- The Washington Times - Friday, June 3, 2005

President Bush yesterday named Rep. Christopher Cox, a crusader against heavy-handed regulation, to head the Securities and Exchange Commission with an eye toward lifting some of the burden in rules that the agency has imposed on businesses.

The president said he wants the California Republican and former Reagan White House deregulator to continue to refine the activist stance taken by retiring SEC Chairman William Donaldson, who oversaw a record of more than 1,800 rules and enforcement actions and $7 billion in corporate fines since 2002.

“Bill took this post at a time when our economy was faced with a crisis in investor confidence. Under his leadership, the SEC vigorously responded to corporate corruption,” Mr. Bush said. “Chris Cox is the right man to carry on this important work.”

As President Reagan’s counsel from 1986 to 1988, Mr. Cox assisted in White House efforts to deregulate business. Mr. Bush noted that in Congress, Mr. Cox championed legislation to curb securities class-action lawsuits and ban taxes on Internet sales, which were priorities of the powerful technology industry in California.

The president suggested that the negotiating skills that Mr. Cox honed as chairman of the House Homeland Security Committee should serve him well when dealing with highly contentious issues at the SEC.

The nomination must be approved by the Senate.

One of the hottest topics on the SEC’s agenda has been a move to require businesses to include the cost of stock-option compensation in their financial statements. Federal Reserve Chairman Alan Greenspan advocates the change, but the rule is opposed by tech companies and big businesses who say it blocks innovation and growth.

Mr. Cox has sponsored legislation to delay the stock-option rule. Hinting at what could be a major change in direction for the SEC, Mr. Cox heralded the “men and women whose creativity, energy and leadership are powering our free-enterprise system” and pledged to “work with all of them.”

Lawrence Kudlow, president of Kudlow & Co. and a Republican economic adviser, said he expects Mr. Cox to pull back on onerous rules implemented under Mr. Donaldson’s direction. He noted that Mr. Cox worked as a securities lawyer for California tech companies and “is a forward-looking, Internet-minded visionary.”

“Cox will be very sympathetic to business arguments that the post-Enron Sarbanes-Oxley era is chock-full of regulatory overkill that has lowered the animal spirits of entrepreneurship and risk-taking,” he said.

Mr. Cox may delay the options rule “since he believes that free markets are efficient and are constantly pricing in options expenses,” Mr. Kudlow said, and likely will discard any rigid method for estimating the cost of stock options.

Mr. Kudlow expects Mr. Cox to eschew the unprecedented fines that the SEC has imposed on corporate directors who had no knowledge of wrongdoing and focus instead on going after the executives who committed fraud. He will not try to “bring down entire companies, as was the case with Arthur Andersen.”

Although Mr. Donaldson sided with the commission’s two Democratic members at critical times in close 3-2 votes — such as when it moved to regulate hedge funds for the first time — Mr. Cox likely will vote consistently with the commission’s two Republican members, Mr. Kudlow said.

The U.S. Chamber of Commerce, National Association of Manufacturers and other business groups, some of which are suing the SEC for what they call overreaching rules, praised the nomination.

“Chris Cox is a great choice,” said John Engler, president of the manufacturers’ group, predicting that he will “work through various issues” that have been debated.

The AeA, the leading technology association, noted the “instrumental role” Mr. Cox has played in freeing the industry from litigation and regulation.

“It is great to have someone who understands our industry running the SEC,” said William T. Archey, the association’s president.

Opposition was muted. Ed Mierzwinski of the U.S. Public Interest Research Group called the nomination “problematic.”

“I hope I’m wrong … but I think they’re making a huge change here that is unnecessary,” he said. “They’re going from someone who is a moderate, who realized investors needed to be protected to someone who is a leader in efforts to take away rights from investors.”

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