SEC head vows more financial justice

The head of the Securities and Exchange Commission (SEC) defended her agency's actions in pursuing wrongdoing tied to the financial crisis, and promised Friday that more action is on the way.

Government regulators have taken some heat for failing thus far to file substantial charges against major players leading up to the financial crisis, but SEC Chairman Mary Schapiro touted the agency's recent efforts on that front as just the beginning. She said the SEC set a record last year in bringing 735 enforcement actions, including filing charges against nearly 100 people for their role in the financial meltdown. All told, her agency returned more than $2 billion to wronged investors, with more work over the horizon.

"It should come as no surprise that there are more actions to come," she told a group of securities lawyers gathered in Washington, D.C., for a conference.

While the SEC has had its hands full with implementing the Dodd-Frank financial reform law, Schapiro also keyed in another market sector that went largely overlooked — money market funds.

These funds, which seek to maintain a share price of $1, are thought to be a highly secure investment, on par with bank deposits. However, the high-profile Reserve Primary Fund "broke the buck" at the height of the financial crisis after taking substantial losses in the bankruptcy of Lehman Brothers, setting off a run on the multitrillion market that settled only when the government stepped in to guarantee the investments.

Schapiro said that danger still remains today, warning that investors have "a false sense of security" of the funds, especially considering that the bailout law passed by Congress prohibited a similar government guarantee in the future.

"Today, the money-market fund industry and, by extension, the short-term credit market, is working without a net," she cautioned.

She said the SEC was looking at either allowing the $1 value of money market fund shares to float with the market, or requiring capital requirements to serve as a cushion for when the funds hit hard times. She noted that both proposals have been met by "the hue and cry" of the industry.

Schapiro also threw some jabs at Republican lawmakers that have slowed budget boosts to the agency requested by the White House. She said the SEC was being tasked with a job that outmatched its resources when she came back on board in 2009.

"When I returned to the SEC, I saw how much the staff was being asked to do, and how little they were being given to do it," she said.

She added that the agency has enjoyed an "overdue ... modest funding turnaround" in recent years, driven by the expanded responsibilities handed it by the Dodd-Frank Wall Street reform law. 

---