Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

SEC under Schapiro after one year

Mary Schapiro took over as the Chairman of the US SEC a year ago
when the SEC’s reputation was in tatters. In a speech
yesterday, she reviewed the achievements of the past year.

First of all, she believes that the problems of the SEC were at the
top and that if the leadership at the top is changed, the rest of the
organization had the competence and attitude required to deal with its
challenges. Schapiro says: “having served as Commissioner 20
years earlier, I knew what the agency was capable of … through this
process, I witnessed firsthand the dedication and expertise that I had
long believed embodied this agency”

Schapiro believes that the new hires she has made and the new
technological initiatives that she has undertaken will be sufficient to
enable the SEC to recover its last glory. My own sense is that the
problems are not merely at the top but permeate the whole
organization. The report on the Madoff investigations revealed
problems at all levels of the SEC (see my blog
post last year).

Schapiro lists the SEC’s achievements in enforcement during the
last year and refers to the case that has been brought against State
Street Bank. She says nothing about the Bank of America case where the
judge has taken the SEC to task, and subsequently the New York
Attorney General has seized the initiative.

On the rule making agenda also, Schapiro is unable to list too much
of significance. Even the utterly misguided short sale restrictions of
the crisis is cited as an achievement. Some minor changes on proxy
rules, rating agencies and money market funds are also cited though
none of these changes went far enough to make a serious

Schapiro came to the SEC with high expectations after a succession
of lacklustre leaders. I think she needs to do a lot more to fulfill
these expectations.


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