Mary Shapiro, Obama’s Choice for SEC Chairman, Called “Regulator With a Light Touch”

In today’s Wall Street Journal, future SEC Chairman Mary Shapiro received a rather scathing review with respect to her record as a regulator. Shapiro, who was recently chosen by President-Elect Barack Obama to replace outgoing chairman Christopher Cox, was described as “being a regulator with a light touch.”

Among the reasons cited by the WSJ for calling Mary Shapiro a regulator with a light touch:

1. Shapiro was formerly the head of the Financial Industry Regulatory Authority (Finra), which had a trend of declining fine amounts during Shapiro’s leadership. Finra levied $40 million in fines in 2008 according the the WSJ’s analysis, which was the third straight year that fines doled out by Finra and its predecessor agency, the NASD, had declined. The 2008 fine total was 73% below the $148.5 million in fines levied in 2005, the year before Shapiro took over the NASD.
2. Harry Markopolos, a whistle-blower in the Bernie Madoff case, said the he did take take his information to the NASD because he had taken other issues there, only to receive no response. Considering Madoff’s close ties to the NASD, Markopolos said he assumed his concerns and knowledge would fall on deaf ears.
3. Finra was “largely left on the sidelines” during probes into the auction-rate securities market freeze-up in 2008, which affected thousands of individual investors. State regulators beat Finra and the SEC to the punch.
4. Despite assertions that the recent mortgage meltdowns at companies like Lehmen fell outside the scope of Finra, many disagree. A consultant to small broker-dealers and a former NASD examiner, Joseph Mays, is quoted as saying, “If I had to assign blame, I’d blame Finra and the SEC, but I’d blame Finra first because it’s the first line of defense.”

The article is definitely worth a read, and casts a curious cloud over the appointment of Mary Shapiro to the chairmanship of the SEC. With the U.S. still reeling from problems that occurred in large part because of deregulation and poor oversight, the WSJ is asserting that the next chairman of the SEC has a history of being less than tough as a regulator herself.

Discussion Questions for Comment Section:

1. Does the WSJ article, and its assertions about Mary Shapiro, make you question her credentials for the position of SEC Chairman?
2. Can the chairman of the SEC succeed in today’s economic environment without being tough and aggressive as a regulator?

Tags: barack obama, finra, mary shapiro, regulation, sec