Cox Promises ‘Vigorous’ Action at SEC

Rep. Christopher Cox, nominated to be chairman of the Securities and Exchange Commission, told a Senate panel Tuesday that he would support “vigorous enforcement” of the nation’s securities laws and bring a “nonpartisan spirit” to the agency that oversees corporate America and financial markets.

The Newport Beach Republican’s confirmation hearing before the Senate Banking Committee was a friendly affair, leaving little doubt that members of both parties would back his move to the SEC despite complaints from some consumer advocacy groups.

“Congressman Cox brings a wealth of experience to this position, and I believe that the SEC and the securities markets will benefit from his leadership,” said committee Chairman Richard C. Shelby (R-Ala.), setting the tone for the hearing.

Although some critics have claimed that Cox’s self-described enthusiasm for free enterprise could prevent him from being a tough regulator, he quickly defused one of the panel’s main questions about him by saying he would support a new rule that requires companies to treat stock options as an expense. “The rule is going forward,” Cox said of the measure he had previously opposed.

He also assured senators that as chairman of the SEC he would respect the independence of such regulators as the Financial Accounting Standards Board, which wrote the stock options rule. A past chairman of that board in 2000 scolded Cox for sponsoring legislation designed to block a rule affecting how companies account for mergers.

More broadly, Cox said Tuesday that he was firmly committed to the SEC’s policing duties. He expressed support for the agency’s enforcement program and for Sarbanes-Oxley, a sweeping corporate reform law passed by Congress in 2002 in the wake of the Enron scandal.

“My top priority will be vigorous enforcement of our securities laws,” he said. “The commission must be vigilant on behalf of investors and stalwart against fraud and unfair dealing.”

President Bush nominated the nine-term congressman in June to succeed William H. Donaldson, who resigned after two stormy years marked by ideological divisions on the five-member SEC commission.

Donaldson, a Republican, had incurred the wrath of major corporate interests by siding with the SEC panel’s two Democrats on key votes that imposed controversial new regulations or oversight on businesses and markets. Donaldson contended that the measures were necessary to protect investors.

Consumer advocacy groups such as Public Citizen in recent days have raised concerns that Cox would lead a rollback of Donaldson’s efforts.

At one point Tuesday, Sen. Paul S. Sarbanes (D-Md.), the committee’s senior Democrat, asked Cox to reconcile his pro-shareholder rhetoric with the anti-shareholder image of him his opponents had portrayed.

“Were they all anticipating something we need to know?” Sarbanes asked.

Cox, 52, answered first by saying that he would seek consensus on the SEC panel.

“I will bring not only a bipartisan spirit but a nonpartisan spirit to this enterprise,” he said.

Alluding to his critics, he added: “Some people’s guesses of what I might do as chairman, which I’ve read in the newspaper, are just wrong.”

His detractors have painted a misleading picture, he maintained, “particularly to the extent that they have a view that somehow I would be, in any way, lax when it comes to enforcement, or that I would, in any way, not want to pursue appropriate regulation because I have a deregulatory mentality or I’m for free enterprise.”

Cox spoke admiringly of Donaldson, calling him “a very stand-up guy in very tough times,” and added, “I look at his record as one of great achievement and would hope to build on it.”

But asked how he might have voted on some of the SEC’s 3-2 decisions in recent years in which Donaldson was in the majority, Cox said he didn’t know, and didn’t want to second-guess what the commission had done.

He also defended a 1995 law he sponsored to impose tougher standards for shareholders to file lawsuits against companies. Critics contend the law weakened an investor weapon against corporate misconduct.

“I view that legislation today as I did then,” Cox said, describing it as “a vital part of the whole regime of shareholder protection” against “shakedowns and extortionist lawsuits.”

As expected, Cox was asked to describe his involvement with First Pension Corp., a Southern California investment company that ran an extensive investment scam beginning in the 1980s. The company’s founder, William E. Cooper, later was sent to jail.

Cox told the committee that, as a securities lawyer in the mid-1980s, he did “preliminary work” on a small SEC-registered public securities offering that he said was not the basis for later criminal charges brought against First Pension.

Cox said that by the time the offering occurred he was in Congress. His former law firm, Latham & Watkins, was the target of a lawsuit by First Pension investors and eventually settled for an undisclosed amount. Cox was initially named in the suit but was later dismissed from it. “There was no settlement” on his part, he said.

Senate staffers have declined to clarify how far they investigated the First Pension matter or whether they spoke directly with Cooper.

Underscoring the hearing’s friendly atmosphere, Cox was introduced by California’s two Democratic senators, Dianne Feinstein and Barbara Boxer.

Boxer, who once derailed plans for Cox to become a federal judge, stopped short of announcing her support but complimented his “considerable talents” and said she looked forward to learning from the hearing how he would handle the role of SEC chairman.

Panel member Sen. Charles E. Schumer (D-N.Y.) said he would vote for Cox. “I am in support of your nomination,” he said, adding that personal meetings with Cox had eased his own concerns about whether the congressman was pro-business to the point of weakening government oversight. “I think that an exploration of your record and certainly our discussions indicate that you are pro-regulation as well,” Schumer said.

At the end of the hearing, Shelby said he hoped the committee would back Cox’s confirmation, as well as those of incumbent Democratic nominee Roel C. Campos and newly nominated Democrat Annette Nazareth, on Thursday.

Nazareth, a senior SEC staffer, would replace Harvey J. Goldschmid. Campos and Nazareth faced mostly routine questions Tuesday.

“Hopefully, we can get you to work as soon as possible,” Shelby said to the nominees.