The SEC and the Missing Democrats: The Senate Moves Forward

According to the Washington Post, the Democrats have decided on their nominees for the two vacancies on the Commission.  As the article states:

• Senate Majority Leader Harry M. Reid (D-Nev) has forwarded the names of Luis A. Aguilar and Elisse B. Walter to the White House for vetting, according to the sources, who spoke on condition of anonymity because the process is not complete. The candidates still require extensive background checks that could take weeks, if not months, before President Bush and the full Senate act on their nominations.

Aguilar, a partner at McKenna Long in Atlanta, was strongly supported by Senator Menendez and originally seemed to have a lock on the position.  His candidacy was put on hold when it came out that he had expressed critical views of SOX, apparently engendering opposition from shareholder groups.  As the Washington Post article noted: "Unhappy with Aguilar, labor groups had pushed Damon A. Silvers, a lawyer at the AFL-CIO, for one of the Democratic slots."  Aguilar's criticism of SOX went to the costs imposed on business, a common enough observation and not particularly surprising for someone working in a large corporate law firm.  It does not make him anti-SOX.  With any luck, the internal vetting process among democrats provided adequate assurances on his views about critical issues such as shareholder access. 

Until recently, it seemed as if the second slot would go to Yoon-Young Lee at WilmerHale.  Lee, who counted among her clients, Goldman Sachs, J.P. Morgan, Lehman Brothers, Merrill Lynch and Citigroup, had written comment letters to the Commission championing various positions of these entities.  Although supported by Senator Schumer who has considerable weight in this area, having been behind the appointment of Commissioner Nazareth, pro-shareholder groups apparently succeeded in getting this nominee killed. 

Elisse Walter, my former boss at the SEC, has spent most of her career in various regulatory bodies, including the SEC, the CFTC and the NASD (now FINRA).  She knows the securities laws and may be in a position to play an important role in any plan to combine the SEC and CFTC.  My impression is that she is quite pro-shareholder in approach.

The two nominees need to be vetted.  The President also needs to approve them, which may have been one of the reasons the Democrats did not send along Damon Silvers, someone well known in shareholder rights circles and a strong advocate for those positions.  Even if the President approves the nominees, he has little incentive to act on the appointment unless there is some kind of quid pro quo offered by the Democrats (approval of appointments to other agencies that he wants, for example). 

It is progress.  With so many crucial issues, the Commission needs to regain its bipartisan approach to regulation.