Breakfast with Christopher Cox, Chairman of the SEC

Wow, he’s really smart!!!!

I had an opportunity to attend a breakfast at which Christopher Cox, Chairman of the SEC, spoke this morning. While many will say, “So what, you and 200 other people!” it does matter because he came to speak at a function (the breakfast) held by the organization that my mother runs, Town Hall Los Angeles. So connections are important, I get to meet and be introduced, etc. It’s a very cool thing :-)! And the event was spectacular. Of course I’m biased, but having attended a lot of these types of events, this one was fabulous. Everything went well and if there was a problem (I didn’t notice any) it was handled and not seen. Even the food was edible, which is a rarity at these types of gatherings!

What can I say about Chairman Cox… again, he’s a really smart guy! Have you ever been to a meeting where you sit around hear people talk and then the person that’s been quiet opens their mouth and speaks… and says what others have been trying to say but does it in such an eloquent and direct way that everyone not only understands it, but takes it to heart? That is how Chairman Cox spoke.

He came to speak, and was a bit late because he decided to give a speech that actually had market implications, not just to give a canned speech (in my family, many of us have had to give a lot of speeches, so when asked, “What did you talk about this time?” and it’s a canned speech we’ve given before we say something like “Oh, I gave speech 112-B.”) So why was he late? He had to release the speech publicly prior to giving it and had trouble doing so. It was explained that he had some problem with his Clipper Chip and the computer. In the end, he had to go and use another computer and was on his hands and knees under the desk fixing it so he could release the speech and then give it. Very funny to imagine the Chairman of the SEC under a desk fixing a computer, but it happened :-)!

What did he speak about… Municipal Securities. I’m sure you will hear a lot about it in the news later today/tomorrow. As I said, it had market implications (according to him and his “handlers”). He started by explaining a bit about what municipal securities are, even though it was a room filled with lawyers and accountants from all the big firms, etc., but it was good for us lay people. He explained that they aren’t just bonds and securities offered by governments for roads and the like, but also those bonds issued by said municipalities for funding things like stadiums, convention centers, etc. He also threw out some statistics on how large the municipal securities market was. Let’s just say it’s huge, larger than the GDP of China, about $2.4 trillion. Wow, that’s a really big number!

Net, net he talked about how the rules for municipal securities were different from corporate offerings. While that was all well and good when Securities Laws were enacted over 70 years ago and the municipal securities market was in a nascent state, these days it’s huge and has serious implications for investors (he gave figures here too, something that something like 25% of all muni-securities are held by individuals at small dollar values and another huge chunk held indirectly by individual through mutual funds, etc.). Chairman Cox said that he was fighting for the small guy, the individual investor, and even showed his humor by referencing local baseball by saying, the SEC goes after the Dodgers, but cheers for the Angels ;-)! Basically, Chairman Cox eluded to the need for reform in securities law to be able to act before there is a “meltdown” such as with New York City’s bankruptcy in the 70’s, Orange County California’s debacle of the 90’s and what San Diego went through recently. His other funny analogy was CalTrans (California Transportation) and that they put up signs that say “Bridge Out Ahead” instead of just having an ambulance at the bottom of the ravine, waiting.

So again, I say a very smart man that I really enjoyed hearing speak. He really appears to have the individual investor at heart, not just the large or institutional investors. He understands that the aggregate of small investors is a large sum and they need to be protected and be able to understand the documents. Hence the desire to make changes in such a huge securities market that has opened up to smaller/individual investors these days. So look for changes to come in the laws regarding filings and disclosures in the municipal securities market!