Speech by SEC Chairman:
'The 75th Anniversary of the Securities Act'
Remarks to the Association of Securities and Exchange Alumni 16th Annual Dinner
Chairman Christopher Cox
U.S. Securities and Exchange Commission
Ronald Reagan Building and International Trade Center
February 8, 2008
Thank you, Marty [Martha Cochran, ASECA President], for that generous introduction. I, too, wish to join Marty in recognizing the outstanding leaders who are with us here tonight. In addition to all of those whom she just named, there is one important individual I'm pleased to recognize, who is at Marty's table and who is her partner at Arnold & Porter - and that's Jim Turner, my former colleague in the Congress from Texas, who was my Ranking Member when I served as Chairman of the Homeland Security Committee. Jim would have become Chairman when the Democrats won control of the House in 2006, if he had not retired. He is an outstanding leader. Welcome to the SEC family, Jim.
And let me join in welcoming each of you to this 16th Annual ASECA Dinner. These are exciting times in the life of the SEC. This year marks the commencement of what will, in effect, be a two-year celebration of the agency's founding three-quarters of a century ago — since it was the passage of the Securities Act in 1933 exactly 75 years ago this year that firmly established the disclosure model of regulation that has become the agency's hallmark, and that prefigured the creation of the SEC itself.
Anniversaries such as this are important opportunities to appreciate and learn from history — for example, to take comfort in the fact that the original bill giving the SEC's authority to the Post Office didn't actually become law. [Laughter]
Happily, as the SEC's unofficial historian laureate Joel Seligman has put it, "Roosevelt shared [some] doubt that empowering the Post Office to supervise such matters as a uniform system of accounting would be wise." [Laughter]
For an agency that has seen such extraordinary success over so many decades, it is humbling to reflect how little was expected either of it or the statutes it administers when Congress first enacted them. Straight out of the box, the '33 Act was subjected to withering criticism. Business leaders and organizations such as the Investment Bankers Association saw it as dangerously overbroad. Professor Bill Douglas of Yale Law School remained unhappy with even the version of the '33 Act that passed, because in his estimation it did not go nearly far enough. He called it "a 19th century piece of legislation."
The actual creation of the SEC the following year led many to describe the selection of Joseph Kennedy to be its first Chairman as "putting the fox in charge of the henhouse." Or as future SEC Chairman Jerome Frank put it in 1934, it was "like setting a wolf to guard a flock of sheep." (America was more rural in those days, and so the farm animal comparisons were more common.)
And yet the new SEC was in fact a tonic that, among all of the Roosevelt Administration's New Deal agencies, had the most obvious remedial relation to the problems that the nation had suffered. As Amity Schlaes put it in her new history of the Great Depression, The Forgotten Man, the "SEC would turn the stock market from a free-for-all with hazy rules into a more comprehensible game, one in which the small player had a fairer shot."
That fundamental purpose guides all that the SEC does even to this very day. Since I became Chairman, I've worked to ensure that every one of our important initiatives is ultimately focused on protecting and assisting the average investor. This morning at the "SEC Speaks" conference, I outlined over two dozen rulemaking and other initiatives for 2008 — all of which have in common that they are aimed at benefiting the average retail customer whose savings are dependent on healthy, well-functioning markets.
Back in Joseph Kennedy's day, our first SEC Chairman was amazed that "one person in every ten" owned stocks. Today, over half of American households own securities. And when you then consider all of the teachers, government employees, and workers throughout private industry who have pensions, it becomes clear that nearly all taxpayers have a personal interest in fair and honest securities markets.
I'd like to thank ASECA for its outstanding work as you encourage rising generations of securities regulators and securities professionals, and as you honor those whose service has already demonstrated exceptional commitment to the integrity of our markets. I particularly want to thank Cecile Srodes [ASECA Executive Director] for all of her time and effort in supporting these programs. I also want you to know that ASECA provides indispensable support for the Commission. And we will be watching carefully the career paths of all the scholarship winners, because we are always on the lookout for the best and the brightest.
Perhaps with the exception of William O. Douglas himself, there is no individual associated with the SEC whose attainments rank higher or whose star shines brighter than Mary Schapiro, the agency's former Acting Chairman and this year's William O. Douglas Award winner.
It has been my privilege to work with Mary since she was the head of Regulatory Policy and Oversight and Vice Chairman at the NASD, and during the ensuing years when she has been Chairman and CEO of both the NASD and its successor, FINRA. Mary has made her mark not only at the SEC, the NASD, and FINRA, but also as Chairman of the Commodity Futures Trading Commission. And she has been a leader in global capital markets regulation through her high-profile participation in the International Organization of Securities Commissions. It was thanks to Mary's vision and leadership that today's FINRA, the result of the merger of NYSE Regulation and the NASD, exists in its present form.
So Mary, for that and for all that you have done for America's investors and for capital markets the world over, thank you — and congratulations. You are richly deserving of the Douglas Award.
The SEC's mission is enduring, and its place in American life and in the governance of our now global capital markets is permanent — because as Chairman Douglas once said: "Those in power need checks and restraints lest they come to identify the common good for their own tastes and desires, and their continuation in office as essential to the preservation of the nation."
It is precisely so that we remain focused on making markets work for the ordinary investor that this dinner tonight is so important. Your continued support for this organization, and the active participation of such exceptional leaders as Mary Schapiro,
as well as of the outstanding Board of Directors and membership of ASECA, are what enable us to carry on the agency's legacy.
It is ASECA's good fortune that, as the SEC continues to grow — and as the men and women who work at the agency inevitably grow older — we continue to produce alumni. [Laughter] We need each other, and both the markets and investors depend upon our continued collaboration.
So tonight, in addition to sharing each other's friendship, a splendid meal, and the inevitable war stories, let us also rededicate ourselves to the pursuit of the SEC's mission of investor protection, well-functioning markets, and capital formation that works for the benefit of every American. And let us raise our glasses to success in that mission for the next 75 years.
Thank you, and enjoy this evening's program.