SEC Chairman to Resign

SEC Chairman Arthur Levitt will resign early next year. In this article, we look back at his career as an advocate for the individual investor and voice the hope that his replacement will continue to give Fools a voice that is heard as clearly as that of Wall Street money managers.

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By Jay Perlman
December 21, 2000

Securities and Exchange Commission (SEC) Chairman Arthur Levitt this week announced he would step down in mid-February after serving almost eight years, the longest tenure of any SEC chairman. If one sentence could sum up Levitt's term at the helm, it would certainly be: "Individual investors win!"

During his tenure, Chairman Levitt prided himself on being an advocate for the individual investor. He pushed the SEC to pursue initiatives and enact rules that would level the playing field, providing the soccer mom the same investment opportunities and the same quality of information as the analysts and institutional investors traditionally considered an "upper caste."

"The rise of the individual investor in the last decade is one of the most powerful and striking developments in the history of our capital markets," Levitt said in a statement to SEC employees. "While technology and competition are two reasons for the emergence of the retail investor, one, in my mind, is foundational: public confidence."

Without trying to make this article sound like an episode of This Is Your Life, let's take a look at some of the SEC's accomplishments during the "Levitt Years" and see how they affected individual investors.

As the Internet began to revolutionize the financial world by providing continuous access to market information and market participants, investing began to move increasingly toward a "do it yourself" approach.  As more investors migrated toward online investing, Levitt began emphasizing the importance of investor education, establishing an Office of Investor Education and Assistance and holding more than 40 "town hall" meetings across the U.S. to answer individual investors' questions and listen to their concerns.

Under Levitt's guidance, prospectuses were required to be written in "plain English," rather than legalese or other jargon, so investors could understand the nuts and bolts of investment opportunities and make independent, informed decisions. 

Yet even as the Internet continued to transform the way the investing world worked, there were still instances when the big and powerful players received preferential treatment over individual investors. Levitt led the SEC's efforts to remedy this disparity, particularly over the past year. 

This summer the SEC enacted Regulation FD, which ensures that individual investors get access to the same corporate information -- and, most importantly, at the same time -- as analysts and institutional investors. This regulation came into being after a lengthy public comment period during which thousands of investors, spurred by a number of high-profile cases in which well-known companies leaked key information to analysts before making it publicly known, contacted the commission to voice their support.

More recently, the SEC passed the Auditor Independence Rules. These rules sought to protect the integrity of financial reporting by providing investors with information about the relationships between auditors and corporate clients -- relationships like consulting deals that have the potential to impact an auditor's duty to render an independent opinion about a client's financial statements.

For obvious reasons, these initiatives were not very popular among many in the Wall Street establishment. Levitt, however, believed the individual investor was just as important as the world's big money players. He believed that in order to protect the integrity of the U.S. capital markets, there had to be a level playing field, and was able to turn those principles into action. For that, the actions of Levitt and the SEC should be applauded.

The SEC has made significant progress on the establishment of equal opportunity for all investors, but is the job finished? No. Earlier this month, the SEC said it would consider rules designed to provide investors with better disclosure about mutual funds. But without Levitt to continue the fight for individual investors, the question "What will happen next?" naturally arises, particularly with a new administration moving into Washington. 

It's our hope that the SEC and its next chairman will continue to work for the individual investor. At its core, this is not a political issue -- your political persuasion couldn't matter less in this case. The Motley Fool has always championed the belief that the best person to manage your money is you. To effectively manage your own money you need accurate, reliable, and timely information with which to do the "homework" necessary to make informed decisions.