Mary Schapiro, president-elect Barack Obama's choice to lead the Securities and Exchange Commission, told members of the Senate Banking Committee yesterday that she would "reinvigorate" the SEC's enforcement division and ensure the commission adopts a "laser-like focus" on uncovering fraud and protecting investors.
In a confirmation hearing before the committee, Schapiro, the chief executive officer of the Financial Industry Regulatory Authority, repeatedly acknowledged shaken investor confidence in the SEC but pledged to act swiftly to restore faith in the commission.
"There are many reasons for this crisis - and one of them is that our regulatory system has not kept pace with the markets and the needs of investors," she said. "It is precisely during times like this that we need an SEC that is the investor's advocate - that has the staff, the will, and the resources necessary to move with great urgency to bring transparency and accountability to all corners of the marketplace, to vigorously prosecute those who have broken the law and cheated investors, and to modernize our country's regulatory system to match the realities of today's global, interdependent markets."
Schapiro also provided a general outline of her agenda if confirmed by the Senate. It included oversight of credit default swaps and hedge funds, as well as rules to eliminate conflicts of interest at credit rating agencies. She also called for reconstituting an office of risk assessment to allow for better coordination of the SEC's examinations staff with its other divisions. The office was first established by chairman William Donaldson in 2004 but has languished under chairman Christopher Cox.
Obama tapped Schapiro last month to head the SEC, as he and federal lawmakers are poised to consider a major overhaul of financial services regulation and as the SEC has been under the gun for acting too slowly to the financial crisis and failing to protect investors.
She easily dismissed criticism that FINRA failed to detect the $50 billion Bernie Madoff ponzi scheme by arguing that FINRA and its predecessor organization, NASD, did not receive any tips on the matter and the SEC did not share the tips it received. She said regulators have adopted a "stovepipe approach" that discourages information-sharing.
But even as senators criticized the SEC or FINRA, they praised Schapiro, signaling that she is likely to be confirmed. "You're extremely well qualified for this job," said committee chairman Christopher Dodd, D-Conn.
Schapiro, who is politically independent, previously served on the SEC from 1988 until 1994 - including a stint as acting chairman before Arthur Levitt was confirmed to lead the agency in July 1993. She was at the SEC when Levitt launched his campaign to reform the municipal market. She was chairman of the Commodities Futures Trading Commission from 1995 to 1996.
Schapiro did not make herself available for questions from the press and did not indicate any changes she might be considering for the regulation of the municipal securities market.