“Work in Progress” SEC Has Made Big Strides, Schapiro Says

Terry Flanagan

When Mary Schapiro was named Chairman of the U.S. Securities and Exchange Commission in early 2009, the financial crisis was just starting to subside and Bernard Madoff had recently been arrested. Many market participants were wondering where regulators had been.

“It was a pretty dispirited place, with lots of vacancies at the senior level,” Schapiro said at the Investment Company Institute’s General Membership meeting Friday in Washington.

In the nearly three and a half years since then, the SEC has improved substantially, Schapiro said. The agency has hired more people from the financial industry, including ETF experts, quants, and traders. Along with the new expertise, employees are better trained, and the result is that the agency is “doing more of the right things and looking in the right areas” in its quest to protect investors, she said.

Still, the agency remains a “work in progress” that especially needs to ramp up its technology to keep pace with advances in the financial industry, Schapiro said.

With regard to specific initiatives, Schapiro noted that the SEC has been criticized both for being too fast and too slow in implementing Dodd-Frank. Staffers feel a sense of urgency to finish the work, but that must be balanced with the need to get it right, she said. Different regulators with the U.S. are collaborating effectively on regulation, but there are some gaps in harmonization across borders.

Speaking just over two years after the ‘Flash Crash’ of May 6, 2010, Schapiro said the SEC remains focused on managing market volatility and addressing what can cause disruptions. Dark pools, algorithmic trading, and high-frequency trading tactics are all under the SEC’s microscope for this reason, she said.

Schapiro also addressed the SEC’s disagreement with the asset-management business on the issue of reforming money-market funds. “We understand the passion around this issue…(but) we have to deal with it,” she said.

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