Commentary: He's Going to Streamline the Street

By Mike McNamee

What can Washington do to help Wall Street out of its doldrums? The biggest boost, of course, will come from the capital's strenuous efforts to boost the economy, which should lift the stock market. But Wall Street may also get a leg up from the new chairman of the Securities & Exchange Commission. Harvey L. Pitt's pledge to review 70 years of securities regulation may soon ease the burdens on brokers and investment bankers.

To a point. Pitt plans to throw out old rules that no longer make sense in today's wired world. And streamlined regulation will cut costs and boost profits on the Street. But Pitt's main goal is to make life easier for the providers and users of capital--investors and companies that issue stock--not for financial middlemen. His mantra is "Not easier regulation or harder--but smarter." And that may hold some surprises for Wall Street.

ON THE CASE. Consider enforcement, the SEC's job of policing abuse and fraud by brokers and bankers. Even after September 11's atrocities wiped out the SEC's New York regional office, locus of most of the agency's probes, the securities cops have bounced back. At Pitt's direction, their main investigation--into kickbacks bankers allegedly collected when they were handing out stock in hot Internet initial public offerings--is proceeding apace. And the agency, aided by the stock exchanges, is pressing ahead on new rules to expose and reduce conflicts of interest for analysts, whose blindly bullish recommendations helped pump up the high-tech stock bubble.

Cleaning up the abuses of the last bull market should help restore investors' battered faith. But Pitt also wants to head off the next bubble by giving investors better information through an overhaul of companies' quarterly and annual financial reports, documents designed for the telegraph age. In their place, monthly or even weekly online reports could present "more relevant and less dense" data, Pitt says, that could help wean investors from their fixation on per-share earnings and encourage them to take a harder look at companies' true value.

To help Corporate America raise capital, Pitt wants to trim the paperwork companies must produce when issuing stocks while keeping disclosures that aid investors. The U.S. should have "the least burdensome and most protective capital-raising system in the world," he says. And to ensure that those shares trade in America rather than abroad, he says, the SEC will push U.S. stock markets to adopt the best of the electronic-trading systems that sprang up in the 1990s.

Nothing on Pitt's agenda will reverse the triple whammy of economic weakness, terrorist attacks, and investor fear. But his focus on cleaning up regulations to benefit investors and issuers could be the tonic Wall Street needs for the long run.

McNamee covers the SEC in Washington.

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