No more. The SEC has become kinder and gentler, it seems, with bigger interests than just advocating for investors. I mentioned Commissioner Paul Atkins’ speech last week, the one where he continued to bash Section 404 costs while praising efforts at making Auditing Standard 2 less onerous. I forgot to mention this snippet:
“The SEC is very concerned about maintaining our capital markets as an attractive place for investors to invest. In fact, we are charged by Congress to look after not only investor protection, but also competition and efficiency of the financial marketplace and ease of capital formation. We must ensure the integrity of our markets so that investors have confidence that they will be treated fairly. At the same time, our regulations must not price those very investors out of our markets through burdensome regulations or eat up the fruits of their investments through nonsensical mandates.”
“Charged by Congress to look after not only investor protection but also competition and efficiency of the financial marketplace and ease of capital formation?” Well, yes. And he’s right; it’s in black-and-white in the 1933 Act. But the 1933 Act presents it in a slightly different tone:
“Whenever pursuant to this title the Commission is engaged in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.” [Emphasis added.]
Notice what comes first: the protection of investors. The rest is secondary. Commissioner Atkins’ statement sounds like he’s channeling the Bloomberg/Schumer report or the Paulson Committee reportt more than echoing William O. Douglas. This reference to Douglas comes from a 1995 speech by Arthur Levitt:
“One of my predecessors, later Supreme Court Justice, William O. Douglas described our special role in this way: 'We’ve got brokers’ advocates; we’ve got exchange advocates; we’ve got investment banker advocates; and we are the INVESTOR’S advocate.' "
Maybe the pendulum hasn’t swung completely the opposite way from the reform era after Enron - but it feels like it’s almost there. I offer this list of “Top Ten Signs the Pendulum Has Swung” compiled by David Katz at CFO.com so you can at least get a good laugh out of the current deregulatory folly.