SEC chief has regrets over short-selling ban

By Rachelle Younglai

WASHINGTON (Reuters) - Under fire for regulatory missteps, top U.S. securities regulator Christopher Cox defended his agency's record but acknowledged some regrets over how he handled the worst financial crisis in decades.

The Securities and Exchange Commission has been lambasted by lawmakers and others for not doing enough to prevent the 2008 collapse of Bear Stearns and Lehman Brothers, interfering with markets and failing to detect the alleged $50 billion fraud at Wall Street financier Bernard Madoff's firm.

Cox, a Republican and former California congressman, said the SEC's focus has been customer protection and broker dealer regulation and that the agency "performed that traditional role superbly."

However, Cox said he had some regrets over a drastic action the agency took as markets were hurtling downward in September. For a few weeks, the SEC stopped investors from making bearish bets on financial stocks like Morgan Stanley (MS.N) and Citigroup (C.N).

The SEC's office of economic analysis is still evaluating data from the temporary ban on short-selling. Preliminary findings point to several unintended market consequences and side effects caused by the ban, he said.

"While the actual effects of this temporary action will not be fully understood for many more months, if not years, knowing what we know now, I believe on balance the commission would not do it again," Cox told Reuters in a telephone interview from the SEC's Los Angeles office late on Tuesday. "The costs appear to outweigh the benefits."

Less liquidity in the markets was one of the unintended consequences, experts have said.

The SEC imposed the temporary ban under intense pressure from the Federal Reserve and Treasury Department which insisted it was crucial to the short-term survival of these institutions, Cox said.