Congress Praises SEC's Schapiro for Cracking the Whip

o bolstering internal training; and

o bringing on new leadership and new skill sets throughout the agency.

• Cleaning House; Maybe a Budget Hike?

  In less than six months, Kanjorski noted, Schapiro has replaced nearly all of the agency’s senior staff. The most recent departure was Lori Richards, director of the Office of Compliance Inspections and Examinations, who will leave the agency in early August

Schapiro also noted that the SEC inspector general should release its report in a matter of weeks on why the SEC failed to detect the Madoff Ponzi scheme.

During his opening remarks, Kanjorski said he’s now developing a bill on financial services reform using the “ambitious set of 42 legislative proposals” that Schapiro recently sent to Congress, as well as ideas offered by the SEC’s inspector general, and the Obama Administration’s reform proposal.

Kanjorski noted that one important proposal stands out: To put in place new standards that reward whistleblowers when their tips lead to catching fraudsters.

Kanjorski also said that the House will soon consider a bill providing for a modest increase of 8% in the Commission’s 2010 budget. However, he thinks the House should “seriously consider” the Commission’s request to raise its 2011 budget authorization by an additional 20%. Alternatively, he said, “we might decide to put the Commission on the same independent footing as other financial regulators by moving the agency outside of the appropriations process.”

On Budgets and an SRO

Schapiro noted in her testimony that for FY 2011, the Commission submitted to Congress an authorization request of over $1.2 billion, a 21% increase over the FY 2010 request. “This amount would support over 375 additional full-time equivalents and $30 million in new technology investments, mainly in the enforcement, examination, risk assessment, and market oversight functions,” Schapiro said.

When asked whether an increased budget would prompt the SEC to not further explore the option of a self-regulatory organization for advisors, Schapiro said that “even though our budget is growing, I am game to explore the SRO because I think it will allow us to do a better job.” Given the SEC’s limited resources, she said, “We have to consider leveraging third parties.” She said the key to a successful SRO would be strict oversight by the SEC.