Schapiro Vows to Improve SEC's Operations

Wall Street Journal
JUNE 2, 2009, 2:56 P.M. ET
By SARAH N. LYNCH
WASHINGTON -- Securities and Exchange Commission Chairman Mary Schapiro told U.S. lawmakers Tuesday she has been "disappointed" to learn of shortcomings in the agency's internal operations and vowed to fix them.
She added that a merger with the Commodity Futures Trading Commission could be a logical move.
In testimony before the Senate Appropriations Subcommittee on Financial Services, Ms. Schapiro laid out a series of overhauls that are in the works at the SEC, including plans to hire a chief operating officer and improve records management, Freedom of Information processes and call-center operations.
"I have also discovered in the past four months that much attention needs to be focused on the internal operations of the agency, the processes that guide our work, the agency's infrastructure and how we are organized," Ms. Schapiro said in prepared testimony. "I have been disappointed to find that in some areas of our internal operations, we fall short of what the taxpayer has a right to expect of us, and what our employees have a right to expect of a world-class organization."
The comments about the CFTC come not long after news of a White House document suggesting a merger of the two agencies as part of the regulatory revamp began making the rounds on Capitol Hill. She spoke about the merger in response to questions from Sen. Jon Tester (D., Mont.).
"There is a logic and efficiency that can be achieved in the merger of the two agencies," Ms. Schapiro said, although she noted that short of a merger, the two agencies "can do a better job" working together. Ms. Schapiro, who used to serve as the chairman of the CFTC, didn't take a firm stand on the idea. "I have argued both for and against a merger over the years," she said, noting that the decision is really in the hands of Congress.
Ms. Schapiro's testimony before the committee Tuesday served to update lawmakers on the agency's activities and also discuss what additional improvements can be made if Congress approves President Barack Obama's request for a 7% increase in the SEC's fiscal year 2010 budget. If approved, the SEC would have a total budget of $1.026 billion, helping the agency fully fund 50 additional staff positions over 2008 levels.
Still, despite those increases, the subcommittee's ranking member, Sen. Susan Collins (R., Maine), said she is concerned because even with the proposed and recent budget increases, the SEC's staffing levels still will be less than years past.
"I am troubled the current funding level supports a staff that is 5% lower than your peak level back in fiscal year 2005," she told Ms. Schapiro.
The SEC has been under great scrutiny over the past year, both for its failure to detect Bernard Madoff's massive $65 billion Ponzi scheme and for what some have deemed its lax oversight of investment firms that have since collapsed. The previous enforcement director, Linda Thomsen, told lawmakers earlier this year that the division lacked the resources needed to weed through the thousands of so-called whistle-blower complaints it receives each year.
Ms. Schapiro has already taken some steps to address these problems and managed to obtain permission from lawmakers to tap $17 million in unspent funds from last year.
But she revealed Tuesday the SEC recently submitted a fiscal-year 2011 budget request asking lawmakers for enough money to fill an additional 1,000 positions. That would bring the SEC's total budget request for fiscal 2011 to $1.241 billion.
When asked by Ms. Collins if it would be helpful for the SEC to receive some of that additional money in the fiscal 2010 budget instead, Ms. Schapiro said it would.
"The opportunity to move toward that 2011 budget earlier would be a wonderful opportunity for us," Ms. Schapiro said.
Write to Sarah N. Lynch at sarah.lynch@dowjones.com