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The message from the Securities and Exchange Commission at the annual SEC Speaks conference last week was clear: The agency is seeking safe harbor from the stormy seas of rulemaking until it gets another permanent captain at the helm. Under the leadership of former chairman Arthur Levitt, the SEC had been unusually activist, issuing groundbreaking rules in the areas of financial disclosure, auditor independence and plain English, on top of myriad smaller initiatives. Laura S. Unger, who was appointed interim chairwoman by President George W. Bush after Mr. Levitt left the SEC last month, presented a far more modest agenda. Ms. Unger’s unassuming goals, none of which encompassed rulemaking, plainly reflect the transitory state of the agency’s leadership, which limits what she can expect to accomplish. Two of the five commission seats are vacant, including the chairman’s. And with her term expiring in June, Ms. Unger herself will probably move on before the year’s end. Chairwoman Unger’s most noteworthy remark likewise came as no surprise. She announced that “in deference to the White House,” during her tenure the agency would be abiding by the “Card memo,” the regulatory moratorium President Bush ordered on his first day in office. The Card memo prohibits agencies from sending proposed or final regulations to the Federal Register until they are renewed or approved by the new agency head. Regulations sent to the Federal Register but not yet published will be withdrawn for review and approval, and those published but not yet effective will be postponed for 60 days. As an independent agency, the SEC was not required to comply with President Bush’s order and Mr. Levitt had declined to do so. But Chairwoman Unger’s announcement means that no regulatory initiatives will take place until a new SEC chairman is named and approved, which some insiders conjecture may not happen for several months. Names being floated for the job include Stanford Law School professor and former SEC commissioner Joseph Grundfest; Representative Christopher Cox, R-Calif.; and James Doty, a partner at the Washington, D.C., firm Baker Botts LLP and former SEC General Counsel. In lieu of rulemaking, Ms. Unger said the agency will focus on interpretive guidelines and “no action” letters. Ms. Unger also said she is pushing to achieve “pay parity” for SEC staffers, moving the agency into the same salary range as other financial services regulatory agencies such as the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. The bank regulators at those agencies got themselves off the government pay scale in 1989. The SEC is facing a “huge staffing crisis,” Ms. Unger said. She pointed out that the agency’s turnover rate for its approximately 1,200 lawyers was nearly 14 percent, or double that of the other agencies, mainly because of “disparate salaries.” Ms. Unger said that other financial regulators get paid from 24 to 39 percent more than the SEC. The salary gap between the SEC, which pays a starting salary of about $43,000, and the private sector — which pays beginning attorneys at large firms $125,000 or more — is even greater. With pay parity, Ms. Unger has picked up on a campaign that former Chairman Levitt embarked on last March. At that time, Senate Banking Committee chairman Phil Gramm, D-Texas, and Senator Charles Schumer, D-N.Y., sponsored a bill to increase SEC salaries, as part of a larger initiative to cut agency fees on transactions and new stock issues. The fees, originally earmarked to fund the SEC, have swelled far beyond the actual cost of running the agency: $2 billion is expected to be collected this year, compared with the SEC’s $422 million budget. The Senate Banking Committee finally approved the bill just last week. On the House side, the capital markets subcommittee of the newly created Financial Services Committee is holding a hearing on SEC fees this week. Committee Chairman Michael Oxley, R-Ohio, has stated that he supports the measure to reduce fees, although his bill “may or may not” include a provision to increase SEC salaries, at least initially. The third part of Chairwoman Unger’s three-tiered agenda is a series of “roundtables” over the next couple of months to gather information on issues of SEC concern. Ms. Unger said that the roundtables, which will be open to the public, will include global market issues, on-line financial portals and Regulation FD, the controversial SEC rule enacted last November that forbids companies from disclosing financial information on a preferential basis. The SEC Speaks conference, which has been held annually since 1972, is the Practising Law Institute’s second most popular program, attracting about 1,000 attendees. Participants are SEC employees or alumni. PLI’s largest program, the Annual Institute on Securities Regulation, which is held in New York City each November, draws approximately 1,500 people.
Securities Regulation and the Internet. Archived Program. Commissioner Laura S. Unger, acting SEC chairwoman, was a panelist on this upcoming seminar.

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