Commissioner's departure could leave partisan SEC
The Securities and Exchange Commission announced that Annette Nazareth, the last remaining Democratic commissioner, would leave in the next few months. Her departure, following the exit two weeks ago of Roel Campos, another Democrat, means that unless the Senate and the White House move quickly to fill the seats, the SEC could end up being comprised by three Republicans.
While investor advocates expressed general concern about the SEC's ability to function while it was dominated by nominees from one party, the scenario is not without precedent. Often, especially in the months after a new president is elected, one or several SEC chairs remain unfilled.
But what distinguishes the current SEC from previous incarnations is the gulf that has developed between positions championed by Republicans Paul Atkins and Kathleen Casey, and those supported by Nazareth and Campos.
SEC chairman Christopher Cox, a Republican, has often found himself acting as a referee between the camps. Earlier this year, Cox split his votes between the two sides on the issue of giving shareholder groups access to the proxy statements of corporations.
In essence, Cox's votes allowed two competing proposals on the measure to be put forth for comment.
With Campos now out of the picture, it is unlikely that the SEC will embrace any radical changes to the status quo.
"It's bad to have a one-party commission for any length of time," says Barbara Roper of the Consumer Federation of America.
"That doesn't mean we need to throw bodies into the seats. We need strong pro-investor advocates, with securities expertise, to make the case for investor protection and investor interests."
The open seats also raise the question of whether the SEC will pull in its horns on some enforcement issues. In recent years, Atkins has articulated the position that the SEC shouldn't fine companies that run afoul of regulations, because those fines impose another penalty on shareholders. Campos, a former prosecutor, took the opposite point of view.
Meanwhile, the commission has yet to deal with the glut of stock-options backdating cases that have piled up in the past year.
"There's a tremendous inventory of options backdating cases that have to be moved along," says Stephen Crimmins, an attorney with Mayer Brown.
"In the past months, we've seen public statements suggesting that there may have been a difference of opinion as to how these cases should be handled," says Crimmins. "It's going to be interesting to see whether these two Democratic seats are filled quickly and in the interim, whether the commission takes any significant steps affecting businesses and investors."
A call to the Senate Banking committee, which is responsible for submitting the names of SEC candidates to the White House, was not returned Tuesday.
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