SEC's Cox: No Signs Of Trouble At Wall Street Firms

Judith.Burns

WASHINGTON -(Dow Jones)- U.S. securities regulators are closely monitoring Wall Street firms but haven't seen any signs of trouble despite recent market turbulence, Securities and Exchange Commission Chairman Christopher Cox said Tuesday.

"We are throughout the day in contact with those firms," checking in "on a very regular basis," Cox told reporters after appearing at a Capitol Hill press conference with newly released Chinese political prisoner Yang Jianli. He said market regulators are eyeing liquidity and other issues given the recent market turmoil prompted by concerns about poor-quality "subprime" lending.

Credit-rating agencies have come under fire for giving high-quality ratings to some mortgage-backed securities larded with poorer-quality loans, something Cox said won't be ignored as the SEC begins inspecting rating firms under new authority granted by Congress last year. Lawmakers gave the SEC new authority to regulate firms such as Standard & Poor's, a unit of McGraw-Hill Cos. (MHP), and Moody's Investors Service, a unit of Moody's Corp. (MCO) under a law that also sought to bring new competition into the rating business.

While Cox stressed that the SEC won't "second-guess" ratings, he said rating firm procedures "will almost certainly be incorporated in normal inspections" of rating firms. The SEC's ability to inspect such firms is new and will be forward looking, with the exception of investigations into possible securities-law violations, Cox noted.

Cox reiterated his view that the SEC will finalize its position this year on a controversial question of shareholder democracy, after issuing two divergent proposals this summer on whether shareholders should be able to put their candidates for a corporate board of directors on the company's proxy ballot.

"There will be a rule in place that clearly defines the responsibilities of companies and shareholders" regarding shareholders' ability to access corporate proxies, according to Cox, who termed questions about what would happen if the SEC fails to adopt such a rule "entirely hypothetical."

When the five-member commission voted to issue the competing proposals, it split largely along party lines, with Cox as the swing vote, siding with Republicans who supported one plan and Democrats who backed another.

SEC Commissioner Roel Campos, a Democrat, has since announced he will leave the SEC in September. Cox said he doesn't know if the Bush administration plans to promptly nominate a successor to fill the opening.

"I haven't spoken with anybody, including Commissioner Campos," Cox said.

-By Judith Burns, Dow Jones Newswires; 202-862-6692; Judith.Burns @ dowjones.com

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