Walter to Head SEC

Econintersect:  Elisse B. Walter, a current SEC Commissioner, will become the new chairman of the Securities and Exchange Commission (SEC) when current chairman Mary Shapiro leaves in three weeks.  The interim appointment needs no Senate confirmation for the first year because Walter was previously confirmed for her 2008 appointment to the commission by then-president George W. Bush.  That term ended in June of this year but she is still listed as a commissioner by the SEC.  Walter holds a designated Democratic seat on the SEC Board of Commissioners.  According to Investment News she is eligible to serve after the end of her term until the end of the next complete session of Congress, or until December 2013.  In addition to her most recent position as an SEC commissioner, Walter has a professional history with the CTFC (Commodities Futures Trading Commission, FINRA (Financial Industry Regulatory Authority, a financial industry self-regulatory organization) and as an SEC staff member.

After December 13, 2013, Walters will have to be submitted to the Senate for confirmation as chairman or a replacement will need to be named.  Among those mentioned as leading candidates are Under Treasury Secretary Mary John Miller and Neil Barofsky, former Inspector general for TARP (Troubled Asset Relief Program) and former Assistant Attorney for the Southern District of New York.  Barofsky is favored by those who want a stronger prosecution of financial fraud.  He is strongly opposed by Wall Street.

However, some feel that Walter may not be a temporary appointment.  According to Investment News, Walter may be offered by the president as the permanent chairman.  It is pointed out that the president designated Walter as the “chairman” avoiding any caretaker terminology such as “interim”, “acting” or “temporary”.

The question of whether Ms. Walter can improve the SEC record for successful prosecution of financial fraud has been raised by Aaron Eistein in another Investment News article.  If she does attempt to pursue more prosecutions the bar has been set fairly low.  Few criminal prosecutions have been initiated under Shapiro and the success rate has been low.  Eistein reports that the SEC has lost one case in November, dropped another and has had a third case weakened by judicial decree.

Here is the full press release from the White House:

Statement by President Obama on the Departure of SEC Chairman Mary Schapiro

Today, the President issued the following statement on the announcement by Mary Schapiro, the Chairman of the Securities and Exchange Commission, that she will be leaving her post. The President also announced that he intends to designate Elisse Walter, a current Commissioner, as Chair upon Ms. Schapiro’s departure next month.

President Obama said, “I want to express my deep gratitude to Mary Schapiro for her steadfast leadership at the Securities and Exchange Commission. When Mary agreed to serve nearly four years ago, she was fully aware of the difficulties facing the SEC and our economy as a whole. But she accepted the challenge, and today, the SEC is stronger and our financial system is safer and better able to serve the American people – thanks in large part to Mary’s hard work.

“I am also pleased to designate Elisse Walter as SEC Chairman after Mary’s departure. I’m confident that Elisse’s years of experience will serve her well in her new position, and I’m grateful she has agreed to help lead the agency.”

Here is the current press release from the SEC regarding the resignation of Mary Shapiro:

Washington, D.C., Nov. 26, 2012 — After nearly four years in office, SEC Chairman Mary L. Schapiro today announced that she will step down on Dec. 14, 2012.

Chairman Schapiro, who became chairman in the wake of the financial crisis in January 2009, strengthened, reformed, and revitalized the agency. She oversaw a more rigorous enforcement and examination program, and shaped new rules by which Wall Street must play.

“It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity,” said Chairman Schapiro. “Over the past four years we have brought a record number of enforcement actions, engaged in one of the busiest rulemaking periods, and gained greater authority from Congress to better fulfill our mission.”

Chairman Schapiro is one of the longest-serving SEC chairmen, having served longer than 24 of the previous 28. She was appointed by President Barack Obama on Jan. 20, 2009, and unanimously confirmed by the Senate.

During her tenure, Chairman Schapiro worked to bolster the SEC’s enforcement and examination programs, among others. As a result of a series of reforms, the agency is more adept at pursuing tips and complaints provided by outsiders, better able to identify wrongdoers through vastly upgraded market intelligence capabilities, and more strategic, innovative and risk-focused in the way it inspects financial firms.

In each of the past two years, the agency has brought more enforcement actions than ever before, including 735 enforcement actions in fiscal year 2011 and 734 actions in FY 2012.

In addition, the SEC engaged in one of the busiest rulemaking periods in decades. Due to new rules now in place, investors can get clear information about the advisers they invest with, vote on the executive compensation packages at companies they invest in, benefit from additional safeguards that protect their assets held by investment advisers, and get access to more meaningful information about company boards and municipal securities.

“I’ve been so amazed by how hard the men and women of the agency work each and every day and by the sacrifices they make to get the job done,” added Chairman Schapiro. “So often they stay late or come in on weekends to polish a legal brief, review a corporate filing, write new rules, or reconstruct trading events. And despite the complexity and the intense scrutiny, they always excel at what they do.”

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agency has implemented a new whistleblower program, strengthened regulation of asset-backed securities, laid the foundation for an entirely new regulatory regime for the previously-unregulated derivatives market, and required advisers to hedge funds and other private funds to register and be subject to SEC rules.

During Chairman Schapiro’s tenure, the agency worked to improve the structure of the market by approving a series of measures that have helped to strengthen equity market structure and reduce the chance of another Flash Crash. Among other things, the Commission for the first time has required the exchanges to create a consolidated audit trail that will enable the agency to reconstruct trading across various trading venues.

Chairman Schapiro previously served as a commissioner at the SEC from 1988 to 1994. She was appointed by President Ronald Reagan, reappointed by President George H.W. Bush in 1989, and named Acting Chairman by President Bill Clinton in 1993. She left the SEC when President Clinton appointed her as chairman of the Commodity Futures Trading Commission, where she served until 1996. She is the only person to have ever served as chairman of both the SEC and CFTC.

As SEC chairman, Schapiro also serves on the Financial Stability Oversight Council, the FHFA Oversight Board, the Financial Stability Oversight Board, and the IFRS Foundation Monitoring Board.

John Lounsbury

Sources:

• White House Press Release

• SEC Press Release

• Elisse B. Walter (Wikipedia)

• Mary John Miller (Wikipedia)

• Neil Barofsky (Wikipedia)

• Mary Shapiro (Wikipedia)
  

• Elisse Walter chosen to lead SEC (Marcy Gordon, Associated Press, via Life Health Pro, 26 November 2012)

• New SEC bos Walter may not be lame-duck (Mark Schoeff Jr., Investment News, 26 November 2012)

• Why the SEC whiffs on prosecutions – can Walter do better? (Aaron Eistein, Investment News, 26 November 2012)

• Mary Miller vs. Neil Barofsky For The S.E.C. (Simon Johnson, The Baseline Scenario, 25 Novemeber 2012)