COLUMBUS, Ohio - Attorneys general Marc Dann of Ohio and Mark Shurtleff of Utah say the Securities and Exchange Commission has not been protecting investors and want to see more Congressional action.
The two co-authored a letter sent Friday to Reps. Barney Frank (D-Mass.) and Spencer Bachus (R-Ala.) of the House Committee on Financial Services and Sens. Christopher Dodd (D-Conn.) and Richard Shelby (R-Ala.) of the Senate Committee on Banking, Housing and Urban Affairs.
Dann and Shurtleff applauded the House committee's decision to hold an oversight hearing and urged the Senate to do the same.
"We are only five years removed from the scandals of Enron and Worldcom and yet many have forgotten the lessons those cases have taught," they wrote.
"There have been multiple reports and publications in the press recently, including the 'Commission on the Regulation of U.S. Capital Markets in the 21st Century Report' released by the United States Chamber of Commerce in March, that propose regulatory and legislative reforms that would effect sweeping changes to basic investor protections existing in the United States since 1934.
"While the SEC has not endorsed all of those proposals (and SEC Chairman Christopher Cox has thus far rejected the reports' calls to affirmatively amend the Sarbanes-Oxley Act), the SEC's actions-and inactions-regarding the way that law and other securities laws are implemented is a cause for alarm."
Among those alarming actions, according to Dann and Shurtleff, are:
-The SEC's submission of a brief in the U.S. Supreme Court case Tellabs, Inc. v. Makor Issues & Rights Ltd advancing an "extremely narrow interpretation of the securities laws";
-The SEC's opposition to the pro-investor position taken by the Second Circuit Court of Appeals in the case of American Federation of State, County and Municipal Employees, Employees Pension Plan v. American International Group, Inc.;
-Rather than scrutinizing investors' claims of recent backdating scandals, SEC commissioners issued remarks minimizing this clearly fraudulent practice ; and
-The SEC's consideration of rules that would allow companies to head off lawsuits by investors by changing its bylaws to mandate arbitration.
Dann and Shurtleff also wrote that it was defrauded investors who fought and won to protect investors' rights in recent corporate scandals -- "Private lawsuits are an important complement to the regulatory system," they wrote.