He has allowed the call for reform to diminish as he has helped those who wish to misrepresent accounting truth in their financial reports.  He ignored issues surrounding special purpose entities and derivatives.  He did not monitor the activities of the banking industry, much less attempt to rein in the self-serving actions of bank managers.  And he does not bother to examine their role in the financial crisis.

The following was written by a knowledgeable securities analyst, who wishes to remain anonymous. While it is a hoax, this fictional news release captures the essence of Mr. Cox’s tenure at the SEC. May the next SEC chair be less pro-manager.  Maybe, just maybe, the next SEC could even embrace the presumed philosophy of the SEC and actually "protect investors."

SEC Expands Sweeping Investigation of Market Manipulation and Record Enforcement Actions
Measure Will Require Statements Under Oath by Market Participants
FOR IMMEDIATE RELEASE
2008-214

We continue to pursue our pro-public company and pro-banking without oversight agenda in response to the current financial crisis. As you know, market confidence—whether or not misplaced—is crucial to our goal of making stock prices go up at all times, even when economic trends do not support these increases. Therefore, we are going to diligently pursue those that alerted the public to recent scandals at publicly traded financial firms.

Some have suggested that lying, cheating, and bleeding shareholders dry is the root cause of the current problems besetting our publicly traded banks and insurance companies. However, this is not the case. Scandal and malfeasance are important components of any free market. It is not the scandal that caused prices to go down. It was the deliberate attempts of hedge funds, analysts, and journalists who have revealed the extent of these scandals to the public who must be held accountable for the financial meltdown.

We have also achieved another record year in actions brought by the Commission. Our approach has been to avoid those that might pose a threat to market confidence, while also focusing on as many lower level individuals as possible. The latter set of individuals has limited means for legal defense, making a quick settlement much more likely. These cases are also extremely important to our efforts to purge negative information (i.e.,“false rumors”) from the marketplace by identifying as many scapegoats as possible, as quickly as possible. For example, in a recent case (SEC vs. Peter Pauper), we achieved a $593 settlement from a brokerage firm intern. This is the largest ever settlement attained in a case involving an intern. In this key case, Mr. Pauper, age 20, illegally earned $293 in profits after spreading a false rumor regarding the shares of Creative Obfuscation Networks (ticker CON). On or about October 1, 2008, Mr. Pauper received a telephone call from Mr. Cheatem N. Steele, the CEO of the subject company (CON). Mr. Steele instructed Mr. Pauper to have a broker “sell 10 million CON shares immediately, at whatever price is available.” On October 5, 2008, after Mr. Steele’s trade had been publicly disclosed on a Form 4, Pauper examined the most recent 10Q filed by CON management. Purportedly based on that review, Mr. Pauper then shorted 100 shares of CON common stock. Later that afternoon, Mr. Pauper called a fraternity brother, Juan Penny, age 19, and asserted that “CON’s fundamentals are terrible… this is a screaming short.” On October 6, Mr. Penny also shorted 100 shares of CON. On October 11, 2008, CON announced that a pending acquisition by rival Big Networks Inc (ticker BIG) had been cancelled. During a 3-day deposition, Mr. Pauper admitted that “he had failed to realize CON’s declining fundamentals could threaten the pending merger” and that his assertion that “the fundamentals made CON a screaming short” was, by itself, not substantiated by the ex-post facts. Mr. Pauper therefore agreed to disgorge his $293 profit and pay a $300 penalty to settle the charge of making false rumors. Mr. Steele was awarded $50,000 for his role in uncovering Pauper’s scheme. The Commission is still pursuing its case against Mr. Penny.

Relevant SEC documents:
SEC Expands Sweeping Investigation of Market Manipulation (September 19, 2008) http://www.sec.gov/news/press/2008/2008-214.htm 

Agency Brings Second-Highest Number of Actions Ever; Significant Increase in Insider Trading and Market Manipulation Cases (October 22, 2008) http://www.sec.gov/news/press/2008/2008-254.htm

This essay reflects the opinion of the author and not necessarily the opinion of The Pennsylvania State University.

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J. EDWARD KETZ is accounting professor at The Pennsylvania State University. Dr. Ketz's teaching and research interests focus on financial accounting, accounting information systems, and accounting ethics. He is the author of Hidden Financial Risk, which explores the causes of recent accounting scandals. He also has edited Accounting Ethics, a four-volume set that explores ethical thought in accounting since the Great Depression and across several countries. He is the co-author of a monograph, Fair Value Measurements: Valuation Principles and Auditing Techniques (with Mark Zyla, Managing Director, Acuitas, Inc.) to be published by BNA.