Reagan Taps Professor for Top SEC Post : Some Disappointed by Academic Image, Prefer a ‘Tough Cop’

President Reagan on Wednesday nominated David S. Ruder, a law professor at Northwestern University in Chicago, to be the new chairman of the Securities and Exchange Commission, succeeding John S. R. Shad.

The choice of Ruder, a legal scholar, disappointed some in the Administration who had pushed for the appointment of a law enforcement official to continue the crackdown on insider-trading violations. Among the other candidates were Rudolph W. Giuliani, the U.S. attorney in Manhattan, who has directed the crackdown, and U.S. Customs Commissioner William von Raab.

But Ruder, 58, who practiced securities law before becoming a professor, told reporters that he will continue the SEC’s campaign against insider trading on Wall Street if he is confirmed by the Senate.

“As far as the question of ‘tough cop’ is concerned, I would tell you that if I were confirmed, I would continue the SEC’s strong enforcement policy against insider trading,” he said after meeting briefly with President Reagan. “Insider trading will be a problem for years to come and it needs to be addressed.”

Insider trading, which, many analysts complain, damages investor confidence in the stock market, is the practice of realizing illicit profits by buying or selling securities on the basis of so-called inside, or non-public, information.

In announcing the nomination, Reagan said in a statement that “no one is better equipped to continue the fine work of Chairman John Shad in the area of insider-trading enforcement.”

Envoy to the Netherlands

Shad, an investment banker with a bachelor’s degree from the University of Southern California and a law degree from New York University, is leaving soon to become U.S. ambassador to the Netherlands. He was vice chairman of the E. F. Hutton brokerage house in 1981 when he became the Reagan Administration’s first SEC chairman.

“The commission’s vigilant efforts to enforce the anti-fraud laws have enhanced investor confidence in the nation’s securities trading markets and, under the leadership of David Ruder, we can expect the commission will continue with that essential role,” Reagan said in his statement.

Administration officials said Reagan was impressed with Ruder’s strong academic background and his “free market” philosophy, which is in line with White House economic policy. Associates described him as a moderately liberal Republican.

Officials at Northwestern University’s Law School, where Ruder served as dean from 1977 to 1985, described him as an expert in corporation and securities law. “He’s really spent his professional career preparing for this,” said Robert W. Bennett, the current dean.

A native of Wausau, Wis., Ruder received a bachelor’s degree, cum laude, in 1951 from Williams College, where he was a member of the Phi Beta Kappa national honor society. He received his law degree with honors from the University of Wisconsin law school in 1957.

Ruder practiced law for nine years in Milwaukee and Chicago. A resident of Highland Park, Ill., he is married and has six children.

In a brief interview Wednesday, Ruder said he would not discuss his goals at the SEC before his Senate confirmation hearings later this summer, though “I am strongly in favor of vigorous commission enforcement activities.”

He said he has written and lectured on broad areas of corporate and securities laws with “a particular specialty in the anti-fraud area and market misrepresentations.”

Each SEC commissioner, including the chairman, is appointed to a five-year term. However, it was not clear Wednesday whether Ruder’s appointment would expire in 1991 or 1992 because Shad has remained chairman without reappointment for a full year beyond the June 5, 1986, expiration of his term.

The Securities and Exchange Commission, created by an act of Congress in 1934, is responsible for regulating virtually all investment activities in the nation. The agency is headed by five commissioners, appointed by the President for five-year terms on a rotating basis, and operates through four major divisions: corporation finance, enforcement, investment management and market regulation. The SEC also maintains regional offices in major cities throughout the country, including Los Angeles.

In recent years, the SEC has stepped up its enforcement activity against insider trading on Wall Street. On another matter of current concern, the commission tentatively ruled last week to expand the scope of the “one-share, one-vote” rule, which now applies to New York Stock Exchange issues but not to shares traded on other exchanges. The proposed rule would virtually ban stock trading in companies that have special classes of common shares that do not carry full voting rights.