The Invisible Man

SEC Chairman Cox has often been missing in action during the financial crisis, even while Treasury Secretary Paulson and Fed Chairman Bernanke tread on his turf.

By Jesse Westbrook and Robert Schmidt
Bloomberg Markets, November 2008

On Aug. 19, U.S. Securities and Exchange Commission Chairman Christopher Cox summoned the press to a conference room at the SEC's Washington headquarters for an important announcement. The agency's new computer technology to make corporate filings more useful to investors was almost ready, and Cox wanted to give reporters a preview.

In a flourish uncharacteristic of the normally buttoned-down ex-congressman, Cox, 55, strutted across the stage, took off his suit jacket and sat down at a computer to demonstrate the new Extensible Business Reporting Language, or XBRL. Investors were given a chance to ask questions about the technology online as an aide wrote a live blog.

When it came time for reporters to pose questions, however, it didn't take long for the queries to turn to the news of the day: the roiling controversy over the sale of billions of dollars of so-called auction-rate securities to investors who found they couldn't get their money back. Cox urged reporters to stick to the topic of technology and then gave a brief answer.

``Nobody is getting a pass,'' he said of the banks and brokers being probed for misleading buyers of the auction- rate bonds. The SEC, he added, had more than a dozen investigations under way.

Missing in Action

U.S. financial markets had been swooning for a year as Cox gave his computer lesson. Commercial and investment banks had suffered more than $500 billion in losses and writedowns related to the sale of mortgage-backed securities. Financial stocks were reeling, with Lehman Brothers Holdings Inc. at risk of following Bear Stearns Cos. into extinction.

Yet former SEC officials and members of Congress say throughout the tumult in the banks and markets, Cox, a Harvard University-trained lawyer, has often been missing in action.

``Cox just hasn't done anything except for XBRL,'' says Peter Wallison, who supervised the SEC chairman when he worked in the White House counsel's office under President Ronald Reagan. ``It perfectly encapsulates what Chris Cox's chairmanship has been: exceedingly cautious, a chairmanship which seemed to take as many steps as possible to avoid controversy that would result in pushback by anyone.''

Dismayed Conservative

Wallison is now a fellow at the American Enterprise Institute in Washington, which advocates for limited regulation of financial markets.

Cox was hardly part of the conversation when Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson stepped in last March and arranged for JPMorgan Chase & Co. to rescue Bear Stearns from collapse, according to people familiar with the matter at the Treasury, Fed and SEC.

On the night of March 15, when Fed and Treasury officials were hammering out the terms of JPMorgan's takeover of Bear Stearns, an SEC official looking for Cox found him at a birthday party for Mark Olson, head of the Public Company Accounting Oversight Board.

When Paulson, two weeks after the Bear Stearns crisis, proposed a reorganization of Washington regulators that would abolish the SEC, Cox didn't strongly defend his agency. He now says that was because he didn't think Congress would take such a proposal seriously.

Enforcement Uprising

Some of Cox's own enforcement attorneys say the chairman has undermined them by delaying votes on settlements they've reached with accused corporate miscreants and by publicly rebuking them in a case where they subpoenaed journalists.

``A lot of investors are looking at the SEC and saying, 'Where were you with respect to auction-rate securities? And where were you with the securitization process of home mortgages?''' says Senator Jack Reed, Democrat of Rhode Island and a member of the Senate Banking Committee.

Committee Chairman Christopher Dodd, a Connecticut Democrat, and Reed ordered a probe by the Government Accountability Office this year after the SEC disclosed that sanctions against companies and individuals accused of violating its rules fell 51 percent, to $1.6 billion, for the fiscal year ended in September 2007.

Not Just Democrats

It's not just Democrats who are dismayed at Cox's approach. On Sept. 18, Republican presidential candidate John McCain called for Cox's resignation. ``The chairman of the SEC serves at the appointment of the president and, in my view, has betrayed the public's trust,'' McCain said at an Iowa campaign rally. ``If I were president today, I would fire him.''

On Sept. 15 Carly Fiorina, former CEO of Hewlett Packard and a McCain economic adviser, said, "We have had a regulator in the SEC that in many ways has been asleep at the switch." Dana Perino, President George W. Bush's spokeswoman, said Cox has Bush's confidence.

Democratic candidate Barack Obama, campaigning in New Mexico, responded to McCain's statement by saying, ``Don't get rid of one guy. Get rid of this administration.''

