And Then There were Three

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New York – The latest SEC commissioner to indicate that they are leaving the Commission is Annette Nazareth. The resignation brings the number of Commissioners to three on the 5 person Board. Ms. Nazareth’s term was up in June, and while commissioners may continue to serve for up to 18 months after their term expires, Ms. Nazareth has informed President Bush that she is does not wish to be renominated for another term in office. Of interest is that Annette Nazareth is set to speak at the Securities Trading Association tomorrow, though we expect she will not address the resignation.

Given the potential political impact of the SEC, only three of the commissioners may be of the same party at any time. After accounting for the Nazareth resignation, the SEC will be governed by 3 Republicans, Paul Atkins, Christopher Cox and Kathleen Casey. Should Bush decide to replace Ms. Nazareth, he would need to find a Democrat to serve.

What is more likely than a democratic nomination, though, is no nomination at all, leaving the SEC under-manned, but under Republican control. This is not without precedent. President Clinton allowed the board to dwindle down to just two democrats during his term as President.

Christopher Cox’s tenure has been characterized as one being ruled by calm consensus. The commission has ruled unanimously on most issues that were taken to a vote. Under the surface, however, there have apparently been some substantial disagreements. One such disagreement—and the probably cause of Ms. Nazareth’s decision—is a pending decision as to whether shareholders can nominate their own candidates for the Board of company (proxy access).  

Some feel that it is somewhat exclusive to give management the sole right to table Board members. On the other hand, in the world of growing shareholder concentration and activism, there is also a massive conflict of interest in approving proxy access.

Ms. Nazareth has served on the Board of the SEC over nine years. She did not indicate the reason for her decision.

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