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Former SEC GC David Becker Some people have argued that the Securities and Exchange Commission could have done more to prevent the current corporate scandals, but David Becker isn’t one of them. The commission’s former general counsel argues that “whatever the SEC hasn’t done, it hasn’t done because it’s been doing other things.” Becker joined the SEC as deputy general counsel in 1998 after toiling as a partner at Wilmer Cutler & Pickering. He became the commisson’s GC in January 2000 and stayed in the post until this past spring, when he was succeeded by Giovanni Prezioso, a partner at Cleary, Gottlieb, Steen & Hamilton. In June Becker himself became a partner at Cleary, Gottlieb, where he works with clients on corporate governance and accounting issues, as well as other regulatory issues involving the SEC. He recently sat down for an interview with Shanon D. Murray of The Daily Deal. Q: Robert Herdman, the SEC’s chief accountant, said that the commission should have new auditor independence rules finalized by this summer. Similar rules were adopted in 2000, during the tenure of SEC chairman Arthur Levittwhile you were general counselbut they were less stringent. Could stronger rules have helped prevent the current accounting scandals? Do you have any regrets? A: I have zero regrets. I spent a lot of time on those rules, and at the time, I felt it was the most demanding thing professionally I had ever done. Given what we knew then, and given the circumstances, our [rules were] a major accomplishment. The rules went beyond the consensus at the time as to what was needed. The consensus has since moved, and I would hope that either Congress or the commission moves along with the consensus. But in terms of where we were at the time and the difficulty of the enterprise, I thought the rules really were a monumental achievement. Q: What are your thoughts on the increasing criminalization of securities fraud, and how are your corporate clients responding to the trend? A: I don’t think anyone is hoping that every time they come under SEC scrutiny, that there is criminal scrutiny as well. But I think there is a strong view that people who seriously misbehave should be seriously punished. There are times when the criminal process can be well suited to dealing with securities fraud issues, when there are instances of plain, clear violations of the law, and there is significant personal gain and significant harm to investors. And sometimes, there are instances where the actors simply don’t have a sufficiently nuanced understanding of the markets and the securities laws. I don’t have any problems with criminal prosecution, but there are a lot of complex accounting or market structure-related cases that don’t readily lend themselves to the type of distillation that is necessary for criminal prosecution, where you have to convince a jury of 12 people that the actor is guilty beyond a reasonable doubt. Q: Even while you were still at the SEC, critics were saying Harvey Pitt wasn’t the right man to head the commission, and they questioned whether the SEC was prepared to deal with the oncoming financial crisis. How did that make you feel as general counsel? A: Well, under chairman Levitt there was occasional public criticism of the commission, mostly for going too far, whatever that means. But that was when the stock market was zooming up with unprecedented speed. A dramatically falling market changes everything. And the principal thing that changes is the extent to which the public and the politicians even notice what the SEC is doing. As the market has gone down, and as the politicians have gotten more involved, there is a tendency to personalize and say who is doing a bad job. There is a tendency sometimes for people to fall over themselves expressing outrage [over] things they were quite comfortable with some months earlier. There is a certain inevitability to that type of criticism. But I’ll tell you, it is very hurtful to the agency to hear that [it was] somehow insufficiently vigilant. It’s demoralizing to the people who work very hard with an extraordinary amount of dedication and a sense of mission. I can tell you that whatever the SEC hasn’t done, it hasn’t done because it’s been doing other things. The agency is dreadfully understaffed and underfunded.

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