SEC Chairman, Mary Schapiro Discusses The Changes Coming From The Agency
Thursday, April 16, 2009PAUL KANGAS: The Securities and Exchange Commission's mission is to be the investors advocate. But in the heat of the financial crisis, it seemed to be anything but. It said Bear Stearns was well capitalized just days before it collapsed and it missed red flags on the Madoff Ponzi scheme. Now the agency is trying to restore its credibility. At the helm is new Chairman Mary Schapiro. NIGHTLY BUSINESS REPORT's Stephanie Dhue spoke with Schapiro earlier today in the chairman's first television interview.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Mary Schapiro is now 10 weeks on the job as SEC chairman. So far she spent much of her time responding to the financial crisis and talking with lawmakers. The agency took up short selling rules last week and yesterday held a roundtable about the shortcomings of credit rating agencies. She says changes are coming.
MARY SCHAPIRO, SEC CHAIRMAN: We got an enormous amount of information from all of these participants and a lot of issues for us to parse and to really think about. So I can't tell you a specific time when I think we'll be done on that issue, but we will be very much informed by what we learned yesterday from all these experts and proceed hopefully sometime this summer to propose some additional enhancements.
DHUE: So you think new regulations will be needed, that the regulation that have been put in place just don't need enough time to work?
SCHAPIRO: Some of the regulations are so new they haven't really had enough time to work, but I think there are some additional things we need to focus on to align the interests of the credit rating agencies with the users of the ratings, investors, as opposed to the issuers of the security.
DHUE: We're just about in the throws of proxy season and shareholder activists are pushing hard to rein in executive pay. Will you help them and give them easier access to get rid of non responsive board members by giving them access to the proxy?
SCHAPIRO: We are very committed to giving long term, serious shareholders access to the proxy and we should propose rules on that probably in about a month or so for the commission to consider and to put out for comment. But it's real important, especially given the crisis that we are going through right now that boards be ever more accountable to the owners of the company, the shareholders.
DHUE: Just before the financial meltdown, banks that owned money market funds were quietly shoring up funds they were concerned would break the buck, or would have broken the buck if they didn't pour money in, largely unbeknownst to investors. What changes are you going to make to money market mutual funds and the way they are regulated?
SCHAPIRO: Money market funds are an enormously important part of the financial system. There are $4 trillion in money market funds and investors rely on them enormously. So from my perspective, it's really critical that the SEC take all the steps it can to bolster confidence in money market funds. So we are going to look at proposing rules very shortly that will enhance the credit quality of money market fund holdings, shorten maturities and therefore increase liquidity and hopefully make them more resilient in an economic crisis than we learned they were in this past fall.
DHUE: The SEC has been involved in investor education on Ponzi schemes, particularly in light of the Madoff scandal. Are you getting more people calling in with tips about potential Ponzi schemes and what are you doing with that information?
SCHAPIRO: We receive close to a million tips a year at the agency and we need to handle them better and more effectively then we have historically. And we are reviewing from "A" to "Z" our process for handling tips so that we can be more effective with them, but I will tell you that the number of Ponzi schemes that we are uncovering early on and stopping, shutting down immediately has grown dramatically in the time that I've been here and I think to quote Warren Buffett, when the tide goes out we see who's been swimming naked. And that's what's happened with Ponzi schemes. They can't maintain the scheme in more difficult economic times and as a result, they are being exposed earlier on.
DHUE: But even though you've been making all these efforts, the SEC, given its handling of the financial crisis is under fire and some critics say, you know, it's time to scrap it and start over, maybe fold it into the Commodity Futures Trading Commission or just do away with it. They haven't done their job. What do you see for this agency in the next five years?
SCHAPIRO: I don't think that there's any doubt that the agency has had a difficult couple of years, but I think now more than ever, particularly in a crisis, we need a really competent, very aggressive, very activist Securities and Exchange Commission. We are the only Federal agency charged with protecting investors. Those are our constituents. Those are the people we should be serving and I'm highly committed to doing that. I would not have come to the SEC if I didn't feel like I had the freedom to move the agency very much in that direction. The markets are critically important. Restoring investor confidence in the market is important. That's not going to happen unless the SEC is doing a first class job and that's what we're all committed to do.
DHUE: Can the SEC do the job? Can they police the markets? Or does it just give people a false sense of security that their investments are being protected, when they're not.
SCHAPIRO: I think the SEC can do the job. Does that mean we'll never miss a fraud or never miss a scam? Of course not. The markets are enormous. We're an agency of only 3,500 people with close to 30,000 regulated entities, so we're small for the task, but with that said I think with an aggressive enforcement program, with a great program of regulatory response to problems as they begin to emerge, so that the rules are written that protect the public more effectively, I think we can do a very, very good job. That said, investing always has risks and investors need to always have that in the front of their minds.
DHUE: We've been speaking with Mary Schapiro, chairman of the Securities and Exchange Commission, thanks so much for joining us.
SCHAPIRO: Thank you. It's my pleasure.
