Mary Schapiro Should Not Be Confirmed as SEC Chief

Barack Obama's selection of Mary L. Schapiro to head up the Securities and Exchange Commission is a bitter disappointment to investors. Her appointment will do nothing to reinvigorate an agency that has been a toothless tiger and a puppet of the industry it is supposed to regulate.

Here are some questions she should be asked at her confirmation hearing:

1. You have been a career bureaucrat. You have never held a job in the private sector. You have only held positions with industry dominated organizations. Isn't this the time to have someone running the SEC who has extraordinary judgment and an instinct for the jugular when it comes to protecting investors?

2. You have been Chairman of the Financial Industry Regulatory Authority (FINRA) and its predecessor, the NASD, since 2006. You were the President of NASD Regulation starting in 1996. These are industry dominated organizations who most often act to protect the industry from investors. Should we expect you to switch allegiances if you are confirmed?

3. Under your stewardship, FINRA missed the Madoff scandal, the Auction Rate Bond fraud, and the credit swap fiasco, which caused Wall Street to meltdown and threw the global economy into an unprecedented financial panic. Why should we assume you will be any more vigilant at the SEC?

4. Leadership in vigorously pursuing these frauds has been largely taken over by state regulators, like William Frances Galvin, the highly respected Secretary of the Commonwealth of Massachusetts , Joe Borg, the Commissioner of Securities in Alabama, and Andrew Cuomo, the Attorney General of New York. FINRA's role has been reluctant at best. Is this the kind of foot-dragging leadership you will bring to the SEC?

5. FINRA runs a mandatory arbitration system that requires investors to submit all disputes with their brokers to arbitration run by FINRA for the benefit of the industry. Secretary Galvin testified before Congress that this system represented "an industry sponsored damage-containment and control program masquerading as a juridical proceeding." Investors who have been victimized by their brokers are often re-victimized by this process. Is this the way you intend to protect investors at the SEC if you are confirmed?

6. FINRA has refused to provide copies of its database of awards to academics and others who want to review them and publish findings on the fairness of the process. A request by the authors of the Solin/O'Neal study for this information was denied by FINRA. In fact, FINRA hired a major law firm to fight this request. The SEC supervises the mandatory arbitration process. Will you continue to support hiding this data or do you believe in Justice Brandeis' observation that "sunshine is the best disinfectant"?

7. The Fairness in Arbitration Act of 2007 would ban mandatory arbitration clauses in consumer agreements, including agreements with stock brokers and advisors. FINRA is opposed to it under your leadership. Can we expect you to continue to advocate depriving investors of their constitutional right to access to a jury trial if you are confirmed, or will you support this legislation?

While the securities industry is salivating that Ms. Schapiro has somehow slipped through the cracks of otherwise stellar Obama appointments, investors are deeply concerned. Blocking her confirmation will not be easy, but we simply cannot afford to have more years of business as usual at the SEC.

Follow Dan Solin on Twitter: www.twitter.com/DanSolin

Comments

[ptarantino]

Senator Dodd needs to show he is really for the people & not corrupt business. I beleive he will head the Senate Commitee to dis-aprove or approve her.

Dodd was a ultimately cheerleader for the bail-out give Banks billions of tax-payer money, so don't be suprised if he is a worm here.

[gimbal174]

mary schapiro was the pick of frank zarb to replace himself. her main job was to let him do whatever he wanted to do inorder that he could take nasdaq public and make millions for himself and billions for his friends. he is a managing director of hillman&friedman they owen 37.5% of nasdaq and he is still pulling mary's strings. this is just the truth and she should just not be the head of the SEC. ask her how many shares and/or wts she got when nasdaq went public. i don't know the number if any but i do know she is in the pocket of nasdaq and zarb and she should not be the new sec chief!!!! gimbal174

[Fremon]

I have noticed a lot of negative comments regarding this woman for SEC. It seems to me that Obama will have to live or die with his appointment choices like Bushie did with Gonzolez, et al. This SEC choice was not made in a vacuum. Obama ,maybe, should have been more clear as to why she would be better for the system and ordinary investor and her charge as to what changes she would persue. Her experiences are out there and it will be up to Obama and co. to monitor these changes and successes. Part of what I personally look for is ability to manage systems of people. This is personally why I did not vote for Clinton or, God forbid, McCain and Palin. They couldn't run their campaigns administratively or fiscally and I felt they couldn't do any better with controlling the Govt. Give Obama a chance and monitor closely the successes and changes of all these appointments.

