Rep. Christopher Cox (R-Calif.) yesterday pledged that the Securities and Exchange Commission would continue to crack down on fraud and uphold the spirit of a corporate accountability law if he is confirmed as the panel's chairman.
Under polite questioning from members of the Senate Banking Committee, Cox also said he would not thwart a plan that requires companies to treat stock options as an expense. Cox had opposed the move as a member of Congress whose constituents included technology executives.
Cox's nomination comes at a pivotal time for the agency, which split 3 to 2 on several key votes under the tenure of then-Chairman William H. Donaldson. Cox would provide a new and potentially decisive swing vote on a panel where the former Republican chairman often voted with the agency's two Democrats.
Senate Banking Committee Chairman Richard C. Shelby (R-Ala.) expressed concern about the past division on the commission and asked Cox for his views.
"I will undertake as chairman to do my level best to seek the common ground," Cox replied.
Lawmakers led Cox through nearly two hours of questions on such matters as the agency's budget, high executive pay and proposals to allow shareholders to nominate corporate board members in limited circumstances.
In response to an inquiry from Sen. Paul S. Sarbanes (D-Md.), Cox said a plan to give investors more power to propose directors is worthy of further study. A proposal floated under Donaldson's watch never achieved consensus.
Cox also told lawmakers that the 2002 Sarbanes-Oxley Act, passed after accounting failures at Enron Corp. and WorldCom Inc., "is now a pillar of our securities regulatory charter." The law has drawn barbs from industry groups that argue it is too costly.
Liberal advocacy organizations such as Public Citizen oppose Cox's candidacy on the ground he may roll back investor protections and tamper with the independence of accounting rulemakers. But Cox told the committee that such claims were "just wrong."
Aside from enforcement, Cox said his other priorities include "continuity" in SEC rules, technological advances and protection of the financial sector in the event of terrorist attack. If confirmed, Cox also will have the opportunity to appoint new chiefs for at least two key SEC divisions, which oversee mutual funds and the stock markets.
The Banking Committee also considered the nominations of two Democrats -- Roel C. Campos, a current SEC commissioner and a former prosecutor, and Annette L. Nazareth, who serves as director of the agency's market regulation unit.
Campos said, "The positive impact is just beginning to be evident" from a series of new rules passed after the collapse of Enron and WorldCom.
Nazareth, who has worked at Lehman Brothers Inc. and Salomon Smith Barney, told the committee that she is "keenly aware of the cost of regulation and the importance of balancing these costs with the benefits."
None of the nominees proved controversial. Sen. Thomas R. Carper (D-Del.) pointed out that he and Cox belonged to the same fraternity. Sarbanes told the three Cox children seated in the front row that their father could set his schedule around their Little League games after he is confirmed. Cox's youngest child, 6-year-old Kevin, snapped a photo of his father during the hearing with a yellow disposable camera.
Lawmakers said the Banking Committee would vote on all three nominations tomorrow. Aides predicted that the candidates could be approved by the full Senate before the August recess.