[NOTE: This is a news brief of a February 22, 2006, meeting at the Council on Foreign Relations.]
NEW YORK — Four former chairmen of the U.S. Securities and Exchange Commission have welcomed ongoing moves toward greater global convergence on market regulatory standards, saying they are key to the success of U.S. investors.
The four—Richard Breeden, Arthur Levitt, Harvey Pitt, and William Donaldson—represent the four previous chairmen of the U.S. market regulatory body dating back to 1989. At a panel discussion hosted by the Council on Foreign Relations in New York, they largely agreed that convergence on regulatory issues such as accounting standards was important for U.S. investors and U.S. financial markets alike.
Arthur Levitt, who headed the SEC from 1993 to 2001, stressed the move toward convergence on international accounting standards was a "natural, evolutionary process" and does not amount to a sellout of U.S. principles. While not pressing for a single accounting standard, Levitt said that at a time of rapidly globalizing electronic market systems, convergence on standards will help ensure U.S. investors are protected wherever transactions take place. At the same time, some panel members urged caution in response to concerns that an increasing number of companies are choosing to list their shares on stock markets outside the United States to avoid rigorous U.S. listing requirements.
Richard Breeden, SEC chairman 1989-93, said the danger of U.S. exchanges losing companies to foreign markets has been exaggerated. "The U.S. capital market is still the most attractive market in the world and we can keep it that way if it remains attractive to investors," Breeden said. That effort, he said, must involve regulations—such as those required by the 2002 Sarbanes-Oxley legislation—to ensure major corporations issue reliable financial statements.
The most competitive markets will remain those setting the highest standards of disclosure, said Harvey Pitt, the SEC chairman from 2001 to 2003. Pitt said market regulators worldwide are working much more closely together and that a global regulatory system is already increasing and elevating standards.
Saying "globalization is a discipline on all of us," Breeden added that the role of commissions like the SEC is to balance between imposing rules some companies may see as burdensome, with maintaining quality in capital markets.
Panelists also expressed broad concern about politicization of financial markets, saying it must be up to individual investors to decide whether they support companies doing business with unsavory regimes.