Several media outlets have been reporting extensively on the horse race for Mary L. Schapiro’s replacement as the SEC chairman prepares to leave her post on Dec. 14. My hope is that the horse race yields someone strong enough to withstand rough waters as regulatory reform is far from over and there are bitter battles ahead.For now, Elisse Walter, an SEC commissioner, has been tapped to succeed Schapiro. Walter could stay on as chairman past her desired departure by the end of next year. A close associate of Schapiro, Walter is expected to continue Schapiro’s initiatives regardless of how long she holds the top spot. Much will depend on whether she takes the position and runs with it or becomes more of an interim caretaker.
To keep Walter on as chairman, whose career arc includes working with Schapiro at FINRA and at the CFTC, would require Congressional approval and the appointment of another SEC commissioner, which would also need a nod from Congress.
Other worthy candidates for chairperson, according to reports in The Wall Street Journal, The New York Times, and elsewhere, are: Sallie Krawcheck, the former president of global wealth and investment management for Bank of America; Richard G. Ketchum, chairman of FINRA; Robert Khuzami, director of the SEC division of enforcement; and law professor Harvey J. Goldschmid, a former SEC commissioner. (A widely touted candidate apparently out of the running is Mary John Miller, undersecretary for domestic finance at the U.S. Treasury Department; Miller is not interested in the position, according to multiple media reports.)
Another possibility is Neil Barofsky who served as the special inspector general for the Troubled Assets Relief Program, or TARP. Barofsky was portrayed in a recent New York Times opinion piece by Simon Johnson, an MIT Sloan School of Management professor, as the ideal person to head the SEC because of his experience and independence.
In fact, Barofsky said when he was a guest this week on radio station WNYC’s Brian Lehrer Show (hosted by journalist Heidi Moore) that the next SEC chairperson has to use the post as a bully pulpit in order to drive real change. During the radio show, Barofsky declined to criticize Schapiro and acknowledged that he got to know her when he was overseeing TARP; he pointed out that she actually returned his calls. Her availability, although rare in Washington, is apparently in keeping with what Barofsky says is her preference to be a consensus-builder rather than a rabble rouser.
Barofsky may be right—the next SEC chairperson may have to be more vocal to forge a greater connection to those beyond Wall Street. The next chairperson will also have to be a workhorse as we review only a small sample of the issues waiting for review:
- What to do about high-frequency trading (HFT);
- Whether or not to truly bring reform to the mutual funds industry;
- Finishing the overhaul of the over-the-counter (OTC) derivatives markets;
- Real coordination with the CFTC and other relevant government agencies and industry groups;
- A bloody battle over the Volcker Rule;
- More budget battles to get the resources the SEC will need to enforce the many more Dodd-Frank rules to come;
- And a potential battle with Congressional Republicans over merging the CFTC and SEC in their attempt to streamline regulatory efforts.
Of course, as pundits mull her replacement, much has been said about Schapiro’s record. The SEC has released a nine-page PDF listing all of Schapiro’s accomplishments, but I will focus on the initiatives that I think have hit home for many firms.
As for revamping the SEC, Schapiro’s initiatives included: streamlined enforcement procedures to launch investigations faster; a national, centralized database for all tips and complaints and a staff to react to them; upgrades in technology infrastructure and the case management system; a whistle-blower program; more hiring of experts in risk management, quantitative analytics, trading, portfolio management and valuation skills; more collaboration via cross-agency working groups; and the creation of the agency’s first chief operating officer (COO).
Overall, though, Schapiro beat the odds and reactivated an agency that had lost its way. She may have side-stepped the bully pulpit, but she revived the agency’s relevance, which will be one less battle that her successor will have to fight.
Need a Reprint?
Leave a Reply