U.S. SEC nominee seeks to reinvigorate agency

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U.S. SEC nominee seeks to reinvigorate agency
Reuters, Thursday January 15 2009
(Adds further quotes and detail from hearing)
By Rachelle Younglai and John Poirier
WASHINGTON, Jan 15 (Reuters) - President-elect Barack Obama's pick to head the U.S. Securities and Exchange Commission told lawmakers she would reinvigorate an agency beset by regulatory missteps and blamed for missing one of the biggest investment frauds in history.
Mary Schapiro, a veteran regulator, was greeted warmly on Thursday by members of the Senate Banking Committee, which is expected to swiftly approve her nomination.
If confirmed by the full Senate, she would be chairman of an agency criticized for not helping to prevent the worst financial crisis in decades and for failing to uncover Bernard Madoff's alleged $50 billion fraud until his sons told authorities he had confessed.
"One of the first things I will do will be to try to take the handcuffs off the enforcement division," Schapiro told the committee. "I think the agency has to have a laser-like focus on fraud and investor protection."
The 53-year old Schapiro has spent more than two decades regulating financial markets with a resume that includes chairing the Commodity Futures Trading Commission and six years as an SEC commissioner.
With investor confidence shaken to the core, Schapiro said it is imperative that the SEC be given the resources and the support it needs to investigate and go after those who cut corners and break the law.

After a year in which U.S. markets lost trillions of dollars and the federal government was forced to bail out large financial services firms, Obama and the new Congress are eager to revamp the country's regulatory structure.
It is unclear whether the SEC, now entering its 75th year, will stay in its current form or be dismantled. Schapiro said she would make sure that any regulatory overhaul preserved the SEC's commitments to investor protection, transparency, accountability and disclosure.
Schapiro appeared to embrace more regulation, saying complex financial instruments like credit default swaps and unregulated entities like hedge funds needed oversight.
She said she would boost the agency's office of risk assessment and raised the possibility of placing SEC examiners at credit rating agencies like Moody's Corp and Standard & Poor's.
Schapiro looks likely to try and roll back some of the initiatives of departing SEC Chairman Christopher Cox.
She said the SEC needed to "step back" and look at the entire area of short-selling, including reinstating the "uptick rule" that forced short sellers to sell at a price higher than the previous trade.
Schapiro was also skeptical about the quality of international accounting standards that some U.S. companies would have to use by 2014 under a current SEC proposal.
The SEC should also revisit the thorny issue of proxy access, or giving shareholders another way to advance their nominees to the corporate board, she said.
"There are about 40 of the largest markets outside of the United States that allow investors or shareholders of some size and of some duration access to the proxy," she said. "I think it's time for the United States to step into that club."
BACKBONE SOUGHT
Many see Schapiro as someone who will help heal the five-member SEC, and she has been widely praised by both industry and investor groups.
But Sen. Robert Menendez, a New Jersey Democrat, wanted to know if she had the backbone to stand up to Wall Street.
"Ms. Schapiro, I want to hear from you that you are willing to take no prisoners and question everything about the way the industry does business and the way the government regulates it," said Menendez, who said he would support her nomination but hold her accountable.
Currently the chief executive of the Financial Industry Regulatory Authority, or FINRA, Schapiro was grilled over what the broker-dealer watchdog could have done to discover Madoff's fraud.
Schapiro repeated FINRA's defense that the broker-dealer watchdog did not have the authority to examine Madoff's investment advisor business and that the SEC did not share its concerns or tips with FINRA.
If confirmed, Schapiro would be the 29th chairman of the five-member SEC that has about 3,500 employees.
"I would think we need to move her, we need to get her nomination out as soon as legally we can," Sen. Richard Shelby of Alabama, the top Republican on the banking committee, told reporters after the hearing. (Additional reporting by Karey Wutkowski; Editing by Tim Dobbyn)