Collegiality on Agenda at SEC Chief’s First Meeting

Its leaders traditionally come from Wall Street, but on Wednesday the Securities and Exchange Commission got a taste of what it’s like to have a politician at the helm.

In his first public meeting as SEC chairman, former Orange County congressman Christopher Cox presided over a session noteworthy for smiles and friendly asides. It was a sharp contrast to the tense divisions that characterized the panel under ex-Chairman William H. Donaldson, who made his mark as a New York investment banker.

Before taking their seats, the commissioners huddled in what looked to be sociable conversation. Soon after, Commissioner Paul S. Atkins, a harsh critic of Donaldson’s, offered the new chairman a verbal bouquet.

“Although it might not yet be clear to the public in your short time here, I can say that you have demonstrated that you are interested in fostering a collegial working environment at the SEC,” Atkins said. “You have already demonstrated that you will be an engaged and effective leader.”

Atkins, a free-market adherent, added: “Your presence and Golden State perspective certainly add some diversity away from any East Coast ‘lock’ on the commission. I look forward to working with you.”

Cox’s political background was apparent throughout the meeting. At the outset, he said that it felt unfamiliar “being at a hearing without a gavel.” Other times, he engaged in friendly chats with colleagues seated on his left and right while SEC staff members made presentations.

In August, the Republican Cox was sworn in as chairman of the panel, which has been divided over how best to crack down on corporate fraud and safeguard investors’ interests.

Donaldson resigned in June after his vigorous style of oversight sparked a backlash from business lobbyists and their allies in the Bush administration.

Cox’s honeymoon period as SEC chairman was helped by Wednesday’s non-controversial agenda.

With little dispute, for example, members agreed to establish updated guidance on the use of “soft dollars” -- an arrangement in which investment advisors essentially charge clients a little more in commissions to cover outside brokerage and research services.

Outside brokers then rebate money or credits -- “soft dollars” -- to the advisors, some of whom abuse the practice with “breathtaking audacity,” Cox said, by spending the rebates on such things as carpeting, entertainment and membership dues.

Cox inherited a commission that has two Democrats and three Republicans, including him. On some issues, Republican Donaldson found himself allied with the two Democrats -- and bitterly opposed by his own party members.

Ideological schisms remain, and were not completely concealed despite the agreeable tone of the meeting.

The commission, for example, voted 5 to 0 to ease a deadline for when small companies must document their internal financial controls under Section 404 of the Sarbanes-Oxley law, which targets corporate fraud. The discussion underscored the divisions over the law itself.

Atkins made clear his concern that the government might be doing too much meddling.

“Right now, with the huge costs and overly prescriptive application, I don’t believe the case has been made that the benefits outweigh the burdens,” he said.

A few moments later, Democrat Roel C. Campos declared: “The benefits of 404 significantly outweigh the costs.” Still, Campos agreed with his fellow commissioners that it made sense to push the small-company deadline back a year to 2007.

Cox sought to make it clear that he was committed to protecting investors, and that his vote to extend the deadline “in no way reflects any desire to back away from the letter or the spirit of the Sarbanes-Oxley requirements.”

Wednesday’s meeting was also the first for Democrat Annette L. Nazareth, formerly a senior SEC staffer who also became a commissioner in August. Nazareth is a protege of Harvey Goldschmid, a former Democratic commissioner who pushed hard for shareholder rights.