Mary Schapiro, President-elect Obama’s pick to head the Securities and Exchange Commission (SEC), vowed to take on corporate cheaters and lawbreakers while overseeing America’s financial world.
At her confirmation hearing before the Senate Banking Committee, Schapiro said that she would “move aggressively to reinvigorate enforcement” and “go after those who cut corners, cheat investors and break the law.”
Schapiro’s comments come at a time when the SEC is under heavy criticism both for its role in overseeing financial firms at the heart of the economic crisis and, more recently, for failing to prevent Bernard Madoff’s alleged $50 billion Ponzi scheme.
Sens. Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.), the chairman and ranking member of the committee, are currently investigating the Madoff firm, and the oversight role of regulators at the SEC and the Financial Industry Regulatory Authority, the largest non-governmental regulator for all securities firms doing business in the United States. Schapiro is currently the head of FINRA.
Schapiro defended her tenure at FINRA, saying that the authority did not have access to any tips or intelligence about the Madoff firm, and that whatever tips the SEC may have had were not passed along. She also said that FINRA did not have authority over Madoff’s investment business.
More broadly, Schapiro said that America’s financial regulatory systems suffer from a “stovepipe approach.” If confirmed, she said she would move immediately to beef up the commission’s enforcement division.
In a wide-ranging discussion of the financial landscape, Schapiro offered some initial thoughts about an overhaul of financial regulations — one of Congress’s top priorities this session. Schapiro would be at the center of any dramatic consolidation or shift in the agencies that oversee financial markets. One proposal mentioned frequently intends to merge the SEC with the Commodity Futures Trade Commission to ensure that some types of derivatives do not slip through the nation’s financial laws.
Schapiro said that regulators need to reconsider the oversight of credit default swaps, hedge funds, insurance firms and credit rating agencies.
Schapiro also laid out several specific thoughts about regulation, saying that she would look into reinstating the “uptick rule” on short-selling of stocks that was repealed in 2007. “We do need to look at whether the uptick rule needs to be reinstituted,” she said. She also threw cold water on the concept of merging American accounting standards with those used abroad, and appeared to question whether a new law preventing a revolving door between the SEC and the corporate world would discourage talented staff from joining the commission in the first place.