According to the Securities and Exchange Commission (SEC) Chairwoman, Mary Schapiro, the SEC certainly is becoming meaner and leaner. On February 5, 2010, Schapiro gave a speech entitled “Looking Ahead and Moving Forward.” In her speech, she highlighted some of the major changes that have been undertaken in the last year since she took office. These changes include, among other things:
- Enforcement Division streamlined procedures – (1) SEC attorneys no longer need to get full SEC approval to initiate an investigation or enter into settlement talks with corporate defendants, (2) it removed a layer of middle management and redeployed dozens of superbly qualified attorneys back to the front lines, (3) it created specialized units to concentrate expertise and better connect the dots, and (4) it recently added a host of measures to encourage corporate insiders to come forward with evidence of wrongdoing.
- Inspections and Examinations Office – the (1) SEC began to improve its inspections program and place greater reliance on risk assessment such as requiring examiners to routinely verify the existence of client assets, and (2) SEC started to more rigorously review firms before sending in its examiners in an effort to use its limited resources more efficiently and target those firms with the greatest risks.
- SEC’s Internal Systems – The SEC expects (1) to have fully centralized its system so that complaints received in Chicago are downloaded into the same database as complaints received in Miami, (2) to have a new set of guidelines and protocols that will govern how everyone should handle the tips they receive, and (3) to work on further upgrading its technology so that the system will be able to not only store the complaint, but also analyze the complaints and connect the dots that might not be readily apparent.
- Created a New Division – For the first time in 37 years, the SEC established a new division, the Division of Risk, Strategy and Financial Innovation. This new Division is expected to help the SEC keep pace with Wall Street by employing renowned experts in the economic, legal, and public policy implications of the financial innovations being crafted on Wall Street.
- Rulemaking Agenda – These include new enacted rules and rule proposals covering disclosures to shareholders on proxies and investors in municipal securities, target date funds, custody rule for investment advisers (see prior post discussing the new custody rules), point of sale disclosures and 12(b)(1) fees.
As evidence of the SEC’s greater focus on protecting investors, the Schapiro cited statistics showing that the SEC has significantly increased the amount of temporary restraining orders, formal orders of investigation and disgorgement orders. In addition, Schapiro pointed out that the SEC hopes to enact new rules governing the credit rating agencies, proxy access, money market funds, as well as certain aspects of market structure. Clearly, under Schapiro’s leadership the SEC is taking its responsibility for investor protection very seriously.
If you have questions about the Chairwoman’s speech or would like to discuss it in more detail, contact Jeffrey Wittenberg at 877-352-2010.