Tighten up patchwork of SEC laws, Congress urged

* A securities fraud has taken place. Congressmen hold hearings, pound tables, and ask the Securities and Exchange Commission (SEC) if it was napping. Instead of "headhunting," says the former chairman of the SEC, Harold M. Williams, Congress needs to provide better and more consistent oversight of the SEC and to write better securities legislation. He laments: "There's no reward for good congressional oversight unless you can get some newspaper coverage out of it."

* Securities legislation has been a patchwork process -- evolving since 1933. Congress should pass the proposed Federal Securities securities lawyers to codify and change the securities laws, putting all the acts together Code, which is a 12-year effort by the SEC and securities lawyers to codify and change the securities laws, putting all the acts together and updating them.

* Burned by an unscrupulous "wheeler dealr," individuals cannot sue for violations of the securities laws. They should be able to.

These are a few recommendations that Mr. Williams made in a recent interview in his office. Mr. Williams, who will become the president and chief operating officer of the J. Paul Getty Museum, in Malibu, Calif, added that he didn't feel as if he were leaving the SEC with anything "unaddressed that I feel ought to be addressed." Mr. Williams is leaving the SEC after four years of a five-year term , and had openly expressed his desire to remain at the agency through his term.

Mr. Williams also stated that he felt his most important "short term" accomplishment in his four years was to encourage the Financial Accounting Standards Board (FASB), a self-regulatory and rulemaking body for accountants, to adopt a controversial proposal requiring corporations to disclose the impact of inflation on their earnings statements.

"I think the disclosures, particularly, in the aggregate, are terribly important and very meaningful," he says, adding. "They explain why some of our industries are in trouble and that there are many companies and industries that are paying dividends out of capital and not out of income -- thus they are in the process of liquidation, often unbeknownst to directors and management and shareholders." Mr. Williams believes the inflation accounting statistics also reveal why "there isn't enough money being retained by American business to make the kind of capital investment that business needs to make."

In his recommendations, Mr. Williams also suggested that the SEC needs to have a remedy for violations of securities laws that falls between a formal proceeding calling for injunctive relief and an administrative proceeding. In the former instance, the SEC goes to a judge and asks for an injunction against further violations of the securities code. In the latter instance, it seeks an agreement from an individual not to violate the securities laws in the future. This agreement, however, is not an admission of guilt.

If an individual is convicted of securities fraud, he points out, "it's very serious." The middle level, he says, would be reserved "for when the level of conduct is too serious to ignore but not serious enough to merit injunctive action."

As far as congressional oversight is concerned, Mr. Williams says, "We've had some good oversight. but typically it isn't." More effective oversight, he declares, will not only say, "'Why aren't you doing more?' but will also say 'Why aren't you doing less?' or 'Aren't there ways you could do it better?'"

Mr. Williams believes Congress ought to look at the "sloopy" laws and the poor oversight that follows them.

Even though the former SEC chief believes that the Federal Securities Code legislation should be passed, he doesn't believe it has a high enough priority with Congress to be passed in its entirety. Thus, he urges Congress to consider specific issues.

High on this list, he says, is the right for individuals to sue other individuals for violations of the securities laws. At the moment, only the commission can sue for such violations. Supreme Courts have said in the past they believed Congress was implying that individuals have the right to sue as well.

However, the current court, notes Mr. Williams, says "Congress knows how to speak, and unless it speaks, we're not going to imply." Thus, he concludes, there is a need for such legislation to "put the law on the books."

Mr. Williams says he also learned while he was at the SEC that "we really need to professionalize the regulatory corps."

Specifically, he continues, "Everyone comes in and invents his onw wheel. . . . In part because everyone tends to be lawyers, they go at it in the proscriptive, 'Thou shalt -- thou shalt not' mode. . . . I think that's part of the problem." In particularly, he would like to eliminate "the oppressiveness of regulation."