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Cox: can he take the heat? Chief executives crave some regulatory relief, but Cox has to thrive in a nasty political environment in order to deliver.

Two years of tough enforcement at the U.S. Securities and Exchange Commission appear to be headed toward less bumptious and more business-friendly times with the nomination of U.S. Rep. Christopher Cox as SEC chief. President Bush nominated Cox, a 52-year-old conservative Republican from southern California, after SEC chairman William H. Donaldson abruptly resigned.

Donaldson, 74 surprised many chief executives with his unexpectedly tough stances. Although a Republican, he often backed the SEC regulatory staff on controversial interpretations and enforcement issues and sometimes sided with the two Democrats on the board.

Cox, by contrast, has a long history of working on pro-business legislation. He was instrumental in a 1995 bill that would have limited the rights of shareholders to file class action lawsuits because a company's stock tanked. The bill, which would have raised the burdens of proof for alleged fraud by shareholders, was modified and passed despite a veto by former President Bill Clinton.

Cox, who voted in favor of the Sarbanes-Oxley Act, is also the first politician, rather than financial expert, in recent memory to be nominated for the top seat at the SEC. If approved, two of Cox's first challenges will be how to handle a recommendation by the Financial Standards Accounting Board that stock options be listed as expenses, and how to toughen SEC oversight of hedge funds.

"He's a very thoughtful guy," says Stuart Kaswell, a partner in the financial service group at Dechert LLP. Kaswell, a former general counsel for the Securities Industry Association, worked with Cox on the bill limiting shareholder lawsuits. "He understands the importance of securities legislation and legislation on financial markets. He has a lot of experience on the economy on the Hill."


But most observers believe the role will be difficult because he must build on the integrity Donaldson instilled while charting a course for less stifling regulatory oversight of business. Whether he's right for the job remains open to debate, and how he comports himself during the confirmation process should be quite interesting.

Kaswell believes Cox has the right stuff to receive confirmation and navigate any subsequent scrutiny thereafter. "There was a lot of questioning and crazy rhetoric that the bill would slam the door on all future shareholder lawsuits," he says, citing Cox's tough stance in the face of enormous pressure from the House Commerce Committee while preparing his shareholder bill back in 1995. "That proved to be nonsense, and Cox held his ground."

But Cox has been less steely when more personal issues were at stake, and it remains to be seen how he'll react when--and if--things get ugly. While seeking a bench appointment to the U.S. Court of Appeals back in 2001, Cox withdrew his name when it became apparent his confirmation would face opposition from Democrats. Given the recent flood of congressional filibusters surrounding recent presidential nominations, Cox's intestinal fortitude may be put to the test before he even takes office.
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Title Annotation:REGULATION; Christopher Cox
Author:Galuszka, Peter
Publication:Chief Executive (U.S.)
Geographic Code:1USA
Date:Jul 1, 2005
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