Wednesday, April 8, 2015

Quick Note on an Update: Andrew Bowden Leaving the SEC

Quick Note on an Update:  Andrew Bowden Leaving the SEC

Yesterday the SEC announced that Andrew Bowden, Director of the Office of Compliance Examinations and Inspections, has tendered his resignation.[1]    Mr. Bowden led the first set of SEC examinations of private equity and other alternative managers.  From the public’s perspective, he’s best known for two sets of statements.  In May 2014, Mr. Bowden announced that the SEC had found many instances in which alternative managers were not in full compliance with agency rules or their contractual arrangements with their investors.  More recently, Mr. Bowden was recorded making favorable statements about the efficacy and profitability of private equity.

Critics, including the blogs Naked Capitalism and New Economic Perspectives, called for Mr. Bowden’s resignation after his comments about the efficacy and profitability of PE.  While I thought his comments were inappropriate, I argued that his comments were far from a fireable offense.

We don’t know why Mr. Bowden is leaving the SEC.  According to the SEC’s press release, he will be returning to the private sector.  In addition, Chairwoman White thanked him for his service.  Nonetheless, Naked Capitalism is claiming credit for Mr. Bowden’s departure as if the blog had achieved a significant goal or received a major award:

I would like to thank all of writers and members of the press who called attention to and criticized Bowden’s fawning, which undermined his credibility and that of the SEC, and to Naked Capitalism readers who called and wrote their Congressmen and Mary Jo White. Even with regulatory capture and the revolving door recognized as common if not pervasive, some conduct is still recognized as being outside the pale.[2]   

Even if the blog’s criticism and public response helped to push Mr. Bowden out of the SEC, it is a very hollow victory.  The SEC isn’t going to be a better agency without Mr. Bowden.  In fact, this is a loss for the agency and the public.  While Mr. Bowden’s comments were ill advised, I am confident that his talents were a significant positive in conducting examinations and identifying deficiencies among money managers. Mr. Bowden’s departure will not bring us any closer to effective regulation, which is what our financial system requires.


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