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SEC Chief Rejects Bigger NYSE Role

November 21, 2003|From Reuters and Bloomberg News

A suggestion that Washington should directly oversee the scandal-torn New York Stock Exchange was dismissed Thursday by Securities and Exchange Commission Chairman William H. Donaldson.

Sen. Paul S. Sarbanes (D-Md.), who led the Senate's corporate and accounting reform agenda in 2002, said at a hearing that the SEC might be able to take on regulating the NYSE with a modest staff increase.

Currently, the SEC approves major NYSE policies but does not directly manage the exchange.

Donaldson said forcing direct oversight on the SEC "would create a lot of bureaucratic problems." Instead, he said the NYSE reform proposals from interim Chairman John S. Reed deserved a chance to succeed.

The Senate Banking Committee hearing focused on Reed's ideas and whether they could repair the damage done to the NYSE's image by the major flap over former Chairman Richard Grasso's huge pay package and related issues over conflicts of interest at the exchange. Grasso resigned in September.

Reed, brought in to restore confidence in the NYSE, has reconstituted the exchange's board and proposed creating a chief regulatory officer reporting to independent directors rather than the NYSE chief executive.

But some senators questioned whether the NYSE, owned by its member brokerages, was capable of adequately regulating itself.

Sen. Jim Bunning (R-Ky.) said Congress should think about ending industry self-regulation, such as in securities markets. "It seems to me in most cases that self-regulation does not work," he said.

Reed said he strongly disagreed with the idea of eliminating self-regulation: "We are on the right path to creating and implementing a governance process that will reduce and manage the conflicts of interest inherent in self-regulation, and provide greater transparency to ensure accountability."

Donaldson said the SEC would accept public comments on Reed's plan through Dec. 4.

Separately, Reed said he had a list of as many as 10 candidates to succeed him as permanent NYSE chairman. He said he would present the list, drawn up with the help of an executive search firm, to the NYSE's new eight-member board Monday.

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