Evening star., 1950-03-19
SEC Turnover
Calls for Correction
Writer Says Ex-EmpIoyes
Represent Corporations
By Frank Kent

Any governmental agency whose pr1-
mary purpose is to regulate private en-
terprise and prevent corporate and indi-
vldual abuses ought to so regulate itself
as to be wholly free from comparative
abuSes-or even the suspicion thereof.
The justice of this expectation can hard
ly be disputed.
This being so, il does seem that the
Securities and Exchange Commission,
whose regulatory power is perhaps
greater than that of any other Federal
board. should no longer remain inactive
and indifferent to the charges recurrent-
ly made against it. One of these is that
1t is grossly overmanned. Another is
that more than any other Government
commission its operations are impeded
by and entangled in red tape A third
Is that its turnover in personnel is alb
normally high, often running as much
as Is per cent year.
1t Is true that these allegations are
made by persons over whom the COM
mission has regulatory powers and are
not therefore predisposed in its favor.
But it is also true that, through personal
experience, these persons are in position
better to know the facts than any one
else. However, there is another charge
OF different nature which comes not
from hostile but from friendly sources
and to which there seems no excuse for
commission tolerance This deals with
the manifest impropriety of former en-
ployes-nearly all of them laWyers-Who
leave the commission after year or so
ana Immediately show up on the legal
stan OF public utility corporations and
others who have dealings with the COM
mission.
The appearances before 1t of these
former employees as representatives OF
these corporations and individuals can
hardly be justified by any standard of
public or private morality. Originally
this charge was made by Cyrus s. Eaton
OF Otis & Co.. with whom the SEC has
been conducting a feud for a long time
and who while he may not be regarded
as wholly detached critic, certainly has
a lot OF facts to sustain his contention.
But 1t has been recently repeated by
that ardent liberal columnist, Thomas
L. Stokes, and by the concededly liberal"
Senator Paul Douglas of Illinois, who
vehemently declared after digging into
the subject, that Il am shocked at the
exodus OF people from the Securities and
Exchange Commission who promptly 60
over to the public utilities corporations"
The practice continued Senator
Douglas, "is one Of the greatest sources
of abuse in the whole administrative
system"
There seems considerable foundation
for this statement. Certainly, at tns
moment Washington is fairly well clut-
tered up with these ex-employes Of the
yrhn IN, 1,%i1
before the SEC. The training, the
friendships and the information acquired
while they were serving the SEC give
them a decided advantage in this prac-
tice and make them much more valuable
to the corporations than lawyers who
were not employees. Some of these ex-
employees, 1t is said. command very high
fees indeed. and are really cleaning up."
y
Some members of the commission n
self have admitted the existence Of this
inherently bad practice and agreed that
something should be done about 1t. But
though 1t has been going on for years
and has now reached the proportions
Of q racket. nothing Is done about It.
It is pointed out that the SEC Is one OF
the few Federal commissions which has
no rule barring practice before 1t Of for
mer officials and employees until a speci-
fed period has elapsed. Usually, the
period has been flxed at two or thres
years. Efforts to get the SEC to act along
these lines have been made. but though
the violation Of the proprieties by its
ex-employes is more fragrant than by
any other group it has failed to act.
However. with little more publicity
and q continued show Of interest and
indignation by the outspoken Senator
Douglas and few others, there is reason
to believe the commission will act to
end a state of affairs that good many
persons regard as scandalous. OF course.
the commission ought to act without
being prodded. But If 1t continues to
ignore the facts it can and should be
made to act. 1t is public duty to slow
down this sort Of thing whenever 1t can
be done. Permitted to continue un-
checked and uncriticized, ultimately the
point will be reached where there is not
so much as a trace Of morality left In
the whole public service.