certainly in my years of observing the working of the civil justice system, I was made amply aware of the costs to ordinary citizens of the litigation system. I can assure you that if I had ever believed that a client of mine was guilty of fraud, I would have acted immediately to end the representation and refer the matter to the authorities.
Has your long history in Washington, D.C., taught you anything?
I grew up with Democrats in Minnesota and Republicans in Orange County [Calif.]. I still visit both places. What I find is that, outside of Washington, people of various political stripes seem always to put the country first and politics second. The temptation in Washington is to put politics first. Whether we are Republicans or Democrats in charge of protecting American investors, we have a responsibility to keep partisanship out.
What's on the table for you this year?
We're redoubling our efforts to protect senior citizens from fraud. We have aggressively moved to give investors the full benefits of today's technology. We are working closely with our overseas counterparts to make regulation work in this new global environment. And we're simplifying the presentation of disclosure so that investors get to see things in plain English, rather than legalese.
Is it going to be harder getting unanimous votes out of the SEC this year because of the contentious nature of the issues?
It's never easy to tackle tough issues and resolve them to everyone's satisfaction. The way we have been able to do that on the commission is that there has been a lot of mutual respect. Our skills and experiences complement one another nicely. There is no guarantee that we will always agree. But I remain convinced that we will have a collegial commission even if necessarily we have an occasional disagreement.
Comments? Please direct them to kroane@usnews.com.
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