In a March 1964 address to the Investment Bankers Association, Cohen first espoused his theory of SEC-securities industry relations. His address, entitled "Cooperative Regulation," played a theme that was music to President Johnson's and his audience's ears. He reminded them that the Special Study had expressed confidence in the private self-regulatory agencies. "[S]elf- regulation," Cohen announced, "must be permitted to enjoy such autonomy as will enable them to act as responsible partners in a cooperative enterprise and that the Commission's direct and oversight powers are to be used with restraint."(17)
Building on Chairman Cary's efforts, Cohen worked to invigorate the SEC's enforcement efforts, shifting most enforcement efforts to a new Trading and Markets Division, which prosecuted the case of SEC v Texas Gulf Sulphur, one of the most significant insider trading enforcement actions in SEC history. That case resulted in a landmark Circuit Court of Appeals decision upholding the SEC's use of Rule 10b-5 to prosecute insider trading cases.
Cohen was never afraid to wield the SEC's power, but he sought methods of cooperation rather than confrontation. An infusion of competition, Cohen argued, was a principle reason for the success of securities regulation. The fair and efficient use of government regulation to promote economic competition became the theory on which the SEC would implement much of its regulatory agenda for the next two decades.
(17) "S.E.C. Plans to Keep Up With Markets," New York Times, July 21, 1964, 45.
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