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Why Cox Has the Valley Smiling

By Amy Borrus The Securities & Exchange Commission will likely adopt a more business-friendly approach to rule-making if Representative Christopher Cox (R-Calif.) wins Senate confirmation as SEC chairman, the nominee's confidantes say. President George W. Bush nominated Cox, 52, on June 2 to succeed William H. Donaldson, who'll step down June 30.

Business reps, especially the tech set, are almost giddy at the prospect of Cox, a Harvard-trained lawyer and MBA, taking the helm of the chief federal agency for markets regulation. Cox practiced securities law before his election to Congress in 1988 from a well-heeled Orange County (Calif.) district and is widely regarded as one of the smartest lawmakers around.

Cox led the charge in two Washington battles of keen interest to Silicon Valley: He was the architect of a landmark 1995 law that made it harder for shareholders to bring securities-fraud lawsuits -- a top priority for high-tech companies at the time. And he has been a Capitol Hill champion of keeping sales on the Internet tax-free. "We're really, really excited" about Cox's nomination, says Lezlee Westine, CEO of TechNet, a bipartisan political action committee of high-tech executives.

MORE DEREGULATION? Bush brought in Donaldson two years ago to clean up a securities industry rocked by corporate scandals. In contrast, the conservative but pragmatic Cox, is expected to be more cautious about issuing new securities rules without strong evidence that they're warranted. "He'll do things that the data suggest are sensible, not just because it seems like a good idea," says Peter Wallison, resident fellow at the American Enterprise Institute, a conservative economic think tank.

Wallison, who has known Cox since the Californian worked for him in the counsel's office of the Reagan White House, has criticized Donaldson for pushing through securities rules without demonstrating that they're needed -- or the SEC's authority to impose them.

That's a view shared by the SEC's two other Republicans, Paul Atkins and Cynthia Glassman. Both have questioned the rationale for two controversial SEC rules that Donaldson, a Republican, championed with the support of the commission's two Democrats, Harvey Goldschmid and Roel Campos. One requires mutual-fund boards to have independent chairmen. The other requires hedge-fund advisers to register with the SEC. With Cox as chief, the balance could tip to more 3-2 commission votes for deregulatory measures rather than for more rule-making.

LIKELY CONFIRMATION. Business reps are hopeful that Cox will slam the brakes on a new accounting standard that requires companies to treat employee stock options as an expense against earnings. The Financial Accounting Standards Board adopted the rule last December, but the SEC has delayed its implementation.

Cox has long opposed expensing and may be amenable to an industry push for an economic-impact study to be completed before the accounting rule takes effect -- a move that could scuttle it altogether.

Many Democrats are wary of Cox. But few have the appetite for another slugfest over a Presidential nominee after the bruising battle over John Bolton, Bush's pick to be U.S. Ambassador to the U.N. Barring any whiff of scandal, the Senate will likely confirm Cox as SEC chief -- and that will be music to high-tech ears. With Eamon Javers in Washington

Borrus is a BusinessWeek correspondent in Washington

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