SEC Chairman Levitt to Step Down
Securities and Exchange Commission Chairman Arthur Levitt said Wednesday that he will step down by mid-February after a record 7 1/2-year tenure during which he pushed through a battery of reforms aimed at helping individual investors.
As the nation’s top securities-industry regulator, Levitt oversaw the revamping of the Nasdaq Stock Market, fought to clean up conflicts of interest in the accounting industry and was the driving force behind a recent controversial rule barring companies from selectively leaking information to favored investors.
Far more than any of his predecessors, the Brooklyn-born Democrat championed the cause of small investors throughout his two terms, arguing that the market should be made fairer and more accessible to the hordes of newcomers who began buying stocks during the last decade.
“I wouldn’t give him an ‘A’ for every single thing he did in his eight years,” said Michael Holland, head of New York-based money-management firm Holland & Co. “But I’ve been on Wall Street a long time, and he’s been the most focused SEC chairman on the individual investor.”
The departure of Levitt, who was appointed by President Clinton in July 1993, was expected. Though his second term doesn’t expire until June 2003, it’s customary for political appointees to step aside so an incoming president can nominate his choice for the post.
Levitt, 69, said he’s unsure what he will do next. Laura Unger, the commission’s only Republican, probably won’t replace Levitt on an interim basis until a permanent successor is in place, experts said.
Early in his tenure, Levitt’s emphasis on small investors and willingness to take on Wall Street’s entrenched interests surprised some people, given his background as a Wall Street executive and head of the American Stock Exchange. But Levitt said Wednesday that he always believed that small investors should have the same benefits as professionals.
“The individual investor has become the most significant force in our markets today,” Levitt said, adding that his proudest achievement was helping to “empower the individual investor.”
Nevertheless, Levitt has been harshly criticized in some quarters.
Junius Peake, a finance professor at the University of Northern Colorado, blasted Levitt’s handling of the ongoing restructuring of the stock market. The emergence of electronic trading systems that compete against the New York Stock Exchange and Nasdaq has in some ways hurt investors by fragmenting the market and making trading costlier than it should be, Peake said.
“Even though he has talked a lot about [reforming market structure], when push came to shove, he didn’t do it,” Peake said.
Likewise, a recently enacted rule that forces companies to disclose key information to small investors at the same time it’s released to professionals has stirred intense controversy. Critics say the rule has increased market volatility and discouraged companies from divulging sensitive information.
Levitt supporters dispute that notion.
“He’s shown courage and wisdom to go out on a limb and take strong positions and stick to them,” said Harvey Goldschmid, a Columbia University law professor and former SEC general counsel who helped craft the disclosure rule.
Among Levitt’s other accomplishments, he oversaw the implementation of new order-handling rules on Nasdaq that reduced the hidden costs on stock trades by about one-third. He also pushed to make mutual fund prospectuses easier to understand.
