November 26, 2012 / 3:48 PM / 8 years ago

Schapiro stepping down at SEC, Walter to step in

WASHINGTON (Reuters) - The head of the U.S. Securities and Exchange Commission, Mary Schapiro, will step down next month after a tumultuous four years spent rehabilitating the agency’s battered reputation, handing the reins at least temporarily to a close ally.

“We’ve gotten a lot done, I’m really proud of where the agency is today, so it seemed like a good time,” Schapiro said in an interview on Monday after announcing her departure.

SEC Commissioner Elisse Walter, a career regulator who has sided with Schapiro on most of the critical issues before the agency, will serve as chairman-designate, the White House said.

Walter, whose SEC term has already expired, could serve until December of next year, buying time for President Barack Obama to win Senate approval for a long-term replacement. Obama plans to nominate someone soon, a White House official said.

Walter is among the candidates likely to be considered, as is Treasury official Mary Miller.

Schapiro’s departure leaves the commission split 2-2 between Democrats and Republicans, which could make it harder for the commission to come to agreement.

Whoever takes the reins will need to finish Schapiro’s task of resurrecting the agency’s reputation, which was badly tarnished by the 2007-2009 financial crisis.

When Schapiro took over in 2009, the agency was under heavy fire for regulatory blindspots that critics said helped fuel the crisis. It was also lambasted for failing to catch now-convicted Ponzi schemer Bernard Madoff, whose fraud cost investors an estimated $65 billion.

In addition to shoring up the agency’s name, Schapiro had to fight numerous other fires — from the 2010 “flash crash” that sent the Dow Jones industrial average tumbling 700 points within minutes to high-profile court losses.

“Chairman Schapiro was dealt a very difficult hand,” said Boston University law professor Cornelius Hurley.


Schapiro is a registered independent who was appointed by both Democrats and Republicans during her career. Yet she was mired in political battles and was unable to get the votes on one of her signature issues, reform of money market funds.

She leaves much unfinished business for Walter and whoever assumes the position on a more permanent basis.

In addition to money market reforms, the SEC is considering additional market structure safeguards and still needs to write a number of major rules dictated by the 2010 Dodd-Frank financial reform law, including a final version of the Volcker rule to ban banks from trading for their own accounts.

Speculation had swirled for months that Schapiro would leave soon after the November election. Walter’s appointment as chairman-designate leaves open the question of how long she will serve and who ultimately will lead the agency.

Potential replacements include Miller, who spent nearly three decades at T. Rowe Price before joining the Obama administration. Miller now serves in the Treasury Department’s top domestic finance job.

At the Treasury, Miller has been outspoken about the need to make money markets safer for investors and would likely continue that effort were she to be nominated as SEC chair.

Other possibilities include Sallie Krawcheck, a former top executive at Bank of America and Citigroup, and Richard Ketchum, chairman of FINRA, Wall Street’s self-funded regulator. SEC enforcement director Robert Khuzami, a Republican, is considered a long shot.

While Walter is also a possibility, she has already been at the SEC for more than four years and served as acting chairman before Schapiro’s confirmation.

In many ways, Walter and Schapiro have been joined at the hip in their career experience and orientations. They both spent years as attorneys at the Commodity Futures Trading Commission and at the SEC, with stints in top positions at FINRA.

“She is a strong advocate of disclosure, of regulation and of consumer protection,” former SEC Commissioner Edward Fleischman said of Walter.


Schapiro’s time at the SEC was marked by some controversy and her departure leaves uncertainty around major initiatives. But former SEC officials said Schapiro helped revive a moribund agency.

“I think she saved the SEC, which was close to extinction when she took over,” former SEC Chairman Arthur Levitt told Reuters.

Schapiro said in the interview that steering the agency out of that period in its history was one of the highlights of her tenure there.

She streamlined the SEC enforcement process, hired new types of employees and created a new tips database and a whistleblower office. In the past two years, the agency logged a record number of enforcement actions and brought major financial crisis cases, including a record $550 million settlement in 2010 with Goldman Sachs.

It has also implemented reforms to protect markets against major swings caused by errant technology — as was the case with the flash crash.

“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,” Obama said in a statement.

But the agency has also been bogged down with major rules the 2010 Dodd-Frank financial regulation law required it to write, many of which are still in process.

Business groups have challenged much of the SEC’s recent rule-making efforts and won major battles, including convincing a federal appeals court to throw out the agency’s “proxy access” rule, which would have empowered shareholders to nominate directors to corporate boards.

Schapiro did not say what she planned to do next.

Additional reporting by Sarah Lynch, Mark Felsenthal and Rachelle Younglai in Washington and Suzanne Barlyn in New York; Editing by Gerald E. McCormick, Andrew Hay, Tim Ahmann and Dan Grebler

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