A top Securities and Exchange Commission official yesterday lashed out at critics of new corporate accountability rules and called efforts to roll back the reforms "a profound mistake."
Speaking to the Directors' Education Institute at Duke University, SEC enforcement chief Stephen M. Cutler said opponents who claim that the agency is overstepping its authority "may have too quickly forgotten the major frauds that rocked the U.S. markets to their foundations only a few short years ago," according to a copy of his remarks.
SEC enforcement chief Stephen M. Cutler rebutted criticism of the agency's corporate rules.
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Cutler did not cite specific groups by name. But in recent months, the U.S. Chamber of Commerce has perhaps been the most vocal critic of the agency and its work. Chamber officials say that the SEC enforcement unit is overreaching and that other divisions are overburdening businesses with costly rules designed to root out fraud and financial mistakes.
The group is backing up its words with legal action and research reports. In a case that has yet to be resolved by an appeals court, chamber leaders sued the SEC last year for mandating that mutual fund boards of directors be led by independent chairmen. They recently filed a friend-of-the-court brief supporting Siebel Systems Inc., which is fighting SEC allegations that it selectively disclosed information to preferred investors.
A chamber spokesman declined to comment, saying he had not seen the Cutler speech. But chief executive Thomas J. Donohue said this month that the group would challenge the SEC "on rules and regulations that go too far and are not based on solid research and data."
The pushback comes nearly three years after Congress passed the Sarbanes-Oxley Act, mandating more comprehensive checks and balances to guard against fraud, in the wake of financial collapses at Enron Corp. and WorldCom Inc.
Recently, debate about the proper role of securities regulators has raged inside the five-member SEC as well. Commissioners Paul S. Atkins and Cynthia A. Glassman have publicly aired concerns that big corporate fines hurt shareholders. Instead, they argue, regulators should punish the people responsible for carrying out fraud. But other agency leaders insist that imposing steep financial penalties on companies helps deter wrongdoing.
In each of the past two years, the SEC has won court judgments awarding the agency $2 billion in civil penalties from miscreants, Cutler said yesterday.
He added that recent financial restatements and insider-trading cases suggest that "we are not out of the woods yet."
"The notion that we should turn back the clock and ease up our enforcement efforts is sorely misguided," Cutler said. "Vigorous enforcement of the federal securities laws is an integral part of what it takes to maintain safe and efficient markets."'
