Wednesday, January 21, 2009

SEC’s Cox Resigns; Emanuel Issues Memo On Review of Pending Regs (CORRECTED)

With the changing of the guard from the Bush to the Obama administration following yesterday’s Presidential inauguration (watch video, or read full text of Obama’s inaugural address as posted on MSNBC), some regulatory changes are happening fairly quickly.

Props to IRwebreport’s Dominic Jones for sharing via Twitter this report by Bloomberg’s Jesse Westbrook, Cox Quits at SEC, Leaves Schapiro to Restore Clout After Madoff. There is no press release (at least not yet) on the SEC website, but Westbrook cites SEC spokesman John Nester saying the resignation took effect yesterday, and a quick check of the SEC website shows Cox is no longer on the SEC Commissioners webpage. The former chairman had previously announced his intent to resign in January, but the exact date at which it would take effect was not previously known. The appointment of SEC Chair-Designate Mary Schapiro is still pending Senate confirmation.

CORRECTION: 3pm Pending Schapiro's confirmation, an acting chair from among the existing Commissioners could be designated by President Obama. NOTE: This corrects and replaces the earlier paragraph we had discussing the potential appointment of an acting chair, in which we had incorrectly stated, based on our reading of a paragraph in the Bloomberg article, that the senior commissioner could 'ascend to acting chair' or one could be appointed by the President.

Observations by a number of experts as to Cox’ legacy at the SEC and the future of the SEC are included in Westbrook’s article. A couple of them cited by Westbrook are:
  • “[Cox] came to the commission wanting to focus on bringing the SEC into the 21st century, making the U.S. more globally competitive by getting rid of burdensome regulations and making the agency more technologically sophisticated. Like so many of his predecessors, that agenda ran up against unprecedented cataclysmic events.” (Georgetown Univ. law prof Donald Langevoort)
  • “The SEC is in worse shape today than the French army was after its defeat at Waterloo. Congress may look to some other agency to regulate, which would be to the detriment of investors.” (Former SEC Chief Accountant Lynn Turner.)

White House Chief of Staff Issues Memo on Review of Reg’s
Here is the White House Memo (more formally, Memorandum for the Heads of Executive Departments and Agencies), which White House Chief of Staff Rahm Emanuel issued yesterday, regarding the Obama administration's desire to review all new and pending regulations. (ADDITION: The White House Memo was posted earlier today on the Washington Post website, linked in the article: Regulators Ordered to Leave Work Unfinished, by Washington Post staff writer Amy Goldstein.)

Among the points in the memo are that: with certain exceptions, no proposed or final regulations should be sent for publication in the Federal Register unless reviewed by a department or agency head appointed or designated by President Obama, and agencies are instructed to consider extending the effective date of pending regulations by 60 days.

Cady North, FEI’s Manager of Government Affairs, explains: "This is common action incoming presidents take in order to evaluate regulations inherited by previous administrations, and it is a directive that both past Presidents Clinton and Bush issued as they took office for the first time.”

It is our understanding that the administration exercises some judgment in interpreting memorandums such the one issued yesterday, e.g., certain ‘exceptions’ are broadly described in the memorandum, so it remains to be seen what the ultimate impact of the memo will be on particular rulemaking. As noted in various press reports, there would appear to be more emphasis on final rules issued during what is informally referred to as the ‘midnight’ period, i.e. between the election in November and the inauguration yesterday.

For example, SEC final rules issued during that period include (but are not limited to) SEC’s final rule on XBRL, approved by the Commission on December 17 but not yet published. According to SEC’s Dec. 18 press release, the effective dates in the final rule on XBRL were to be phased in beginning with large public companies (with public float above $5 billion) providing interactive data beginning with their first quarterly report for fiscal periods ending on or after June 15, 2009. Smaller companies were to be phased in over time, as detailed in the press release.

IRwebreport’s Jones and Georgetown’s Langevoort have observed that now-former SEC Chairman Cox was one of the primary moving forces behind the SEC’s 21st century technology initiatives.

However, technology innovation appears to also be one of the Obama administrations areas of focus, as noted in the final blog posting on the “transition” teams website,, on Jan. 19. That post, entitled, “Inside the Transition: Technology, Innovation and Government Reform,” said: “The Obama Administration’s commitment to reform and transparency is embodied by the one of the Transition’s most dynamic groups—the TIGR (Technology, Innovation and Government Reform) Team.” Following yesterday’s inauguration, the White House blog (part of “The Briefing Room” on the website) and other news updates have now formally moved to the website, which has been redesigned by the Obama team.

AP White House Correspondent Jennifer Loven adds in her article, White House chief of staff orders federal agencies to halt all pending Bush regulations (linked via Chicago Tribune): ”For rules that have already gone into effect, the Democratic-controlled Congress might be able to help the Obama administration by using the Congressional Review Act, a legislative tool to bring new federal regulations under scrutiny.”

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