[TJCole]

Maybe Ralph Nader as well as Brooksley Born would be a much better pick I'd love to see Ralph dig his claws into these swindlers on Wall St..

[DeSwiss]

Brooksley Born to head the SEC.

In addition to being a great appointment, it would be poetic justice.

[sc92705]

Schapiro does not come across as an agent for change.,

The only maverick in his lineup is, arguably, HRC, who can't help but go her own way.

Overall, the Obama lineup is a parade of suits more interested in their own careers then the interests of most Americans.

[olephart]

No rocking the boat here. Shapiro will fit nicely with Bear Sterns bailout Geithner and Glass Steagall repeal/derivatives deregulation Summers. This team will fall seamlessly into line with the current group of miscreants. We can expect regulation lite, bailouts and bullstuff. Now if Gates can keep the Wars going and the defense boondoggles flowing we’ll have 8 more years of Bush lite with a bunch of traditional Democratic pork barrel spending in the guise of a stimulus program. Wake me when the National Debt reaches 25 trillion dollars.

[mediatorman]

INVESTOR PROTECTION has been the last concern or function of the SEC, the NASD now FINRA has had the past 8 years. I say this as a former employee of the NASD arbitration department in the 1986 to 1989 time frame and practitioner in the area of securities arbitration from 1990 to present, who has seen a radical shift in the process from being a profesionally run and fair arbitration forum to a card stacked forum heavily in favor of the securities industry,such that in some arbitration hearings I actually had the distinct feeling that the arbitrators were paid for advocates for the brokerage firm that was being arbitrated aganst, even so far as having arbitrators refusing to allow into evidence NASD Notice to Members as to Compliance issues, thereby eliminating any chance for the INVESTOR to even have a fair chance at prevailing, even in view of the brokerage firms total and abject non compliance with ANY of the compliance rules of the SRO's (NASD and NYSE) !

We need a SEC Chairperson who is seriously interested in INVESTOR PROTECTION now more than ever in order to instill a sense of confidence and trust in the markets, that the regulator is actually regulating the industry for the public investor, not for the benefit of the brokerage industry, which for the past 8 years seems to have been the status quo.

[Libarchist]

I'm in the middle of getting an accounting; that involves some of the same brokers, Madoff used. Are there any publications -- in plain english -- that can describe the rules for brokers and/or de facto brokers?

[ptarantino]

Did Goldman Sachs pick her?

I wonder what specific financier told Obama she was the one.

[cylindar]

Interesting. But I have to say I do not think there are too many people out there who can be appointed that do not have skeletons in their closet.

[althusius]

This is another instance of the revolving door in Washington. I like Patrick Fitzgerald for the job. Wall Street would loathe this appointment.

[themodernleader]

Being surrounded by a bunch of bunglers and miscreants does not a sound financial system make. Allowing the financial powers to direct the appointment to key positions places Obama in a box before he even begins his Presidency.
It is my experience that the higher in financial circles and faster the big money has been gotten, the greedier and more dishonest are the leaders.
The few wealthy can not prevail as long as the rest of the community live in penury and poverty. Revolutions are the stuff of precipitious decline. And wealth is rearranged down the length of a sword, spear or gun. And the erstwhile weathy are forever filled with self-disdain for their uncompromising selfishness and greed.

[thewho77]

The SEC is just a whitewash agency for the wealthy investor class. We are ON OUR OWN. Three words to investors: LAWYERS; GUNS; and MONEY. SEC regulation, I hope I don't die laughing! I'm a CPA with 25 years experience, and have been watching this SEC trainwreck for the last 25 years!

[ObjectiveRealist]

"2. ...These are industry dominated organizations who most often act to protect the industry from investors.­"

Q: from "investors" or from regulators?

[ptarantino]

Too many honest wall-streeters are unhappy w/ this pick.

There's no reason to have someone in question in this spot, we don't need more smoke, just accountability.

That's what you ran on Obama. prove it.

[ibsteve2u]

1. You have been a career bureaucrat. You have never held a job in the private sector.

I am not sure that the latter part of that sentence is a negative, given the state of American Business and its all-too-often inadequate leadership.

As to the former part of that sentence, I am certain that her experience in the bureaucracy has given her insight as to who else within the bureaucracy is controlled by the industry, and so a little firm management guidance from Obama (to whit: "I want both Wall Street and the government departments tasked with its oversight cleaned up - and if you do not do it, my finding someone who will is the least of your worries.") will yield positive results.