The search
begins for a new head of the US Securities and Exchange Commission
(SEC) after chairman Harvey Pitt resigned amid turmoil inside
his agency and a chorus of demands in Congress for his ouster.
The appointment
of Webster last month as chief of the new Public Company Accounting
Oversight Board, with Harvey Pitt’s strong support, precipitated
the crisis that led to the SEC chairman’s stunning move to step
down on the Election Day. Webster reportedly has said he would
consider resigning, depending on the outcomes of investigations
into how the accounting board’s members were chosen and his
role as a director of a company accused of fraud.
In hindsight,
Pitt’s appointment 15 months ago was a grave blunder as he brought
to the office of SEC chairman some serious conflicts of interest.
For one, he was suppose to regulate and subsequently investigate
the accounting industry and securities firms, the very set of
people he had represented for nearly 25 years. Pitt’s performance
at the SEC throws up a dilemma not only for the US but also
for other countries. In an increasingly complex financial market,
the stock market watchdog must be headed by person who has a
good understanding of it. Yet, if such an insider were to be
made the super-cop, there is a danger of him being sympathetic
towards his former profession, colleagues, and clients.
Arthur Levitt,
the previous chairman of the SEC did an admirable job of championing
the cause of investors despite having a Wall Street history,
which shows that the conflict of interests is significant only
in the case of individual failure. The SEC now needs a strong
leader with good market credentials to restore investor confidence
and boost the sagging morale of SEC staff.
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