Taking the Lead

Ralph Ferrara, a Republican and former SEC general counsel, says Cox has been too nonchalant. ``Paulson and Bernanke have stepped up to the plate and taken the lead in responding to the current economic crisis,'' he says. ``There is a risk that the SEC will be marginalized unless the chairman insists on a seat at the table.''

As the financial crisis escalated in mid-September, Cox made sure he had a seat. He was there for the marathon weekend talks in New York that ended with the bankruptcy of Lehman Brothers and an agreement for Bank of America Corp. to take over Merrill Lynch & Co. Cox took a private jet to New York with Paulson and stayed through the weekend, announcing his participation with a press release. When the talks failed to save Lehman, the SEC issued a statement saying it would enforce SEC rules that protect Lehman brokerage accounts.

Investment Banks Disappear

Yesterday, the Fed approved bids by Goldman Sachs Group Inc. and Morgan Stanley to become commercial banks. The firms were the last of the colossal stand-alone investment banks overseen by the SEC, making the future of the agency dimmer, says David Becker, a former SEC general counsel. ``It's a downward spiral where the less significant the population you regulate, the less your available resources,'' says Becker, who's now a partner at Cleary Gottlieb Steen & Hamilton in Washington. ``It also makes it harder to attract and retain people who want to hitch their professional careers to rising stars.''

Cox declined to be interviewed for this story. On the day McCain called for his ouster, he issued a written response to McCain's broadside and another to a series of questions posed to him by Bloomberg News.

He writes that he has been tough on enforcement and more independent than his predecessors. ``Because regulators so often come straight out of the industries they regulate, it's often hard to find both knowledge of finance and markets and independence in the same person,'' Cox writes.

Pajama Games

The chairman takes issue with critics who say he played little role in attempting to rescue Bear Stearns. Cox says he worked over 100 hours during the week beginning on March 10 and, in one instance, was in the office for a 7 a.m. call with Paulson. The Treasury secretary told him he was still in his pajamas, Cox says. The SEC chose not to be a main participant in the talks, Cox says, because it had responsibility for policing the transaction in case of fraud and for acting as an arm's-length regulator.

Cox wrote in his answer to McCain that he had launched investigations of the trading practices of hedge funds and probed unsubstantiated rumors about the health of investment banks. He wrote that the agency had stiffened rules governing rating companies, which regulators blame for giving high ratings to subprime-tainted mortgage securities that didn't deserve them.

Cox says he will leave office at the end of the Bush administration. His term officially ends in June 2009.

Short Sales Crackdown

In other forums, Cox has pointed to the SEC's crackdown on stock option abuses and abusive short selling. In Cox's three years in office, the SEC has filed cases against 23 companies or their executives for improperly backdating stock options -- by changing the date of issuance to a day when a company's shares had hit a low. The total the SEC has collected from companies and individuals since Cox took office is almost $100 million.

As world stock markets unraveled from Sept. 15 to 17, Cox led what ended up being a two-continent assault on the short selling of financial shares. On Sept. 19, the SEC banned short selling of U.S. banks, insurance companies and securities firms through Oct. 2, while the Financial Services Authority in the U.K. banned short sales of financial shares for the rest of the year.

The SEC rule affected 799 financial and insurance companies. In an earlier action, the SEC cracked down on ``naked'' short selling of Fannie Mae, Freddie Mac and 17 other financial stocks in an order that extended from July 21 to Aug. 12.

Short Sales Defined

A short sale takes place when an investor borrows stock and sells it, hoping to replace it later with new shares at a lower price. Naked short selling, which can violate SEC rules, happens when the investor fails to borrow the shares before selling them. A flood of sell orders by naked short sellers can artificially drive down a stock's price.

On Sept. 17, as shares of investment bank Morgan Stanley tumbled more than 40 percent and those of Goldman Sachs fell more than 20 percent, Morgan Stanley CEO John Mack declared, ``Short sellers are driving our stock down.''

On that same day, the SEC passed new rules declaring it a fraud if investors deceive their brokers about their intention to deliver borrowed shares.

Clinton, Schumer Pressure

The broader ban on short selling came after senators Hillary Clinton and Charles Schumer of New York pressured the SEC to impose a moratorium on short selling of bank stocks to restore stability. James Angel, a finance professor at Georgetown University in Washington, doubts that the SEC move will have much impact.

``Cox is trying to show that he's doing something about the situation, but he is fundamentally a politician and not a market guy,'' Angel says. ``If he understood how the market worked, the SEC wouldn't be pushing proposals like this.''

