Ideology full steam ahead, no questions asked
The NYT reports:
In a speech earlier this year, Christopher Cox, the agency’s chairman, said that working on the transition to international accounting standards and reaching enforcement agreements with foreign countries like the Australians were two of the most important items on his agenda as his term comes to a close.
“It is no longer possible for the S.E.C. to do its work in the United States without a truly global strategy — because, in large measure due to today’s instant communications and technology, what goes on in other markets and jurisdictions is now intimately bound up with what happens here,” he said.
But critics say that the move toward harmonizing rules and enforcement practices is fraught with problems and would dilute American securities laws, generally considered to be the most protective of investors in the world.
“The impetus for these changes has been a generalized concern about competitiveness but the results could very well be a weakening of rules,” said Senator Jack Reed, the Rhode Island Democrat who heads the Senate banking subcommittee on securities and investment, which has jurisdiction over the S.E.C. “The notion that we’re becoming rapidly globalized is clear. There is a need for harmonized rules. But the real question is, are the foreign rules any good?”
“We’ve heard this argument about competitiveness for the last two years,” Mr. Reed added. “But guess what? There are a lot of lost jobs on Wall Street not because of competitiveness issues but because our regulators have actually not been up to the task.”
Senator Carl Levin, Democrat of Michigan, said the proposals would “weaken the pressure for credible oversight” of the markets and their regulators.
“This is a very, very serious problem,” Mr. Levin said. “We’ve had so many losses to investors based on inadequate oversight. We can’t proceed to give control of regulation — to delegate or cede control — to bodies that are not accountable. If this is delegated to regulators overseas, it weakens our ability to put pressure on the regulators to do what the law requires them to do.”
Although the staff of the S.E.C. has been working on the changes for many months, the agency has been hampered by vacancies at the top. Those vacancies were filled last week, when the Senate confirmed three new commissioners, including two Democrats, to the five-member commission. To adopt the changes, Christopher Cox, the agency’s chairman, will need to get the support of at least two commissioners.
Industry groups have pushed for many of the changes. Large international accounting firms, for example, have complained that the emergence of a new generation of American and foreign regulators inspecting them has led to onerous duplication.
Jeff Willemain, global managing partner for regulatory and risk at Deloitte, said at a roundtable discussion in Washington last week that the emerging system of “multiple and duplicative” inspections of audit firms by different countries has created “inefficiencies” that do not result in greater investor protection.
But the track record of foreign enforcement authorities indicates that they are generally less aggressive than their counterparts in the United States, and that even the most vigorous ones bring fewer cases and impose significantly lower penalties.
“Few if any countries spend as much on — or devote as much intensity of effort to — enforcement of financial reporting and auditing as the U.S. does,” said Charles D. Niemeier, a member of the Public Company Accounting Oversight Board, who has dissented from its proposal to let foreign authorities inspect auditors. Referring to the fact that foreign investigations are often not wide-ranging, he added, “Even the most robust of those other regulators have faced scope limitations and other challenges that we would not countenance.”
But foreign regulators say it is absurd to think that the United States has the ability to police markets alone.
“Let’s be clear — no single jurisdiction can resolve all the problems of globalization,” said Pierre Delsaux, a senior markets regulator at the European Commission. “We are all doing the same thing. No country has a monopoly on protecting investors.”
The US cannot, of course, police the world. But does this appear to be a reasonable response coming off what we have learned about OCC and Thrift deregulation and shadow banking systems? Or the current situation with WTO rules being so narrow in scope and that exclude concerns such as these?