Roel Campos to leave SEC

Democratic Commissioner Roel Campos announced today that he will be leaving the Securities and Exchange Commission by the end of September. The media is making a big deal out of the fact that Campos is the SEC's first Hispanic commissioner and a Democrat in a highly divided Commission. However, Campos is also the "international" commissioner--he represents the SEC before a number of international organizations and is currently the Vice Chairman (and prospective chairman) of the developed markets committee of the International Organization of Securities Commissions. With Campos leaving, SEC Chairman Cox will have to nominate someone new to represent the SEC before the world--though, given Cox's own interest in international matters, I wouldn't be surprised if he takes up this job himself. If he does, we can expect a new emphasis placed on IFRS-US GAAP convergence and mutual recognition.

The conspiracy theorist in me expects Paul Atkins to leave soon as well, in a quid pro quo that will reduce the SEC to three commissioners. The Financial Times has reported that Atkins may be heading over to the Commodity Futures Trading Commission. Even if he does not, his term ends in a year and he may be interested in more remunerative work even before then. As it stands, the 5-member Commission will soon be down to 4 members, only one of whom is a Democrat at precisely the time that some very important decisions are coming due and an upcoming election season.

If Atkins leaves for the CFTC, I expect Bush will leave the SEC with three commissioners for the remainder of his term. This is because, despite all the talk about a shift in the balance of power, the current Commission is ideologically dysfunctional. Previous SEC chairmen (particularly Arthur Levitt) ran the SEC as a corporate chairman--i.e., largely by fiat, with the four other commissioners more or less falling in line. However, starting with Harvey Pitt and his battles with fellow intellectual heavy-weight Harvey Goldschmid, individual commissioners started having their own ideas and pursuing their own political agendas. The media story on current SEC chairman Cox's predecessor, William Donaldson, was that he "sided" with the Democrats and chaired a fractious Commission. However, the same fractures are starting to appear with Cox as well. And the source of these cleavages? Atkins.

Atkins, in particular, is a thorn in any Republican SEC chairman's side, basically because he has yet to see a securities regulation he likes. He is an ardent deregulator, and such views can be particularly unhelpful to more "responsible" (i.e., vulnerable) Republicans during an election season. Cox is no investor-hugging hippie, but he does recognize that an SEC that appears to be in the pocket of industry is not something good for his party. (Hence his vote with the Democrats to petition the Solicitor General to file an amicus brief on behalf of the investors in the Stoneridge case.) Atkins, on the other hand, would rather be ideologically pure than in power. Furthermore, he has a tendency to get the other Republican commissioner (whoever that might be) to get onboard with him.

Reducing the Commission to three members might, then, help Cox pursue his own (and his party's) wider agenda. Under a 2-1 Commission, Cox likely could count on support from his remaining fellow Republican commission Kathleen Casey, and Democrat Annette Nazareth likely would go along to get along.

A nice, quiet SEC for the remainder of George W.'s term. What's not to like?