Securities and Exchange Commission chairman Mary Schapiro said yesterday that she plans to take a "deep dive" into municipal securities in the coming months.

Market participants said she will have to consider whether to move forward with the initiatives to boost municipal disclosure and accounting standards that were promoted by her predecessor, Christopher Cox.

Speaking to reporters yesterday after she addressed the House Appropriations subcommittee on financial services and general government, Schapiro said that she would scrutinize the municipal market "just as soon as I have a chance to catch my breath," probably before the summer.

In 2007, Cox unveiled an extensive white paper outlining changes to disclosure and accounting standards. But it did not receive much support from members of Congress or market participants, except for one initiative: the establishment of a central repository for disclosure filings. The SEC late last year designated the Municipal Securities Rulemaking Board to become that repository.

Since she was sworn in as SEC chairman Jan. 27, Schapiro has focused on hiring senior staff as well as eliminating a two-year "penalty pilot experiment" that had required the enforcement staff to obtain a special set of approvals from the five-member commission in cases involving civil monetary penalties for public companies that engaged in securities fraud.

She has scheduled an April 15 roundtable to discuss to discuss its oversight of credit rating agencies, including its proposed rules on conflicts of interest, competition, and transparency. And she plans to propose restoring the so-called uptick rule used to regulate short selling.

Schapiro told lawmakers that while she supports the idea of a systemic regulator, she would not want it to "trump" the investor protection concerns that are handled by the SEC. She also warned that the SEC would need to make "significant cuts" to its operations unless Congress authorizes the agency to spend more money.

She asked Congress to permit the SEC to use $17 million this year that went unspent in previous years. She also asked them and urged lawmakers to approve President Obama's $1.026 billion budget request for the SEC in fiscal 2010, a 9% increase over the current funding level. Fiscal 2010 starts Oct. 1.

"I do not believe it would be wise for the SEC to retrench during such perilous times in our markets," Schapiro said. She added that she would use the new funds to hire 50 additional staff, boost the enforcement division's ability to uncover and prosecute fraud, and purchase or develop desperately needed technology to better handle tips, complaints, and referrals as well as to improve the SEC's ability to identify emerging risks to investors.

Subcommittee chairman Rep. José Serrano, D-N.Y., noted that Schapiro's remarks contrasted starkly with those of Cox when he addressed the panel last April and said the SEC had sufficient resources to adequately protect investors. Clearly, the commissioin needed a sharp increase in its resources, he suggested.

In response, Schapiro said that while she couldn't predict that the SEC would have prevented the financial crisis had Congress authorized higher funding levels, more staff going forward "will allow us to make a bigger dent in fraud and to have a bigger deterrent effect."

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