Photos by Joshua Roberts
At the beginning of 2009 the Securities and Exchange Commission (SEC) faced enormous challenges. Embarrassing revelations regarding its failure with the Bernie Madoff scandal were coming to light as the unraveling credit crisis assured that its next chairman would oversee a regulatory overhaul not seen since the Great Depression. The chairman would need vast experience and the ability to work well across the aisle and with fellow regulators. Mary Schapiro was a logical choice. She served as an SEC commissioner from 1988-1994, including a brief stint as acting chairman, before being named chairman of the Commodity Futures Trading Commision (CFTC) in 1994. She left the CFTC to become president of NASD Regulation in 1996, where she remained through its transition to the Financial Industry Regulatory Authority (Finra), serving as its chairman and CEO until being tapped for SEC chair by President Elect Obama. We talked to Schapiro about what she has been able to accomplish over several volatile years and what important missions are on the horizon for the SEC.
Futures Magazine: You joined the Commission at an historic and difficult time. What has been accomplished in your tenure and what are your priorities going forward?
Mary Schapiro: It was an historic time and an incredibly busy time when I arrived here and it is a little hard to list the most important accomplishments because there have been many. The agency has done a pretty remarkable job of reforming the way it operates. I would point out in particular putting in place measures that have helped to prevent another flash crash from happening, implementing important reforms for money market funds after the financial crisis, assembling a pretty big team of experts to write all the rules that are mandated by Dodd-Frank and pushing those rules through the process as well as conducting a number of the studies and pursuing some of the most complex enforcement action coming out of the crisis. That is just a handful; there are a lot more: banning pay to play by municipal advisors or bolstering of custody rules for investment advisors and broker dealers. There are obviously lots of others.
There were a lot of things on our agenda before Dodd-Frank, some of which we have been able to accomplish, many more that we still hope to get to. On the equity side, we have further efforts on market structure reform coming out of this highly fragmented marketplace. We are anxious to go forward with a project we call “proxy plumbing”. It is an in depth investigation around how proxies are voted by shareholders: The effectiveness of the system, the role of proxy advisory firms, the conflicts of interest they may face, the issues of how corporations can communicate directly through shareholders rather than through intermediaries. We hope to be able to turn our attention to that this fall and tackle those issues. Then, on the pure retail side, two areas we are particularly interested in getting back to that are not Dodd-Frank related are 12B1 fees that are charged to mutual fund investors; clarity around those fees. We have put out a proposal but have not adopted it and we need to do more work on it; limitation and disclosure on it. And (2) disclosure around target day funds, which is a vehicle increasingly used by investors to plan for and fund their retirement. There is a lot of misconception and lack of clarity on how those funds operate. I would like to advance the issue of appropriate point-of-sale disclosure so that investors are getting useful information at a time and in a format that allows them to make the best possible decisions possible.