Far from being the 'wild west' of international finance, Paul Atkins believes Ireland can be a model for the US, writes Arthur Beesley, Senior Business Correspondent

Paul Atkins is one of the longest-serving members of the Securities & Exchange Commission (SEC), the powerful regulator that oversees markets in the US. He a Republican nominee on the liberal wing of the SEC but calls himself a child of Sarbanes-Oxley, the unforgiving anti-fraud law that followed the WorldCom and Enron scandals. In fact, he joined the SEC only a day after that regime came into place in July 2002.

Thanks to the work of the SEC and its sister agencies, more than a few errant businessmen have been jailed in the US for their misdeeds. A former Wall Street lawyer with deep experience of international capital markets, Atkins agrees that the threat of imprisonment serves as a deterrent to those who contemplate fraud. As you might expect, he draws no distinction between financial and other crime.

"In some of the recent corporate scandals where people have gone to jail, what's the difference between what they've done and the fellow who breaks into a house and steals a silver spoon?"

While Irish prisons can hardly be said to be overpopulated with corporate criminals, Atkins likes what he sees in the Irish system of regulation.

"We have a lot to learn from Irish regulators and some of the white papers that have been published."

On a brief Irish visit this week to speak at the Finance Dublin conference, he said he saw merits in an approach based on costs and benefit and cited the principles laid out in the Government's Better Regulation white paper.

"They put a lot of thought, I think, into how to build the financial regulator here. It looks like they're doing it in a very thoughtful and deliberate manner that I think will pay benefits in years to come.

"I'm not sure about the moniker "light touch", what exactly that means. But for me what I prefer is the term "smart regulation", because I think you have to balance cost and benefits. You have to try to figure out when you have scarce resources how best to use your resources."

The New York Times, in an infamous 2005 report on the Dublin connection to a big GenRe-AIG insurance fraud, referred to Ireland as a "wild west" of international finance, but Atkins says that description does not tally at all with his knowledge of the scene here.

"We've had a very good history of working with regulators here. I think a testament to stability and their approach is looking out here at how the financial services industry has grown," he says.

"Our biggest investment banks are here, so we have very close ties with regulators because of that because we are tying to make sure that our actions are co-ordinated."

In Dublin this week, Atkins shared a platform with EU internal markets commissioner Charlie McCreevy. In an increasingly globalised economy - where capital moves at will throughout the international system - he says co-operation between regulators is crucial.

"When Commissioner McCreevy and I were talking, it's almost as if you could swap speeches. I think it's a very good indication of how, at the present time, we have pretty similar views as to what regulation should be."

In the US, Atkins has been in the news for his opposition to regulations that require all mutual funds to have a independent chairman and a minimum of 75 per cent non-executive board members. It is a stance that has put him at odds with colleagues on the SEC, but which exemplifies his liberal outlook on regulation and business issues generally.

"I'm not in favour of a one-size-fits-all regime . . . this is the first time in fact that the US government has ever told a specific industry that thou shalt have a non-executive chairman and a 75 per cent non-executive board. That particular rule was thrown out by an appellate court in Washington . . . but there's still discussion as to the propriety of taking any action in that area.

"I do think that in many ways you have to look to the marketplace, because for the government or regulators to make choices or for people or impose costs without a view to benefit basically can preclude innovation and restrict choices that investors ultimately have."

A case in point is clause 404 of the Sarbanes-Oxley law, which requires executives to sign off on a firm's internal controls and have them checked by an auditor. After years of criticism that this clause was excessive and simply too expensive to follow, the SEC moved in December to reform it.

Atkins denies that the development amounts to a watering down of the law. "The costs of section 404 completely exceeded what we anticipated so that is what we are addressing now, we and the public companies. So I don't view us as rolling back on Sarbanes-Oxley because if you talk to the folks who actually drafted it, they say that they were trying to model section 404 after an existing regime for banks . . . Sarbanes-Oxley was meant to be modelled after that but it clearly exceeded anything that that particular banking set of rules did."

Atkins has no time for and has punished business people who lie, cheat and steal but he insists that liberty per se is crucial for the effective conduct of business.

"That enables people to invest and innovate. Because if they can enjoy the fruits of their labour and the fruits of their imagination, then that helps society and mankind to advance."

No surprise then that he appears to have little sympathy with the view that the rapidly expanding private equity sector should be curtailed. Critics say the requirement for high short-term returns leads to asset-stripping and steep job cuts, but he suggests that the pressures of the stock market are equally short-term by nature.

"A very consistent theme of management is that you get what you measure. You measure public companies by how their quarterly earnings are doing and how their stock is performing on a very short-term basis," he says.

"I know people who run private companies who say they always enjoy negotiating with publicly-held companies, especially as it comes down to the end of the quarter or the year when the terms under which a certain deal is going to be done get much more in their favour as the management in these public companies want to do that deal because of whatever affect it will have on their balance sheet or their income statement. I think there's a balance. I think you can argue that private equity has perhaps a longer horizon, but it's hard to make generalised statements."

But are some private equity deals too big for comfort?

"There have been people that have said, especially in some of the largest deals, where you have either consortia of private funds getting together to put money in, that there might not be a lot of competition with respect to the bidding for whatever asset that they are trying to acquire.

"On the other hand, the marketplace does its work because investors and other shareholders of these guys that are being bid for to be acquired, if they don't like the price they don't have to sell. So ultimately, people deal in their enlightened self-interest. So they think sell it or hold it or whatever wait for a better price, I think the market will be the regulator on that one. What's the alternative? The government coming in to decide what fair price is, because that does not work ultimately."

It follows that Atkins does not rank among those who argue that hedge fund investors with their very short-term outlook distort markets. "There are two very good aspects about hedge funds," he says.

The first is that that they help to spread risk around "because you have investors in hedge funds who expect their hedge fund managers to take higher risks because hedge fund investors are expecting higher rewards".

The second is that they increase the liquidity in the market. "The spreading of risk, I think, ultimately makes our financial system a lot more stable and a very strong proponent of that, a very articulate proponent was Alan Greenspan."

Atkins' terms on the SEC expires next year, though he is eligible for re-election.

However, the prospect of another run in private business excites him.

"I do miss the marketplace. It has changed a lot since I've come into the SEC in 2002, so obviously when I am finished with my government practice I'll go back out into the marketplace."

Factfile

Name:Paul Atkins

Job:He is one of four commissioners of the US Securities and Exchange Commission under chairman Christopher Cox.

Age:He turned 49 on Wednesday.

Why is he in the news?He spoke at the Finance Dublin conference this week. Despite a severe clampdown on business scandals in the US, he is on the liberal wing of the SEC. "A constant theme is that excessive, overlapping and unnecessary regulation in the US is a major reason for our loss of market share in the global capital markets," he told the conference.

Background:He is originally from Lillington, North Carolina, but grew up in Tampa, Florida. A corporate lawyer by training, he worked in private practice and served on the staff of two former chairmen of the SEC, Richard C. Breeden and Arthur Levitt.

Family:He is married with three sons, aged 13, 11 and seven. In his free time, he helps with his children's sporting activities.