Cox's original short-selling order raised a storm of opposition in the hedge fund community. The Managed Funds Association, the top U.S. hedge fund group, said in a letter to the SEC that there was no reason to believe in a ``mysterious conspiracy'' to artificially drive down stock prices.

`Too Little, Too Late'

Harvey Goldschmid, a Democratic SEC commissioner from 2002 to '05, says Cox's sudden burst of activity in defense of the financial system is too little, too late.``I have respect for Chris Cox, but the SEC has been too passive in a period where rigor and leadership were essential,'' he says.

Lynn Turner, who was the SEC's chief accountant from 1998 to 2001, says he's not surprised at Cox's diminished role in ad-dressing the country's financial crisis. ``When you do nothing, you make yourself no longer relevant,'' he says. ``When things do blow up, people don't look to you.''

Cox has his champions. ``In my view, Chairman Cox has done a very effective job,'' says Harvey Pitt, a Republican who was SEC chairman from 2001 to '03. ``He's looked at a number of issues and modernized the agency's approach to disclosure and the use of technology.''

Pitt Defends Cox

Both Pitt, 63, and David Ruder, a Republican SEC chairman under Ronald Reagan, defend Cox's role in the takeover of Bear Stearns. Ruder says the chairman was available to the extent that Fed and Treasury officials needed him. ``Cox and his staff followed developments very closely, but they believed -- and I think correctly -- that it was the Fed that should be the leader,'' Ruder, 79, says.

Yet the Bear takeover and its aftermath have resulted in a profound change in the SEC's role, with Cox ceding power to the Federal Reserve. In March, the Fed began extending credit to nonbank securities firms for the first time since the 1930s.

The Fed also put its own examiners inside Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley -- institutions supervised by the SEC. Cox and Bernanke signed an agreement on July 7 that will give the central bank a permanent role in determining how much capital and liquid assets securities firms must hold to stave off financial trouble.

Paulson, Deregulator

As for Paulson, he took office determined to relieve the financial services industry of some of the burden of the new regulations imposed by Cox's predecessors, as he made clear in his first speech as Treasury secretary in August 2006.

The next month, he issued a statement backing the Committee on Capital Markets Regulation, a group that sought to amend the 2002 Sarbanes-Oxley Act, which imposed new strictures on corporate boards and managers.

In 2007, Paulson set up a panel to examine the pressures on the auditing industry, another area under the SEC's jurisdiction. The group is co-chaired by ex-SEC Chairman Arthur Levitt and Donald Nicolaisen, who headed the agency's accounting office from 2003 to '05. ``It seems clear the Treasury Department is intruding,'' says former SEC chief accountant Turner.

Levitt sits on the board of Bloomberg Inc., the general partner of Bloomberg LP, parent of Bloomberg News.

The Interventionist

Then, in March of this year, came the Treasury Department's ``blueprint'' for restructuring federal regulation of the financial industry, which called for the merger of the SEC with the Commodity Futures Trading Commission.

Since then, Paulson the deregulator has evolved into Paulson the interventionist, with his shepherding of the Bear Stearns takeover by JPMorgan and the government's appropriation of American International Group Inc. and federally backed mortgage packagers Fannie Mae and Freddie Mac.

Cox says he wasn't consulted about Treasury's plan for merging the SEC with the CFTC and doesn't think Congress will enact it. ``As I told Congress earlier this year and have stated publicly at every opportunity, if this agency chartered to protect investors, maintain orderly markets and facilitate capital formation did not exist, we would have to invent it,'' Cox writes.

Stepping on Toes

State officials have also stepped on the SEC's toes in their rush to respond to the brouhaha over the $330 billion auction-rate-securities market. Massachusetts Secretary of State William Galvin says the SEC has been playing catch-up with state enforcement officials like himself and New York Attorney General Andrew Cuomo.

Auction-rate securities are long-term bonds whose interest rates were reset weekly or monthly at auctions sponsored by the investment banks.

The market for the bonds froze in February when banks were no longer willing to bid on the securities themselves to make sure the auctions didn't fail. On June 26, Galvin sued Zurich-based UBS AG, charging the bank had defrauded the charities, individuals and small investors to which it sold the securities by touting them as safe and liquid when they knew that wasn't the case. On July 31, Galvin sued Merrill Lynch on the same basis.

The States Lead

Galvin chides the SEC for not doing enough to protect investors. ``Once again, the states are leading the way,'' Galvin says in an interview. ``It argues strongly for a much more aggressive regulatory effort at the national level. You need the national regulator to be fully engaged.''

In the auction-rate cases, Cox declines to specifically address Galvin's comments, though he says the agency's settlements will be among the largest in its history.

