Likely Pick for SEC Chief Raises Some Concerns

Harvey L. Pitt, President Bush’s apparent choice to head the Securities and Exchange Commission, is a high-profile securities lawyer who is well-regarded on Wall Street and in Washington regulatory circles.

But Pitt’s resume and the legal cases he has taken worry some experts, who fear that he could oversee a dilution of the investor-protection and corporate-accountability initiatives adopted by the SEC in the 1990s.

President Bush is expected to announce Pitt’s nomination as early as this week after a lengthy search for a new chairman of the agency that regulates financial markets.

Pitt, 56, is a Washington-based partner at New York law firm Fried, Frank, Harris, Shriver & Jacobson. He has been a key voice on some of the most prominent and controversial issues affecting Wall Street in recent years.

Pitt also was SEC general counsel from 1975 to 1978 in the final four years of a decade-long stint at the agency.

Since going into private practice in 1978, he has represented major brokerage firms, the New York Stock Exchange and infamous insider trader Ivan Boesky, among other marquee names.

“He’s an excellent lawyer,” said Lewis D. Lowenfels, a partner at Tolins & Lowenfels in New York. “He has experience, knowledge, relationships and good judgment.”

Pitt, reached at his office in Washington on Tuesday, declined to comment.

If approved by the Senate, Pitt, a Republican, would succeed Arthur Levitt, who stepped down as SEC chief in February.

Levitt, a Democrat, pushed through a battery of market reforms during his 7 1/2-year tenure and built a reputation as a fierce protector of individual investors’ rights.

Levitt also fought to clean up potential conflicts of interest in the accounting industry, and last year pushed through a controversial rule--Regulation FD--barring companies from giving sensitive information to favored investors before the general public hears it.

Pitt’s background representing Wall Street clients has raised concern that he might lack the same commitment as Levitt to small-investor issues.

Indeed, Pitt has been critical of Regulation FD, which was opposed by many U.S. companies and by Wall Street. And Pitt directly fought Levitt on accounting industry reform. As counsel to the industry, Pitt helped major accounting firms succeed in weakening Levitt’s original reform proposal.

“Arthur had a wonderful passion for the individual investor and for investor protection,” said Harvey Goldschmid, a securities law professor at Columbia University. “I don’t think Harvey will bring that instinct to the same degree. I don’t know anyone who would.”

Nevertheless, Goldschmid praised Pitt as “smart and talented” and “potentially a great chairman.”

Other securities law experts said they were confident Pitt’s client roster would not influence the positions he would take as SEC chairman. They noted his public stances on controversial issues were taken on behalf of clients and don’t necessarily represent his personal views.

“He understands that when you go to the commission you’re representing a new client, which is the public investor, and you’re leaving your old clients at the door,” said Joel Seligman, dean of the Washington University School of Law.

Supporters point out that some of the concerns surrounding Pitt also were raised about Levitt early in his tenure. Levitt was a former head of the American Stock Exchange and longtime Wall Street executive, and there was little to indicate that he would take up the causes he did.

In an interview Tuesday, Levitt praised Pitt.

“Although we’ve been on different sides of issues, he has always demonstrated respect for the agency,” Levitt said.

He added, however, that he hoped the SEC under Pitt would follow through on issues championed during his tenure. One of the biggest is the hotly contested Regulation FD.

The fair-disclosure rule was designed to prevent big investors from getting important corporate information earlier than small investors. The securities industry is fighting to have the rule overturned, arguing that it hampers the free flow of information and exacerbates stock market volatility.

Some experts fear that Pitt, whose clients have included Wall Street’s main trade group, strongly opposes the regulation.

“Does he understand the role the SEC plays in protecting average Americans who have put their retirement funds at risk in the stock market?” asked Barbara Roper of the Consumer Federation of America.

Others noted that it wouldn’t be surprising if sentiment about new regulation of Wall Street has shifted with the arrival of a Republican administration.

“The balance between investor protection and market efficiency may have tilted a little bit more toward market efficiency,” said Rick Roberts, a Washington lawyer and former SEC commissioner.

One way or another, Pitt is sure to make his mark, say people who know him. They note that Pitt would be forfeiting a million-dollar-plus salary for a $133,700-a-year government post.

“He’d be giving up a ton of money,” Roberts said. “It clearly means a lot to him.”

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The Pitt File

Harvey L. Pitt, one of the nation’s best-known securities lawyers, is expected to be President Bush’s choice for chairman of the Securities and Exchange Commission.

Here’s a look at Pitt’s resume and some of the people and companies he has represented.

H. Pitt

* Current post: Partner in Fried, Frank, Harris, Shriver & Jacobson and chairman of the law firm’s Washington office. He joined the firm in 1978.

* Regulatory experience: General counsel of the SEC, 1975-78; executive assistant to SEC Chairman Ray Garrett Jr. (1973-75); chief counsel to the SEC’s Division of Market Regulation (1972-73).

Client: Garth Drabinsky

Represented Drabinsky in connection with SEC and criminal inquiries into alleged accounting irregularities at Drabinsky’s now-defunct Canadian entertainment company, Livent Inc.

Client: Michael Saylor

Defended Saylor, founder of software company MicroStrategy Inc., after the SEC alleged accounting fraud. Saylor settled last year without admitting or denying wrongdoing.

Client: Ivan Boesky

Defended Boesky in the government’s insider-trading case against the former takeover-stock trader in the mid-1980s. Boesky pleaded guilty to violating federal securities laws in 1987.

Client: The Big Five

Represented each of the Big Five U.S. accounting firms on a range of regulatory issues relating to their services.

Sources: Fried, Frank, Harris, Shriver & Jacobson, Times research