The U.S. Chamber of Commerce, a traditional business lobbying group, has criticized the Securities Exchange Commission for its over-zealous regulatory methods. The number of court cases lost by the SEC was at the heart of the complaint by the business representatives, though it appears the chamber may have got its figures wrong:
The U.S. Chamber of Commerce has called on the Securities Exchange Commission (SEC) to form a special advisory committee to examine its enforcement practices. In response, SEC Chairman Christopher Cox said: “As long as a business is friendly to its investors, the SEC will be friendly to it."
Christopher Cox then went on to warn that any business that attempts to trample on the interests of investors will find themselves confronted by “a relentless and powerful adversary in the Securities and Exchange Commission."
The relationship between the Chamber of Commerce and the SEC has been strained since Congress started clamping down on corporate fraud with the introduction of the Sarbanes-Oxley Act (SOX) in 2002. The pressure exerted on corporate America has only increased since. The Chamber of Commerce, the largest business lobby, has launched several attacks on the SEC's aggressive manner of regulation. For example, last year the chamber sued the SEC to try to block implementation of a mutual fund governance rule that requires that fund board chairmen, and 75% of fund directors, be "independent," or free of direct ties to fund managers. The case was seen as an attempt by the business lobbyists to take revenge for SOX, or at least temper the severity of the SEC's investigative efforts.
In its defense, the SEC presented statistics that suggest there has been no significant number of lost court cases. So far in 2006, 13 enforcement cases involving 18 defendants have reached trial. The SEC lost against two defendants. Between 2003 and 2005, 113 cases involving 206 defendants reached trial. The SEC won its cases against 169 defendants for an overall conviction rate of 82%, according to the agency's statistics.
All the same, the chamber cited several instances in which the SEC failed to make its case, including a disclosure action against Siebel Systems (since acquired by Oracle Corp.), in which a judge said the SEC had applied the law incorrectly. The business lobby said this showed SEC regulation was arbitrary and unpredictable."
SOX is undeniably very strict and, as it was recently discovered, the SEC itself is having trouble complying. Moreover, the Government Accountability Office has found that the SEC lacks protective measures against insider attacks.
“SOX is by no means all sugar and sweet, but an outspoken attack on the SEC is not going to help. As I see it, the best way to alleviate the regulatory burden is to be as friendly as possible with your investors. At the end of the day, that approach benefits everybody — management, the shareholders and the regulatory bodies," believes Denis Zenkin, marketing director at InfoWatch.
Source: Netscape News