``The SEC investigated these abuses and took these actions in record time,'' Cox says. ``The SEC helped the states to structure their own settlements with the firms.''

On Aug. 7, Cuomo held a press conference to announce that Citigroup Inc. would buy back $7.5 billion in auction- rate securities as part of a settlement that included the SEC and other states. Cuomo thanked Cox for being ``very helpful in resolving the matter.''

Auction Rate Debate

As of mid-September, 15 banks and brokerages, including Merrill and UBS, had agreed with the states and the SEC to buy back $50 billion of auction-rate bonds.

Meanwhile, the states also jumped on the anti-short- selling bandwagon. Cuomo started an investigation into whether investors illegally drove down stock prices of financial firms. And the California Public Employees' Retirement System, the California State Teachers' Retirement System and the New York State Common Retirement Fund decided to stop lending shares for short sales.

Congress created the SEC in 1934 to stem abuses by Wall Street, including rampant insider trading, in a time of even greater financial upheaval, the Great Depression. ``Unscrupulous money managers stand indicted in the court of public opinion,'' President Franklin D. Roosevelt declared in his 1933 inaugural address.

The SEC's job is to regulate stock markets, police securities sales and make sure public companies of all kinds make adequate disclosures to investors. The commission has five members appointed to five-year terms, with the chairman and two commissioners typically from the president's political party and the other two from the party not in the White House.

1,000 Enforcers

The SEC employs about 3,400 full-time staff, including 1,000 in the enforcement division, who investigate alleged corporate malfeasance and refer cases to the Justice Department for criminal prosecution. The SEC commissioners vote on whether to impose civil sanctions on companies and individuals accused of violating securities laws.

Cox is the third SEC chief appointed by Bush. Unlike his two predecessors -- Pitt, a prominent securities lawyer, and William Donaldson, former CEO of the New York Stock Exchange --Cox had little background in the securities industry when he took office in August 2005.

Born in St. Paul, Minnesota, Cox graduated from the University of Southern California and then simultaneously earned a law degree and a Master of Business Administration at Harvard. After working in the White House counsel's office under Reagan, Cox served 17 years as a Republican member of the House of Representatives from Orange County, California, home to Disneyland and the John Wayne International Airport.

Cheney's Invitation

He sat on the House panel overseeing the banking industry and sponsored legislation designed to curtail class-action lawsuits against companies by raising the bar for what plaintiffs have to show for such suits to proceed. The measure passed in 1995 over then President Bill Clinton's veto.

Cox was named head of the SEC -- Vice President Dick Cheney offered him the job -- in the wake of years of scandal that led to the Sarbanes-Oxley law and a raft of new regulations.

In 2001, Enron Corp., a company with close ties to the Bush administration that reported $111 billion in 2000 revenues, collapsed because it had masked declining earnings through manipulation of a group of special-purpose entities it controlled.

Enron Debacle

Enron's accounting firm, Arthur Andersen LLP, fell apart in 2002 after it was found guilty of obstruction of justice for destroying Enron-related records. (The conviction was later overturned.) Arthur Andersen was also the auditor for WorldCom Inc., the giant telecommunications firm run by Bernard Ebbers that declared bankruptcy in 2002 after it too was found to have manipulated its books to conceal declining earnings.

Ebbers and Enron executives Kenneth Lay and Jeffrey Skilling were all convicted of fraud. Ebbers and Skilling are in prison; Lay died shortly after his conviction.

In light of these events, Cox's nomination to head the SEC drew widespread opposition from investor groups that asserted he would roll back rule changes instituted under Pitt and Donaldson.

``We were extremely concerned,'' says Damon Silvers, associate general counsel at the AFL-CIO labor federation. ``He had every indication of being a deregulator, someone who would bring us back to the set of problems that brought us Enron.''

Status Quo Maintenance

To Silvers's relief, one of Cox's first declarations after his confirmation was that he would make no effort to overturn the initiatives adopted during the tenures of Pitt and Donaldson.

Donaldson, a Republican who co-founded brokerage Donaldson, Lufkin & Jenrette Inc., spearheaded rules overhauling securities trading, revising mutual fund governance and creating new controls on hedge funds. Donaldson, now 77, then voted with the two SEC Democrats, Goldschmid, 68, and Roel Campos, 59, to get them passed -- much to the consternation of Republicans in Congress and the White House.

Donaldson, who served from 2003 to '05, also battled with Republican commissioners Paul Atkins and Cynthia Glassman over their opposition to imposing multimillion- dollar fines on public companies for fraud, misrepresentation and accounting violations.

