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Two years ago Securities and Exchange Commission Chairman Arthur Levitt stood up before the most powerful trade association for accountants and gave the members a warning: Maintain your independence and integrity, or I will make sure you do. Just last month, Levitt made good on his promise when the commission passed auditor independence rules that limit the ability of auditing firms to monitor a client’s books and then sell them extra consulting services on the side. The rules are more lenient than Levitt originally wanted. But they are restrictions, and Levitt got them passed. “I think even those people who disagree with Levitt’s program have to agree he has been a very effective chairman in accomplishing what he has set out to do,” says Paul Huey-Burns, a partner at the Washington, D.C. office of Morgan, Lewis & Bockius who worked at the SEC for 12 years. Levitt has been chairman for seven years, making him the agency’s longest-serving leader. But Levitt’s reign will come to an end soon. He announced Wednesday that he will resign from his position by the middle of February 2001. He will leave without completing his five-year term, which expires in 2003. “This is a day I knew would come but long have dreaded,” Levitt said, fighting back tears. “For the last eight years, I’ve had my dream job.” Although Levitt has put effort into making the agency more effective, he will be remembered more for what he did to change the industry. From his first days at the commission, when he pushed through regulations cracking down on pay-to-play practices in the municipal securities market and requiring plain English in investment literature, Levitt has been focused on cleaning up the various segments of the industry and making it easier and safer for individual investors. Levitt’s announcement was not a surprise. Speculation has run high for quite some time that Levitt would leave his post as chairman after the presidential transition. So, for what was his final year, Levitt seemed especially focused on fulfilling his agenda. The auditor independence rule and the selective disclosure regulation — which forces firms to release new data publicly, rather than to selected members of the investment community — are the most visible aspects of Levitt’s pro-individual investor agenda this year. “I think this year was the year of the small investor,” says Brian Lane, a Gibson, Dunn & Crutcher partner who until January was director of the SEC’s Division of Corporation Finance. “These are what some would call populist efforts.” Both regulations were strongly opposed by powerful forces in the investment arena. And on both regulations, Levitt compromised with the communities he wanted to crack down on, loosening up the language, easing up on the outright bans. Both regulations passed — a feat that shows how politically astute Levitt is, according to observers. “He is extremely skillful,” says Stuart Kaswell, general counsel of the Securities Industry Association. “He has been extraordinarily effective.” But it hasn’t been just the big regulations where Levitt’s touch is evident. Even on smaller matters, Levitt has been pushing for the lone investor. A new regulation passed this year requires investment advisers to file disclosures and forms electronically, so that investors will be able to access a giant electronic database to research financial advisers. Part of Levitt’s success, say many in the industry, is his ability to use both politics and public relations to get what he wants. Levitt has support from both sides of the aisle in Congress. And when Levitt makes a proposal, it’s not long before the editorial pages of the nation’s biggest newspapers step in behind him. That doesn’t mean that business is ecstatic about the regulations he has championed. They see where he compromised — and wish he had compromised a little more. “We are scratching our heads about this one,” says David Tittsworth, executive director of the Investment Council Association, referring to the selective disclosure regulation. “Did this go too far? Does this increase market volatility? Will it reduce the amount of information that investors get? I think the jury is still out.” If Levitt has had one failing this year, it’s been with issues dealing with the SEC itself. Levitt battled to increase salaries for agency employees, trying to get a one-time pay bump or to get salaries set above the standard government pay scale to keep talent from crossing over to the private sector. Although Congress supported him on the small pay bump, he was rebuffed on the salary-hike effort. And he lost a battle on his own turf this summer, when both the SEC’s professional and support staff voted to unionize. It was not a pretty fight. The unionizers complained about management’s tactics during the fight. The union has now promised to get what Levitt didn’t: higher salaries and better benefits for employees. But Levitt hasn’t been tarnished in the industry’s eyes. “I don’t think its fair to criticize a guy for not getting everything done that was on his agenda,” says Kaswell. “He was enormously successful.” The Associated Press contributed to this report.

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