Mary L. Schapiro took over a discredited SEC in early 2009 and vowed to rebuild it.
She promised tougher enforcement — “war without quarter” on financial fraud. Modernized rules to keep up with Wall Street. And a new, more effective organization.
Her tenure at the federal agency responsible for protecting investors and policing markets offers a Washington lesson: Even when epic crises create a sense of urgency, it is tough to tighten the reins on powerful industries. Dramatic results can prove elusive.
On Schapiro’s watch, federal judges and other critics have accused the Securities and Exchange Commission of accepting feeble settlements in major cases of alleged corporate wrongdoing. The cases have reinforced the impression that the SEC lacks not only the means but also the mind-set to hold powerful wrongdoers accountable, perhaps because the agency is too close to the world it oversees.
Many new rules have been written, but other proposals have languished — including some that Schapiro says are badly needed.
The SEC remains overstretched, short of expertise and at a technological disadvantage. Though Schapiro has fought for funding to narrow the gap, glaring administrative blunders have weakened her hand and undermined the agency’s moral authority, lawmakers say.
Early in her tenure, Schapiro was summoned to Capitol Hill to account for failures under her predecessor. Now, she is called to answer for stumbles of her own. At a congressional hearing last month, the focus was on one of the SEC’s self-inflicted wounds, an ethics scandal related to fallout from the Bernard Madoff fraud, and the verdict was harsh.
“[W]e are left with an SEC that is sapped of credibility,” Rep. Randy Neugebauer (R-Tex.) said in prepared remarks.
The damage to the public’s trust “is simply unacceptable,” echoed Rep. Elijah E. Cummings (D-Md.).
Schapiro says that she has made significant progress turning the agency around and that there is more to do.
“From the time I arrived here, I worked tirelessly to improve the agency,” she said in an interview. “To some extent it’s a resource question, but there’s also been a tremendous amount accomplished in the last two years that make this agency more effective, stronger and tougher than it’s been in many years.”
Since she took over, the SEC has reorganized its enforcement staff, lowered internal hurdles to its police work and created a centralized database of tips and complaints. Agency officials recently stood up to intense lobbying by business groups and put in place a program that will reward whistleblowers for exposing financial fraud.
But some say she’s had trouble finding her way through a minefield of political and financial interests.
“I think she has tried to please everyone all the time and in doing so has pleased no one,” said Lynn E. Turner, former chief accountant at the SEC and a boardroom veteran.
Enter Schapiro
When President-elect Obama picked Schapiro in December 2008 to head the SEC, the agency’s reputation was in tatters. The SEC had taken a hands-off approach to overseeing investment houses such as Bear Stearns and Lehman Brothers while they sowed the seeds of their own destruction, pushing the global financial system to the brink of collapse.
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