Editor’s Letter : Donaldson’s SEC: No Bark, No Bite

Much has been said about the failure of the Securities and Exchange Commissionand its chairman William Donaldson in particularto effectively regulate the US financial services industry. Indeed, the misdeeds of some in the industry that have come to light over the past few years have been shockingin some cases breathtakingwhile the SECs actions and responses have been, to say the least, muted. From corporate accounting scandals to IPO chicanery and mutual fund malfeasance the SEC seems to have been without a clue until it was way too late. Despite changes at the top and bigger budgets theres still no indication that its on top of the situation.

That might be where the criticism ended were it not for one small detail: up the road in New York City Eliot Spitzer, the New York Attorney General, is busily showing the world how a real financial watchdog should operate. He is tirelessly rooting out misbehavior and making sure those responsible are punished for it. It is Spitzers tenacity and determination that have brought the mutual funds industry into the spotlight, for example.

The contrast between Spitzer and Donaldson could not be starker.While Spitzers no-holds-barred attitude brings to mind the classic barroom brawler Donaldsons approach is more evocative of a gentlemens club, where a misbehaving member might be discreetly ticked off by the club secretary and then nothing more said.

Critics suggest that Spitzers ferocious approach is driven by his own political ambitions.And whats wrong with that? Perhaps if Donaldson had his eye on a higher office he would be a more effective regulator. Brought in earlier this year to help improve the SECs tarnished image, Donaldson claims that he is dedicated to holding accountable all those who have violated the public trust.With the publics trust in the SEC in tatters the most pertinent question is now whether Donaldson will hold himself accountable. He certainly should.

Dan Keeler