SEC Chairman Schapiro to step down; Walter designated as replacement

SEC Chairman Mary Schapiro, who has led the agency’s response to the financial crisis, announced Monday that she will step down Dec. 14.

President Barack Obama designated Elisse Walter, a current SEC commissioner, as chairman upon Schapiro’s departure. Walter can serve without Senate approval through December 2013 because the Senate confirmed her when she was named a commissioner.

Schapiro became chairman in January 2009 as the United States was struggling to break free of the grip of a crisis that put some of the nation’s largest financial institutions on the brink of collapse.

Failures in regulation are widely viewed as being at least partly to blame for what came to be known as the Great Recession. The report of the federal government-mandated Financial Crisis Inquiry Commission said regulators had ample power in many arenas and chose not to use it. The report said the SEC could have protected the financial system by requiring more capital and halting risky practices at the big investment banks, but did not.

As the crisis abated, the newly appointed Schapiro sought to strengthen, reform, and revitalize the SEC, overseeing a more rigorous enforcement and examination program.

Under Schapiro, the agency has implemented numerous new rules and programs as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203. Among the changes were the creation of a new whistleblower program, a new regulatory regime for the derivatives market, and registration and regulatory requirements for advisers to hedge funds and other private funds.

In addition, the SEC approved measures designed to strengthen equity market structure and help reduce the chance of another so-called “flash crash” such as the one that occurred May 6, 2010, when the markets plunged 5% to 6% in a matter of minutes before rebounding nearly as quickly.

Schapiro served longer than 24 of the 28 SEC chairmen who preceded her.

“It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity,” Schapiro said in a statement. “Over the past four years we have brought a record number of enforcement actions, engaged in one of the busiest rule-making periods, and gained greater authority from Congress to better fulfill our mission.”

The SEC brought a record number of enforcement actions, including 735 in fiscal year 2011 and a near-record 734 actions in fiscal year 2012. The commission has adopted more than three-fourths of the rules required by the Dodd-Frank Act.

AICPA President and CEO Barry Melancon said in a statement that acknowledging the work of CPAs is critical to the effective functioning of U.S. capital markets. He said Schapiro demonstrated a willingness to engage in a constructive dialogue with the AICPA on a wide range of issues.

“We commend her for putting the needs of the investing public first during her tenure as chairman,” Melancon said. “And we wish her the best.”

The Center for Audit Quality, which is affiliated with the AICPA, released a statement from Executive Director Cindy Fornelli thanking Schapiro for her leadership of the SEC and stewardship of the U.S. capital markets during a tumultuous period.

One initiative that failed to gain traction during Schapiro’s tenure was the implementation of international accounting standards in the United States. The SEC issued a 127-page report in July describing the benefits and challenges that IFRS adoption could have in the United States.

But the report did not contain a recommendation on whether U.S. public companies should be allowed or required to use IFRS for their financial reporting. The matter remains in the hands of the SEC commissioners, and there has been little mention of it since July.

Schapiro’s departure leaves the SEC in the midst of changes at two key positions. Chief Accountant James Kroeker stepped down in July. Paul Beswick is serving as interim chief accountant.

Walter has served as an SEC commissioner since she was appointed by President George W. Bush in 2008. She served as acting chairman during January 2009 as Schapiro was appointed and sworn in as Christopher Cox’s replacement.

Before her appointment as an SEC commissioner, Walter served as senior executive vice president for regulatory policy and programs for the Financial Industry Regulatory Authority.

“She is a very able and experienced regulator,” Melancon said. “We are committed to working with her on the many financial and accounting matters of importance to CPAs and investors alike.”

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.