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Naming of Cox to SEC Gets Mixed Reception

Bush's nominee to head the agency says he will follow a mandate to protect investors.

June 03, 2005|Jonathan Peterson and Richard Simon | Times Staff Writers

WASHINGTON — At the height of the Enron scandal, as Congress moved ahead with sweeping corporate-reform legislation, the normally pro-business Rep. Christopher Cox stepped forward to embrace stiff new regulatory measures.

The Newport Beach Republican likened executive cheats to "bacteria" as he sought to rally House colleagues in favor of the landmark Sarbanes-Oxley anti-fraud law of 2002.

But on Thursday, after President Bush nominated Cox to head the Securities and Exchange Commission, some corporate critics said the congressman's long-term record raised fears that he would seek to roll back regulations that have helped to restore investor confidence in business and markets.

His sponsorship in 1995 of a law aimed at limiting shareholders' ability to sue companies for alleged securities fraud has quickly become a defining issue for those concerned about Cox's appointment as SEC chief.

"We consider it one of the most anti-investor pieces of legislation to have been considered in Congress in the last two decades," said Barbara Roper, head of investor protection at the Consumer Federation of America.

Supporters, however, painted Cox as someone who could strike a delicate balance: preserving the major reforms enacted in the wake of the financial scandals that began with Enron, while defusing the business backlash over some of the rules the SEC pursued in reaction to those scandals.

Introducing Cox at a White House ceremony, Bush suggested that his nominee had the attributes needed to bridge divergent views of the SEC's role as the nation's financial regulator.

"He proved that he can bring people together of diverse opinions to get things done. That kind of leadership will be invaluable as the chairman of the SEC," Bush said.

If confirmed by the Senate, the 52-year-old Cox -- low-key, cerebral and a classically conservative Republican -- would replace William H. Donaldson, who announced his resignation Wednesday after presiding over a stormy two years at the agency.

Donaldson, 74, surprised Wall Street by leading an aggressive rule-making campaign that caused a deep split with his fellow two Republicans on the five-member SEC panel and triggered accusations from business interests that the agency was going too far with reregulation.

If Cox takes a more pro-business approach at the commission, he and the other two Republicans, Paul S. Atkins and Cynthia A. Glassman, conceivably could reverse some of the controversial reforms supported by Donaldson and the two Democrats, Harvey J. Goldschmid and Roel C. Campos.

Cox on Thursday assumed the voice of a regulator, decrying financial misconduct as a threat to the vitality of the U.S. economy. "The natural enemies of this economic marvel are fraud and unfair dealing," he said, following his introduction by Bush.

Cox added that he looked forward "to carrying out that mandate" of protecting investors.

While some anticipated a tough confirmation process, no one Thursday predicted that he would be blocked. Indeed, Democratic California Sen. Dianne Feinstein, who had held back supporting Cox when he was a possible judicial candidate for the U.S. 9th Circuit Court of Appeals, agreed to introduce him to the Senate Banking Committee, which will consider his nomination.

"I have no reason to oppose him and believe he's qualified to do the job," Feinstein said.

A native of St. Paul, Minn., and a graduate of USC and Harvard University's law and business schools, Cox is a fomer legal advisor to President Reagan. He was first elected to the House in 1988, representing his Orange County district.

His interests have been varied and ambitious: the emerging Internet, technology leaks to China, the deployment of missile systems and, most recently, homeland security.

Earlier in his career, Cox was closely identified with former House Speaker Newt Gingrich and a band of Republicans who sought big reductions in the government's regulatory apparatus.

He has long been drawn toward financial issues, often working to cut taxes and stymie what he viewed as government intrusion in corporate matters. For example, Cox has energetically opposed the federal estate tax as well as state efforts to tax Internet commerce.

On Wall Street, he is best known for laws he helped author in 1995 and 1998 that limited shareholders' ability to file securities-fraud lawsuits.

Companies, including many in the technology industry, argued that they were paying huge sums to defend against abusive class-action lawsuits. Typically such suits have been filed when a company stumbles badly and its stock price tumbles. Business interests said they were being victimized by law firms trying to shake them down financially.

Critics of the laws say they have hampered shareholders' ability to seek redress from corrupt corporate managers. But among business leaders, Cox's efforts with that legislation have been widely praised.

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