Via Peter Lattman:
A big Bloomberg story puts Chris Cox on the hot seat, raising the issue of whether the SEC chairman is favoring corporations at the expense of investors. ... Said one investor-protection advocate: “There are certain actions they have taken that strongly suggest the SEC is using its authority to scale back litigation and enforcement . . . Cox appears to be very sympathetic to the concerns of corporate defendants.'’
Cox disagrees, saying his agency has “absolutely'’ put shareholders first in regulating financial markets and securities firms. On May 10, he told reporters: “We are relentless advocates for investors . . . Every day we come to work, that’s our priority.'’ His defenders also point out his stepped-up efforts in the area of insider trading.
Personally, I think the balance did need to shift back towards companies and away from the trial lawyers, but that's neither here nor there. Instead, I was struck by the reference to stepped-up insider trading enforcement. If the SEC is taking a deregulatory tack towards corporations under Cox, this would not be the first time that the Commission used increased insider trading enforcement activity to get political cover. As I explained in Insider Trading Regulation: The Path Dependent Choice between Property Rights and Securities Fraud, 52 SMU SMU Law Review 1589 (1999):
During the 1980s, the Commission embarked upon a limited program of deregulating the securities markets. Among other things, it adopted a safe harbor for projections and other soft data, the shelf registration rule, and the integrated disclosure system, as well as expanded the exemptions from registration under the Securities Act. The deregulatory trend motivated one long-time critic of the SEC to compliment the Commission for being 'well on the road toward a sensible disclosure system with much of the dead wood, idiosyncrasies, overregulation, and overdrafting eliminated.' At about the same time, however, the SEC adopted a vigorous enforcement campaign against insider trading. Not only did the number of cases increase substantially, but also the Commission adopted a 'big bang' approach under which it focused on high visibility cases that would produce substantial publicity. In part, this may have been due to an increase in the frequency of insider trading, but one suspects the Commission's renewed interest in insider trading was motivated in large measure by a desire to preserve its budget during an era of deregulation and spending restraint.
Insider trading defendants can thus rest assured that their suffering is for the greater good of protecting the SEC's budget while Corporate America is protected from the trial lawyers.