UPDATE 1-Ex-SEC chief Cox says SEC could bring Lehman case

* Cox says examiner report could lead to SEC case

* Says SEC, Fed was unaware of Lehman’s use of Repo 105

* Calls for quick action on new capital, liquidity rules

WASHINGTON, April 20 (BestGrowthStock) – A bankruptcy examiner’s
report showing that Lehman Brothers (LEHMQ.PK: ) may have filed
misleading financial reports could lead to U.S. Securities and
Exchange Commission charges, the former head of the SEC said on
Tuesday.

Christopher Cox, who was chairman of the SEC when Lehman
declared bankruptcy in September 2008, also said that neither
the SEC or the Federal Reserve was aware that Lehman used
so-called “Repo 105” transactions to artificially reduce its
apparent leverage, as alleged in the report.

“The examiner’s report of evidence that Lehman filed
misleading financial reports and failed to disclose material
accounting information… may provide the basis for SEC law
enforcement action in that case,” Cox said in testimony
prepared for the U.S. House of Representative’s Financial
Services Committee.

Cox did not clarify whether he believes the SEC may be able
to charge the firm or individuals.

Former Lehman Chief Executive Richard Fuld said in prepared
remarks for the same hearing that he only learned of the firm’s
use of Repo 105, a controversial accounting technique, a year
after the investment bank filed for bankruptcy.

The committee is exploring the public policy implications
of investment bank Lehman’s failure and the findings of the
bankruptcy examiner.

Cox, whose agency was the primary supervisor for Lehman and
other investment banks, did not appear in person, but submitted
eight pages of testimony.

He said international bank capital standards at the time
were not adequate to protect Lehman and other firms from shocks
to the financial system.

Cox said he is concerned new stricter capital and liquidity
rules are not yet in place.

“In my view, it remains a matter of the utmost urgency, in
particular for commercial bank holding companies, whose ranks
now include not only such large and systemically important
entities such as Citigroup (C.N: ) and Bank of America (BAC.N: ),
but also the nation’s largest investment banks,” he said.

He also said that in the final days before Lehman filed for
bankruptcy, it was still not clear to top government officials
and Wall Street executives whether there would be federal
support for Lehman.

“The lack of such clarity may have contributed to the
demise of Lehman in September 2008,” Cox said.

Investment Tools

(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)

UPDATE 1-Ex-SEC chief Cox says SEC could bring Lehman case