US Securities and Exchange Commission Chairman William H. Donaldson today announced that he would step down on June 30, 2005. His resignation could potentially lead to significant changes in the US regulation of securities offerings and markets.
Donaldson was appointed by President Bush in 2003 and has led the SEC through a tempestuous period. During Donaldson’s tenure, SEC rulemaking under the Sarbanes-Oxley Act was completed, a new regulator of auditing firms that largely reports to the SEC was established, executives at Enron, WorldCom and other scandal-plagued companies were pursued by the SEC and criminal prosecutors, New York State Attorney General Eliot Spitzer often stole the law enforcement spotlight from the federal regulators at the SEC and virtually all segments of the industries that the SEC regulates were subject to substantial rule changes.
Donaldson had a long career on Wall Street, as a founder of DLJ and head of the New York Stock Exchange, among other positions, prior to being appointed SEC Chairman. Many expected him to be a conservative leader at the SEC, but he pursued a vigorous enforcement and regulatory agenda that he argued was appropriate to the times. Many Republicans, however, including fellow members of the five-person Securities and Exchange Commission itself, felt he often went too far. Unusually, the Commission has split along political party lines on certain key votes recently, with Donaldson voting with the two Democratic Commission members for regulatory changes that the two Republican Commission members have resisted.
Donaldson’s resignation gives President Bush the opportunity to appoint a new chairman and try to build a reliable Republican majority on the Commission. Such a majority would presumably be more business-friendly and less activist than the Commission has been under Donaldson. Nevertheless, because the SEC is partially insulated from electoral politics by the structured rules governing the appointment of its commissioners, the agency has surprised politicians in the past with the regulatory agenda items it has adopted or rejected.
In all events, Donaldson’s resignation is the latest in a number of developments that have the potential to slow or redirect the regulatory and enforcement momentum that has characterized the US capital markets in recent years.
We would be pleased to speak with you about this matter or any matter of US federal securities regulation, US Sarbanes-Oxley Act compliance issues or other US capital markets matters, or if we can be of any other assistance to you.