Donaldson Speaks On SEC Reforms

by Glen Shapiro, LawAndTax-News.com, New York

10 March 2004

Speaking at a meeting of the Practising Law Institute in Washington on Friday, chairman of the US Securities and Exchange Commission (SEC), William Donaldson gave an overview of reforms in key policy areas, undertaken by the regulator in order to address the new challenges which have arisen in the wake of several recent corporate governance scandals.

"Upon arriving at the SEC, I quickly concluded that 50% of the job should be focused on internal management, 50% on policy formation, and 50% on restoring investor confidence, through the use of the "bully pulpit". I know that adds up to 150%, but it provides a sense of the urgency - and enormity - of the task," he explained, continuing:

"Starting on the internal reforms, and management, one of my goals has been to help restore the SEC's credibility as the investors' watchdog. And that meant reforming how the SEC operates. We have undertaken comprehensive reviews of every SEC division - assessing current needs and resources, reviewing methodology, and installing performance measures."

"We have also been working to instill a new culture among all Commission staff. I want us to become better equipped to see over the hills and around the corners of problems that may be looming in the distance. To this end, we are recruiting people to join, and lead, our new Office of Risk Assessment, which will be focused on early identification of new or resurgent forms of fraudulent, illegal, or questionable behavior."

The SEC chief went on to add that:

"We are also trying to break down the "stovepipe" culture, in which the SEC's highly-capable staff sometimes fails to communicate across division lines. Congress helped us to solve this problem, which stemmed in part from a vastly expanded workload, by providing funds for the hiring of 800 new professional staffers - primarily lawyers and accountants - and we have been able to accelerate the pace of hiring efforts thanks to Excepted Service Hiring Authority. We are addressing the "stovepipe" issue in a number of ways - a recent example being an off-site retreat a few weeks ago for the most senior SEC officials, where we discussed our priorities and how we can work together more effectively."

As part of the SEC's broader internal reforms, Mr Donaldson revealed that the Chairman's office within the body has also been rearranged, with the traditional SEC chief of staff role now divided among three experienced executives who joined last year, and oversee policy, external relations, and management and operations.

He then went on to discuss key policy areas for the new, streamlined securities regulator, which included enforcement and investment management issues, market regulation, corporation finance, and corporate governance.

He concluded by observing that "the bad news notwithstanding, I am optimistic about the future. Much work still lies ahead, but I am confident that the progress we have seen recently will endure, and that we will continue to see greater responsibility and more realism from American business leaders".

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