The Honorable Barney Frank rightfully give rise to a suggestion of improper influence, but also bars contact even where the potential for questionable influence was limited or non-existent. The Commission also criticized the Act for its failure to distinguish between private appearances involving nonpublic communications -- where the public might plausibly suspect improper influence and public contacts with the agency, where this risk is highly attenuated. 2/ Accordingly, the Commission proposed the following amendment: Subsection (c) of this section shall not apply to any This provision would provide for public accountability of the agency contacts of former agency employees and a check against abusive communications without unfairly depriving former employees of the right to pursue their careers. C. Combined approach Finally, as I mentioned at the outset, it is possible to meld both these suggestions to provide a bar applicable to those persons designated by the Office of Government Ethics as occupying positions uniquely subject to influencing former colleagues and a disclosure requirement for others. Such a scheme would permit Congress to extend the reach of Section 207 (c) to the GS-16/1 level without deterring recruitment in all covered positions, regardless of the actual duties and responsibilities performed. The Commission's ability to maintain its reputation as a forceful and informed administrator of the federal securities laws depends on its ability to continue to attract the talented 2/ This agency administers the federal securities knowledgeable investment decisions, also acts as a The Honorable Barney Frank and highly motivated staff which has been an agency hallmark over the past 54 years. I am deeply concerned that S. 237 would impair that ability. Because of the great importance I attach to this matter, my staff and I would be pleased to meet with you or your staff to discuss this legislation and the alternatives I have proposed. Sincerely, David S. Ruder David S. Ruder CC: The Honorable John D. Dingell The Honorable Matthew J. Rinaldo S. 237, the Integrity in Post Employment Act, currently under consideration by your Subcommittee, is intended to prevent former high-level federal officials from improperly influencing their ex-colleagues who remain in government. Proposed Section 207 (c) of the bill would extend to persons in pay grades beginning at the basic level of GS-16 the existing prohibition which bars senior government officials from appearing before their former agencies for a period of one year after they leave office, even as to wholly new matters. In my view, this proposal sweeps too broadly. The enactment of such legislation would seriously hamper the Securities and Exchange Commission's ability to recruit and retain the highly trained personnel necessary for the effective enforcement and administration of the federal securities laws. This letter discusses the reasons that S. 237 would handicap the Commission in its ability to discharge its responsibilities. In addition, I have set forth three alternatives to Section 207 (c) of the bill: (1) (2) An independent entity, such as the Office of In the case of the independent agencies, a The Honorable Peter Rodino (3) Alternatives (1) and (2) could be combined. These alternatives seek to balance the actual and perceived potential for former senior employees to exercise undue influence over their former colleagues against the injury to this agency in recruiting and retaining competent professionals. The Commission's Experience The Commission is certainly not an exception to the general proposition that the highest-ranking officials, those who set policy and enjoy public visibility, usually have little difficulty in continuing their careers after leaving government. Thus, the existing one-year ban on senior official's appearing before the agency, although undoubtedly an impairment to future employment, does not significantly deter aspirants to the most senior Commission positions. Below the Commissioner and Division Director level, however, while the degree of influence diminishes, the impact of postemployment restrictions becomes more acute. S. 237 is premised on the assumption that, above the basic rate of pay for GS-16, influence is sufficiently great as to demand a per se prohibition against contact with the agency for one year. I believe that, while the additional employees to which S. 237 would apply may have some influence over their former colleagues, they will also encounter significantly greater obstacles to obtaining postgovernment employment if the one-year restriction is imposed than do those persons now subject to this bar. As a result, the Commission's ability to recruit will be seriously hampered. that, in turn, will impair the Commission's ability to discharge its responsibilities. - And The free flow of individuals particularly lawyers and accountants between the private sector and the Commission has proven extremely beneficial to the agency and to the public. Notwithstanding its comparatively low pay scale, the Commission is able to attract top graduates and capable younger professionals because it offers them an opportunity to develop a specialized expertise in law, accounting, or finance for which there is a demand in private employment. The Commission also recruits individuals with securities law, public accounting, and finance experience for mid-level and supervisory positions. The Honorable Peter Rodino Page 3 These seasoned professionals bring important perspec- tives, drawn from their outside experience and from their knowledge of current issues affecting industries regulated by the Commission, to their Commission responsibilities. Because of the nature of the federal securities laws, it is difficult to pursue a legal career after government service without regular contact with the Commission. The filing of registration statements, periodic reports, applications for exemptive relief, and requests for interpretive advice is the essence of a securities law office practice. Similarly, an employee precluded from any contact with the Commission for one year would have difficulty conducting a securities law litigation practice, since Commission litigation is a major component of such a practice. A bar against contacting the agency would, for example, prevent such a litigator from submitting the traditional brief (a "Wells submission") to the agency urging, for reasons stated in that brief, that the lawyer's client not be sued, or from making an offer of settlement if the client is sued. Government post-employment restrictions therefore adversely affect Commission employees by discouraging potential employers in the securities field from hiring them and by limiting their ability to perform meaningful services during the period of the restrictions. That the Commission may be, for some, a phase of their professional life of limited duration does not impair the agency's effectiveness. On the contrary, persons who have included service at the Commission as part of their career subsequently join a large cadre of professionals characterized by a thorough understanding of the federal securities laws, a respect for the purposes of those laws, and a loyalty to the agency that administers them. Both the Commission and the public benefit from the roles these persons play in the administration of the federal securities laws, both while in government and after leaving the Commission. Currently, the five SEC Commissioners and approximately ten senior employees are subject to the one-year bar against appearances before the agency. If the post-employment bar is extended to all employees paid above the GS-16/1 rate, an estimated 151 persons (out of a total Commission staff nationwide of approximately 2,000 persons, including all clerical and support staff) will fall under the prohibition. In addition to the Chairman and the four Commissioners, these persons would include five administrative law judges; all 48 members of the Senior Executive Service; and 93 GS-15 and GM-15 employees whose pay exceeds the basic GS-16 rate of pay. Enactment of S. 237 is likely to cause a significant number of these newly affected persons to resign before the one-year bar provision becomes |