When President Obama appointed Mary Schapiro to head the Securities and Exchange Commission four years ago, I kept an open mind and was even cautiously optimistic. In a Washington Times op-ed in late 2008, I called the appointment “reasoned and thoughtful.”
I had not been crazy about George W. Bush’s SEC or his policies relating to the capital markets. This was not because these policies were “deregulatory.” Bush had signed the Sarbanes-Oxley Act of 2002, which, until 2010’s Dodd-Frank Act, was the most costly and burdensome financial regulation since the New Deal.
Rather, my critique of the Bush SEC was its lack of regulatory focus on the biggest threats of investor fraud. I wrote that “it threw the book at Martha Stewart for trivial charges but ignored warnings about Bernie Madoff and other fraudsters (as the agency also had done with regard to Madoff, to be fair, under the Clinton administration).”
I was encouraged by the independent-mindedness Schapiro had shown in her past SEC posts under Presidents George H.W. Bush and Bill Clinton and her advocacy of a balanced regulatory approach as chairman of the Financial Industry Regulatory Authority (FINRA), the quasi-governmental regulatory arm of the New York Stock Exchange and NASDAQ stock market. I wrote in the Times that although “no doubt her policies at the agency will be influenced by the priorities of the Obama administration and liberal leaders in Congress,” it’s clear “she recognizes that some regulations have costs that outweigh their benefits.”
But I and other hopeful observers have been beyond disappointed with her tenure. It’s true Schapiro can’t fully be blamed for Dodd-Frank’s hundreds of new rules that threaten both economic growth and investor protection by placing the SEC focus outside its scope to far-flung subjects such as “conflict minerals.” But she can be held accountable for the SEC’s not following basic cost-benefit procedures on the rule creating a “proxy access” platform in shareholder elections for unions and other special-interest groups to nominate their own director candidates. This rule was so flawed a unanimous federal appeals court panel struck it down last year.
And this spring, Schapiro even sandbagged her own boss in one of his few attempts to work with Republicans to lift red tape that kept startup firms from going public. With President Obama’s support, the House had passed the Jumpstart Our Business Startups (JOBS) Act to broaden exemptions for emerging growth firms from some the most stringent provisions of Sarbanes-Oxley and Dodd-Frank.
The bill had passed the House by almost 400 votes, and the SEC had been consulted at every stage to address investor protection concerns. Then, just as the bill was going to the Senate, Schapiro blasted the bill as weakening “core” investor protections.
The bill passed the Senate anyway, and Obama signed it. Provisions that went into effect immediately went on to help facilitate successful IPOs of midsized firms, including Kayak and Five Below.
But Schapiro’s SEC has slow-walked provisions to lift barriers so the smallest startups can raise capital through crowdfunding. Seven months after Obama signed the law, the SEC still hasn’t even put forth a draft crowdfunding rule.
Any new SEC chairman that Obama appoints and the Senate confirms must at the very least be committed to implementing the JOBS Act, a sensible bipartisan regulatory relief and reform.