More Power Centers at the SEC: The Wolves Will Be Roaming

One of the charming facts of the Chrsitopher Cox incompetency years at the SEC was that he was real good and creating burauratic infrastructure which slowed down and eliminated a lot of harrassment of Wall Street by the SEC.

Now that the clueless Mary Schapiro is in charge, she is listening to her hungry staff for clues. She admits this in a recent speech:

In speaking to our enforcement staff, I’ve been told that these [Christopher Cox]special procedures have introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed.

Following the advice of her staff, she is ratchtiing up the power of her staff big time:

At a time when the S.E.C. needs to be deterring corporate wrongdoing, the penalty pilot sends the wrong message. The action I am taking to end the penalty pilot is designed to expedite the commission’s enforcement efforts to ensure that justice is swiftly served to those public companies who commit serious acts of securities fraud.

Another immediate change I am putting in place to bolster the S.E.C.’s enforcement program is to provide for more rapid approval of formal orders of investigation — the permission slips given out by the commission that allow S.E.C. staff to use the power of subpoenas to compel witness testimony and the production of documents. When I was a commissioner, formal orders were routinely reviewed and approved within a couple of days by written approval of the commission or by “duty officer” — a single commissioner acting promptly and on behalf of the entire commission.

Today, however, many formal orders of investigation are made subject to full review at a meeting of all five commissioners, necessitating that they be placed on the calendar sometimes weeks in advance. In investigations that require use of subpoena power, time is always of the essence, and every additional day of delay can be costly. To ensure that subpoena power is available to S.E.C. staff when needed, I’ve given direction for the agency to return to the prior policy of timely approval of formal orders by seriatim approval or where appropriate, by a single commissioner acting as duty officer.

Schapiro is creating the opportunity for individual enforcement agents to create their own feifdoms, for harrasment, shakedowns and who knows what kind of corrupton. SEC harrasment of corporate America is going to increase dramatically under Schapiro. Of course, this will do nothing to stop the real bad guys of Wall Street becasue they are way, way ahead of Schapiro and SEC enforcement agents. They always have been. No further proof of this fact is needed then the news that the former head of the New York branch of the SEC invested his mother's money with Bernie Madoff.

Mary Schapiro Can Be Easily Out Manuevered by the Big Boys

WSJ is reporting on Barack Obama's choice to head the SEC that:

When President-elect Barack Obama nominated Mary Schapiro to lead the Securities and Exchange Commission, he criticized regulators for having "dropped the ball" in a "failure of oversight" in the markets meltdown and the Bernard Madoff scandal.

But a close examination of Ms. Schapiro's record as a regulator shows she has infrequently pursued tough action against big Wall Street firms.

A regulatory-agency merger that Ms. Schapiro oversaw shifted power to larger financial firms at the expense of small ones. The agency she heads, called the Financial Industry Regulatory Authority, or Finra, missed the mortgage crisis and Bernard Madoff's alleged $50 billion Ponzi scheme...

This backs up our initial take on Schapiro, when we wrote in December, after news leaked that she would be named to head the SEC:

Christopher Cox may in retrospect look like an Aristotelian fountain of wisdom, compared to Obama's choice of Mary Schapiro as the new SEC chairman...Schapiro's philosophy on regulation appears to be that the big boys have different rules that they must play by then up and comers...Somewhere in Manhattan, the insiders are celebrating tonight.

From Clueless Cox to Something Else Schapiro: Meet the Future SEC Chairman

Christopher Cox may in retrospect look like an Aristotelian fountain of wisdom, compared to Obama's choice of Mary Schapiro as the new SEC chairman. Word is out that President-elect Obama will name her tomorrow as his choice to become the next SEC chairman.

Schapiro serves as CEO of the Financial Industry Regulatory Authority, created in 2007 through the consolidation of the National Association of Securities Dealers ("NASD") and the member regulation, enforcement and arbitration functions of the NYSE. She previously served as Chairman and CEO of the NASD, as Chairman of the Commodity Futures Trading Commission and as a Commissioner on the Securities and Exchange Commission. She is currently a director of Kraft Foods Inc.

Her stint at the CFTC during the Clinton administration began while the glaring lights were still on Hillary Clinton over her amazing first time futures trading success of turning $1,000 into $100,000.

Schapiro's philosophy on regulation appears to be that the big boys have different rules that they must play by then up and comers. In a speech in October 2007 while CEO of FINRA, she said:

FINRA regulates Goldman Sachs, which had revenues last year of $29 billion, right along side the over 2,400 firms that brought in less than a million dollars...We simply can't ignore the diverse nature of these firms.

It's important that, without compromising investor protection, FINRA distinguish between the different capacities and capabilities of these firms through its rulemaking and examination processes.

Hmmm. I wonder if that is why FINRA didn't catch Bernie Madoff either, since FINRA was also a watchdog of Madoff operations? He must have come under the diverse examination process.

But, things get more amazing. She posed for the cover of Equities magazine. To say Equities reports on some of the edgier parts of Wall Street is to put things mildly. There can not be a better example of clueless, than to pose and be interviewed by Equities, when you are a regulator. I'll let Gary Weiss take it from here since he wrote up this numskull event as it occurred last year:

I practically fainted when I opened up my mail today. No, not a bill or a threatening letter, but a copy of something called "Equities" magazine with the smiling face on the cover of Mary Schapiro, head of the Financial Industry Regulatory Authority (the merged regulatory branches of NASD and the New York Stock Exchange).

What amazed me was not just that Schapiro would give credence to a magazine with a history of featuring shameless penny stock hucksters, but that she gave a ringing endorsement to the magazine.

A lengthy Q&A with Schapiro begins as follows:

Equities: Mary, thank you for taking the time to speak to the readers of EQUITIES. Do you read the magazine?

Schapiro: Absolutely. It's fantastic! You can quote me.

I wonder what Schapiro finds so fantastic about the magazine. It regularly pushes some of the cruddiest stocks known the mankind, and is noted for giving publicity to stock promoters like Ray Dirks.

In fact, right next to Mary Schapiro on the cover is a promo of a softball article on Dian Griesel of Investor Relations Group, which specializes in promoting OTC Bulletin Board and other flyspeck companies. In Wall Street Versus America I describe how Griesel issued a press release proclaiming a lawsuit against citizen activist Floyd Schneider, without actually filing the suit.

Perhaps Schapiro thought the article on Griesel was "fantastic"? Or the microcap promotion articles peppered through the rest of the magazine?

I'd say that Mary Schapiro needs to think a bit more carefully before she gives a ringing endorsement to an investment tome.

Somewhere in Manhattan, the insiders are celebrating tonight.