Fund Democracy Insights

Resource Materials

March 2002

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The March 2002 issue of Fund Democracy Insights reviews the rules governing the appointment of SEC Commissioners. These rules present a host of interpretive issues that raise the possibility that the appointment of a number of SEC Commissioners has been unauthorized, and that the tenure of other Commissioners has been improperly cut short. Although the appointment of SEC Commissioners generally has not been contentious, current practices create a real risk that politicians, activists, litigants and even Commissioners may challenge current and future SEC appointments.

The SEC Commissioner Appointment Process:

Ambiguities and Vulnerabilities

Links to resource materials (.pdf files require Adobe Acrobat for viewing):

• Section 2, Article II, U.S. Constitution
• Section 4 of the Securities Exchange Act of 1934
• Reorganization Plan No. 10, Reorganization Act of 1950, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265
  • Section 1: Transfer of Functions to the Chairman
  • Section 2: Performance of Transferred Functions
  • Section 3: Designation of Chairman
• Concise Directory, Securities and Exchange Commission (listing expiration dates of current Commissioners' terms and names, party affiliations and dates of service for all SEC Commissioners)
• President Signs Recess Appointment of Cynthia Glassman, White House Press Release (Jan. 22, 2002)
• President Signs Recess Appointment of Isaac Hunt, White House Press Release (Jan. 22, 2002)
• Tentative Legislative Schedule for the 107th Congress, 1st Session (2001) (setting forth dates for opening and closing of Senate and intersession recesses)
• Tentative Legislative Schedule for the 107th Congress, 2nd Session (2002) (setting forth dates for opening and closing of Senate and intersession recesses)
• Scot Paltrow, Bush Appointments Irk Democrats, Wall Street Journal (Jan. 25, 2002) (discussing democrats criticism of recess appointment of Glassman to Commission and suggesting that the recess appointment of Hunt was intended to blunt such criticism)
• Bush Grants Former Ernst & Young Official Recess Appointment to SEC, NYSSCPA.org Newsbrief (undated) (discussing democrats' reaction to appointment)
• Articles relating to Commission on Civil Rights case:
  • Jerry Seper, Probe of Civil Rights Panel Urged, Washington Times (Dec. 20, 2001) (describing request by Landmark Legal Foundation, a public interest law firm, to Justice Department to review Victoria Wilson's refusal to vacate her office, and discussing Congressional Research Service memorandum on same)
  • Steve Miller, Clinton Appointee to Rule on Civil Rights Panel Terms, Washington Times (Feb. 1, 2002) (discussing hearing on Justice Department suit to remove Victoria Wilson from the Commission on Civil Rights)
  • Neely Tucker, Judge Rejects Bush Pick for Civil Rights Agency, Washington Post (Feb. 5, 2002) (discussing judge's oral ruling rejecting attempt to seat Peter Kirsanow as a Commissioner on the Commission on Civil Rights) (available to subscribers to online news services)

Worth Reading on the Internet

• SEC Chairman Harvey L. Pitt, Remarks at SIA Compliance and Legal Division Seminar (Mar. 11, 2002) (reaffirming belief in private-sector regulation and importance of personal integrity in ensuring institutional compliance)
• Mutual Fund Industry Developments in 2001, Perspective (Feb. 2002) (discussing industry trends during 2001, including impact of 529 plans, ETFs, and separate managed accounts, and concentration of assets among largest fund complexes) (.pdf file)
• Van Wagoner NSAR-B (including auditor letter identifying fund's material weaknesses in internal controls, namely, failure to document value of private placements, and violation of non-fundamental investment restriction limiting investments in illiquid securities to 15% of net assets)
• Letter from Craig S. Tyle, General Counsel, ICI, to SEC Chairman Harvey L. Pitt (Jan. 4, 2002) (requesting that riskless principal transactions not be treated as principal transactions under the affiliated transaction prohibitions of section 17(a) of the Investment Company Act)
• SEC to Propose New Corporate Disclosure Rules, Securities and Exchange Commission (Feb. 13, 2002)(describing proposed disclosure reforms, including accelerated reporting schedules, enhanced disclosure of significant events, required web site posting of Exchange Act filings, and disclosure of critical accounting policies)
• Letter from Paul Roye, Director, Division of Investment Management, SEC, to Craig Tyle, General Counse, Investment Company Institute (Feb. 12, 2002) (responding to ICI's concerns regarding independent legal counsel requirement) (see also ICI summary of SEC letter)

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This page was last updated on March 20, 2002.