SECURITIES AND EXCHANGE COMMISSION

Securities and Exchange Commission (SEC)

Securities and Exchange Commission (SEC)

Part 1: Recent events of Security and Exchange Commission in the American financial sector

President-elect Barack Obama is faced with many challenges, but no one more pressing than restoring the health of the American financial system. Outside the Treasury, no U.S. agency may play a more pivotal role in this undertaking than the Securities and Exchange Commission (SEC), which oversees the U.S. securities markets. The American financial System meltdown has revealed glaring weaknesses in the existing regulatory system, encompassing past decisions by Congress to keep the SEC's hands off large-scale investment banks. The 2004 Gramm-Leach-Bliley Act provided the SEC no authority to regulate large investment banks for example Bear Stearns and Lehman Brothers, allowing these firms to simply opt out of federal supervision (Hazen, 2008).

Still, the SEC has formidable powers to proceed as investor's watchdog. Democrats in Congress have sharply criticized SEC Chairman Christopher Cox for not doing more to keep markets stable and protect consumer's interests throughout the long slide that started in mid-2007 with the meltdown of the subprime mortgage lending market.

Obama will get to designate a Democrat as chairman of the SEC. There are five commissioners serving staggered, five-year terms. Cox's term sprints through 2010, but he will not remain chairman. Unless a vacancy opens up, Obama will designate one of the SEC's two Democrats as the new chairman (By law, no more than three commissioners can pertains to the same political party) (Seligman, 2009).

Cox, the SEC chairman since 2005, outlined his “core principles” for regulatory reform in a November 2008 op-ed in the Washington Post. “The global financial crisis has revealed numerous of the weaknesses and holes in our regulatory system that is far greater and more consequential than was previously understood,” Cox wrote. “The priority now should be to address those issues and rationalize that system. In doing so, legislators and policymakers should be guided by four core principles: closing regulatory gaps, providing clear statutory authority, consolidating regulatory agencies and expanding transparency”.

The SEC traces its roots to the Great Depression, when the homeland endured through the longest and deepest downturn in its history. Congress established the Securities and Exchange Commission in 1934 to enforce newly-passed securities laws, promote steadiness in the markets and protect investors. President Franklin Delano Roosevelt appointed Joseph P. Kennedy, President John F. Kennedy's father, to assist as the first chairman.

The SEC has a staff of 3,500 in Washington and 11 regional offices to carry out its watchdog duties. Its reputation as a tough enforcer was awfully tarnished by the 2001 collapse of Enron Corp. - which prided itself on its creative and largely unfathomable bookkeeping -- and the later string of corporate failures. Allegations of too close binds to Wall Street dimmed the public's self-assurance in the commission's proficiency to protect investors. Now, Lehman, Fannie and Freddie have restored Enron as the poster businesses for irresponsible corporate governance, departing the next SEC head individual with the unenviable task of restoring ...