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Consumer Advocates Uneasy About SEC


Updated: Fri, Jul 20 5:53 AM EDT
By MARCY GORDON, AP Business Writer
WASHINGTON (AP) - New declarations by President Bush's nominee to head the SEC in favor of reviewing securities laws and listening more to Wall Street have made some consumer advocates uneasy and heartened the industry.

Securities lawyer Harvey Pitt, at his confirmation hearing Thursday by the Senate Banking Committee, also promised to vigilantly enforce rules protecting investors as chairman of the Securities and Exchange Commission.

In his first public remarks since he was named in May, Pitt addressed concerns that his background as a prominent attorney - representing Wall Street figures such as insider trader Ivan Boesky, major brokerage houses, the New York Stock Exchange, Big Five accounting firms and corporate executives - could create conflicts of interest for him as SEC chairman.



If confirmed, he said, "I will ensure vigilant enforcement of sound rules that protect all investors against fraudulent, deceptive and manipulative misconduct. ... I will be trading some very wonderful clients for the most wonderful client of all: the American investing public."

Pitt told the senators that "real-time" enforcement of securities crime was needed, to cut the long periods from the start of an SEC investigation to the imposition of fines and sanctions.

At the same time, he said securities laws must be reviewed because many are obsolete and impose an unfair burden on market participants - striking a tone favoring an easing of government regulation, as have many officials of the Republican administration.

Pitt compared the federal securities laws - many of which are nearly 70 years old and were enacted in response to the stock market crash of 1929 - to the Internal Revenue Code. Both are difficult to understand, he said.

"I would like the SEC to lead a review of the requirements it administers, and the regulations it imposes, to be certain they are sound, reasonable, cost-effective and that they promote competition," Pitt said in his opening statement.

Barbara Roper, director of investor protection for the Consumer Federation of America, had a different perspective.

"We don't think the time is right for deregulating the securities industry," Roper said after the hearing. With about half the nation's households invested in the market, investor protections should not be lessened, she insisted.

Wall Street's biggest lobbying group, which had opposed some of the changes pushed by former SEC chairman Arthur Levitt, liked what it heard in Pitt's testimony.

"He demonstrated true insight into the challenges facing capital markets and how he plans to direct regulatory policies to address those challenges," said Jim Spellman, spokesman for the Securities Industry Association.

Pitt, 56, who was the SEC's general counsel from 1975 to 1978 before going into private law practice, received a friendly reception from the panel during the question-and-answer session, and his eventual confirmation by the full Senate appeared assured.

Pitt earned more than $3 million last year in his securities practice at the Washington law firm Fried, Frank, Harris, Shriver & Jacobson, his financial disclosure report shows.

He will make about $133,000 a year as the government's top securities regulator.

Pitt has promised to sell his and his family's extensive holdings in individual stocks to avoid any potential conflict, saying he will go beyond what government ethics regulators asked him to do.

Pitt did not criticize any specific SEC actions taken under Levitt, appointed by President Clinton and considered one of the most activist chairmen in the agency's 66-year history. But he suggested that Levitt and his fellow commissioners had become imperious and overreaching in making some of their rules.

Pitt said he was concerned that the SEC "may not be seen as a hospitable place for people to come and talk about their problems. ... I think the SEC has an obligation to listen."

Levitt, who came to government from Wall Street, needled the mutual fund industry and pushed major rule changes that drew stiff opposition from the securities industry, accounting firms, Republican lawmakers and others.

Mercer Bullard, a former SEC attorney who left last year to found an advocacy group for mutual fund investors called Fund Democracy, said Pitt's testimony "clearly suggested that ... he's going to be reluctant to make a move in the face of stiff opposition from the industry."

On the controversial issue of financial analysts' independence from companies they cover, Pitt said a new voluntary code of conduct adopted by Wall Street's trade group was "a very good initiative" but would be better if it had the SEC's approval.

"Everyone has to work together to change the popular perception," he said, adding he didn't yet know whether legislation was needed to police analysts.

Pitt also said he supported in principle a fairly new SEC rule, known as Regulation FD, which prohibits corporations from releasing information to analysts, mutual funds and pension funds ahead of the investing public.

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On the Net:

http://www.sec.gov

http://www.ffhsj.com/bios/pittha.htm

http://www.consumerfederation.org

http://www.funddemocracy.com

http://www.sia.com