"It's incredibly anti-competitive that you run this international institute…[T]hese people come, you train them; and then they run their markets the way you run your market. They look to your law; they understand exactly how things work in the U.S."
An important component of this race to have former communist countries adopt U.S.-style securities regulation was the International Institute on Securities Market Development, the brainchild of SEC Chairman Breeden. The Institute hosts an annual two-week training program for foreign officials in which they learn how U.S. markets are structured and regulated. Each year, the SEC invites over 70 countries to select two delegates to attend the Institute. The idea underlying the creation of the Institute was that those attending would learn about U.S. securities regulation so that similar laws could be implemented in their home countries. Funding for the Institute came from USAID.
Michael Mann recounts a moment that summarizes the power of the United States and the SEC as communist regimes collapsed. USAID wanted the SEC to provide translators at the first Institute. The SEC resisted at first because it believed that translators could not grasp technical legal terms, but eventually relented and provided Russian translators. Although SEC staff imagined that it was only the Russian delegates who would use these translators, the first day of the Institute provided a surprise. As Mann reminisces, "I looked at the number of heads that had headphones on. Russian had been the second language of every Eastern European and satellite country; and so there were many of the delegates – including the Vietnamese delegate, who had been trained at Moscow University, all of whom listened to the translator.(105)
With the Institute as the centerpiece of its global strategy, the SEC thought that it would be able to replicate itself throughout the world. It believed that it provided many delegates with their first real lessons in capitalism. Chairman Arthur Levitt, after a trip to Asia, remarked that the "power" of the Institute was "greater than one could ever imagine."(106)
Reflecting upon the connection between the Institute and American power, Mann recognized a certain irony. "It was a magnet for bringing people in and it was to talk about the American way. It was very patriotic in one sense. In the other sense, it was incredibly international. And it was the SEC's."(107)
(105) June 13, 2005 Interview with Michael Mann
(106) Id.
(107) April 22, 2008 Fireside Chat on the SEC Office of International Affairs. The SEC is of course still wrestling with the difficult issues presented by the internationalization of the securities markets. The SEC recently announced that it was going to allow U.S. issuers to use international financial reporting standards rather than U.S. generally accepted accounting principals. This constitutes a drastic change and concretely demonstrates the SEC's commitment to the creation of international uniform standards. Critics contend that that such a change will hurt U.S. investors and dilute the securities laws. See Accounting Plan Would Allow Use if Foreign Rules, New York Times (July 5, 2008).