Donaldson Raises Fines

Under Donaldson, total penalties increased 10-fold to $3.1 billion in fiscal 2005 from two years earlier. Atkins and Glassman publicly complained that the fines against companies were ultimately paid by shareholders who already may have been victimized by dishonest management.

According to a person who worked with him, Donaldson was pressured by aides to Cheney to jettison a proposal to make it easier for shareholders to pick corporate board members.

The message, one former top Donaldson staff member says, was that this was not the policy of the Republican Party.

The admonition still rankles the ex-chairman, who thought his handling of the wave of corporate misbehavior took the issue off the table for the 2004 presidential election, the former aide says.

Donaldson says he saw the job of SEC chairman as nonpartisan.

No Politics Please

``I did what I did without concern for the politics of it, and I think that is the role of an independent agency,'' he says. ``It should not be tainted by politics.''

Donaldson, who declined to comment about Cheney's complaints or Cox's tenure, also downplays the significance of his battles with other commissioners.

``If there is a disagreement one way or the other, that is not bad,'' he says. ``People say that if the SEC doesn't act with unanimity that it somehow undercuts the message the agency is sending. I don't think that is true.''

The public fights among Democratic and Republican commissioners stopped after Cox took office. ``It's pretty evident that Chris Cox had, as one of his high priorities, finding a way to stop public disagreements among the commissioners,'' says Campos, an SEC commissioner from 2002 to '07 who now practices law at Cooley Godward Kronish LLP in Washington.

Unanimity

During Cox's first 22 months on the job, the SEC commissioners approved every new rule that came before them unanimously. Cox supporters say the strategy was necessary- -that it was important to make peace after the quarrelsome Donaldson administration.

``He took on non-controversial things, things everybody could agree on,'' says Stanley Sporkin, SEC enforcement director from 1974 to '81, who later became a federal judge. ``He built a consensus. And now he's able to take on the controversial stuff.''

Former SEC general counsel Ferrara disagrees. ``The most important character trait of a great SEC chairman is the ability to lead,'' he says. ``Sometimes leadership means reaching consensus. More frequently, it means driving to a result without it.''

Under Cox, most issues that triggered disagreement have either been delayed or shelved. When two controversial Donaldson-era rules on hedge and mutual funds were overturned by the federal appellate court in Washington, Cox declined to appeal to the Supreme Court.

Two Court Decisions

The first court ruling, in April 2006, held that the SEC didn't follow proper procedures when it tried to force mutual funds to appoint independent chairmen. Two months later, the court struck down a rule that boosted SEC oversight of hedge funds, saying that the SEC acted outside the law when it required the private investment pools to register with the agency and submit to routine inspections of their books.

One charged issue that followed Cox into office was Donaldson's 2003 initiative to make it easier for shareholders to get their candidates elected to corporate boards. Donaldson's plan died in the face of opposition from business groups and the White House.

In September 2006, the U.S. Court of Appeals in New York forced Cox to revisit the issue by striking down a long-standing SEC staff ruling that let companies keep the names of shareholder director nominees off company proxy statements. The court decision pushed the full SEC commission to establish a formal rule on the question.

Proxy Fight

As Cox prepared to present the issue to the commissioners, he was inundated with pleas from business executives to leave their prerogatives intact and from investors who, up until that time, had been allowed to nominate directors only by offering a separate proxy and sending the ballots out at their own expense.

Cox responded in July 2007 by putting two conflicting solutions up for a preliminary vote -- and then voting for both of them. One, favored by the agency's Democratic commissioners, allowed shareholders to change a company's bylaws, potentially giving them the right to nominate directors on proxy statements. The other, backed by Cox's Republican colleagues, made it a formal rule that companies could keep shareholder nominees off their proxies.

Head Scratching

``Chris used a strategy that is common in Congress -- putting out two completely different proposals to receive feedback,'' Campos says. ``This approach was unfamiliar to many of the SEC's constituents and left them scratching their heads.''

SEC rule making is a two-step process. The agency's staff proposes a new regulation, and commissioners vote to solicit public feedback for either 30, 60 or 90 days. Once the comment period ends, commissioners then decide whether to hold a second vote to make the rule binding.

In the proxy debate, Cox never held a second vote on the rule change supported by Democrats. Two months after Campos left the agency in September 2007, the commissioners approved the measure backed by Republicans in a 3-1 vote.

