There was a great article in Time yesterday by Robert Chew entitled, “Can Mary Schapiro Revitalize the SEC?,” and we’re not (admitting to) saying that just because it referenced Securities Docket and quoted editor Bruce Carton at length.
The article argues that as soon as Ms. Schapiro settles in at “Washington’s most beleaguered agency” she will have “two makeovers to handle: the first, the demoralized and embarrassed agency, and the second, herself.”
First, Chew writes, she will need to demonstrate whether she’s “willing to take no prisoners” in revitalizing enforcement efforts. Columbia law professor John Coffee says Schapiro may need to bring in a “bad cop:”
“She’s probably not known as a hard as nails enforcer, so what will be key is who she brings in to head enforcement,” says Coffee, a specialist in corporate and securities law. “It has to be someone strong, this will send a signal, this will be a symbol of unequivocal enforcement. A tough prosecutor will be a big, big help to her, and the agency needs that now.”
Second, she’ll need “to resuscitate the SEC’s rank and file enforcement officers, the numbers of which have steadily eroded while the complexity of the job has increased.” Chew reports that according to SEC figures, enforcement levels went from 1,232 full-time employees in 2005 to this year’s budget request for 1,093, an 11% drop. In the compliance office, personnel reportedly went from 851 full-time staffers in 2005 to this year’s request for 796, a 6.5% decline.
The article quotes Securities Docket’s Bruce Carton on this point:
“You never have enough people, but if you could bump up enforcement levels, say, 20%, it would make a huge difference,” says Bruce Carton, former senior counsel in the SEC’s Division of Enforcement, and editor of online securities enforcement publication, Securities Docket. “Tweaking policies won’t replace more manpower and training,” says Carton. “It’s one thing to have more enforcement people on the ground, but they have to be trained to know what to look for, too.”
Later in the article, on the subject of policy changes that might help enforcement efforts, Carton is quoted further:
Former SEC enforcer Carton also sees this 2006 “Pre-Authorization” policy as being deadly for enforcement morale. “It put a complete chill on enforcement,” Carton says. His “Day One” advice for Schapiro: kill this program.
Chew notes that “Schapiro apparently agrees,” and that “in her hearing, she said the SEC pre-approval program was among the first things she would examine.”