Reaction was heated. ``It will be viewed as an anti- investor action and a commission that has failed investors,'' former SEC Chairman Levitt said in a Bloomberg Radio interview on Nov. 28.

Cox, Levitt Exchange

Cox took Levitt to task later that same day in a private e-mail exchange obtained by Bloomberg News. He complained, ``You're the only former chairman whose criticisms are made publicly.'' He also remarked that several people had warned him, ``Arthur Levitt is not your friend.''

Cox added that in the weeks leading up to the SEC vote, he had been ``threatened with ample bluster'' by lobbyists. ``One meeting was devoted to explaining how the attendees would work to destroy my reputation so that I would never work again,'' Cox wrote.

``It all comes with the territory, and truly it's not as if proxy access is the Gulf War or the nation's tax system or nuclear disarmament or any of the other far more weighty issues that I dealt with for two decades in Congress and the White House.''

No Friendship Involved

Levitt responded that he felt so strongly that shareholders should have the right to nominate corporate directors that he was compelled to speak out. ``This is not a matter of friendship,'' Levitt wrote.

Levitt declined to comment on the e-mails.

Though Cox says his most important tasks are rooting out corporate fraud and protecting investors, behind-the- scenes his relations with his own enforcement division have been strained, according to interviews with more than a dozen current and former SEC staffers.

The lawyers say that Cox has slowed cases and instituted policies that take decision-making away from line-level attorneys.

Cox angered some rank-and-file enforcement attorneys when, in February 2006, he publicly rebuked the division for issuing subpoenas to several journalists. The SEC had requested e-mails and other correspondence as part of an investigation into whether Gradient Analytics Inc., a stock research firm, had colluded with short sellers to spread misinformation about public companies.

Cox Not Consulted

Cox issued a public statement saying that he hadn't been consulted before the subpoenas were issued. ``Issuing subpoenas to journalists can pose a genuine risk of chilling the kind of reporting that investors depend upon,'' Cox writes. The SEC withdrew them.

``To have the chairman publicly slap us in the face for doing our jobs -- that really crushed the spirit of a lot of people for a long time,'' says Kathleen Bisaccia, the SEC attorney who supervised the investigation. Bisaccia quit the SEC in April 2006 after 17 years and is now a managing director at FTI Consulting Inc. in San Francisco.

In February 2007, the SEC dropped its probe of Scottsdale, Arizona-based Gradient.

Cox has also alienated staff in his effort to resolve the continuing struggle over how and when to fine companies. In January 2006, Cox issued internal guidelines saying the decision to impose a financial penalty would be based on whether a corporation benefited from the alleged infraction and the degree to which a fine would harm shareholders already victimized by dishonest management.

Fight Over Fines

Cox went further in a 2007 edict, leaked to the press by enforcement staff, declaring that the division's lawyers must seek approval from the commissioners before negotiating agreements on corporate fines with investigation targets.

The changes have caused long delays in bringing cases and stalled the agency's crackdown on stock option backdating and other corporate fraud cases, current and former SEC attorneys say.

A $7 million options-backdating settlement with Brocade Communications Systems Inc. was delayed for almost a year as Cox held off putting the case up for a vote. The company said in July 2006 it had reached a preliminary agreement with the agency; the final settlement was announced on May 31, 2007. A $75 million agreement with bond insurer MBIA Inc. and a $30 million accord with Symantec Corp.'s Veritas Software unit also languished for more than a year.

Promoting XBRL

If Cox's SEC has been slow to reach settlements with the targets of its investigations, it's been quick to advertise its new XBRL technology. During Cox's time in office, the SEC has issued more than 20 press releases about the XBRL software program and held at least four ``roundtables'' to discuss it. When, three months after he took office, Cox made a speech at the annual Securities Industry and Financial Markets Association conference, XBRL was the only new policy initiative he brought up.

Meanwhile, Henry Paulson is moving ahead with his plan for a regulatory overhaul that would abolish the SEC. Though Cox has assured his staff that the agency will not be reorganized out of existence, current and former SEC employees are not reassured, a dozen of them said in interviews.

``Pulling the plug on the SEC would be a monumental thing,'' says Stephen Crimmins, a former trial lawyer at the commission who's now a partner at law firm Mayer Brown LLP in Washington. ``It would send a tradition of effective financial regulation down the chute.''

The SEC will celebrate its 75th anniversary in 2009. Cox, notwithstanding the Paulson proposal, has assured his 3,400 employees that it won't be its last.

To contact the reporters on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net. Robert Schmidt in Washington at rschmidt5@bloomberg.net.

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