At the 410th meeting of the Economic Club of New York at the Sheraton on 811 7th Avenue this afternoon, Securities and Exchange Commission chairman Mary Schapiro discussed her agency’s scrutiny of the May 6 “Flash Crash,” what she hoped to do to prevent another Bernie Madoff from fleecing investors, and the delicate balance between implementing necessary financial reform legislation and allowing markets to operate efficiently.
In her prepared remarks, Schapiro discussed the rise of high-frequency trading and its potential impact on the “Flash Crash” of May 6. Since the crash, investors have consistently withdrawn money from mutual funds. A report on the crash is due by the end of September, she told Reuters.
After her speech, Schapiro fielded questions from former SEC chairman William H. Donaldson and Verizon CEO Ivan Seidenberg. They kicked off the session with questions about the Dodd-Frank financial reform law that was signed in July. Donaldson was curious about whether Schapiro saw the SEC as having enough resources to take on the new mandate Congress has given the agency.
Schapiro said that although the agency did not obtain the self-funding it had sought — through fees collected in the process of regulating financial firms — she was “very pleased” with Congress’ “generosity,” and that the agency is on a better path than it had been before Dodd-Frank.
Seidenberg, meanwhile, sought reassurance that ramped-up regulation wouldn’t unneccessarily hinder the capital markets and asked whether Schapiro would be willing to appear before Congress to contest some of the more intrusive measures in the law.
“We’re really obligated to meet the statutory deadlines and requirements” outlined in Dodd-Frank, Schapiro said. “At the end of the day there were significant gaps in our regulatory structure. … It really is up to the SEC and the CFTC to get it right.”
An audience member asked by email what would be done to prevent another Madoff-style scheme from harming investors. Schapiro didn’t delve too far into details, but did say the SEC has undergone significant leadership changes, altered training regimens and developed relationships with private-sector companies like accounting firms to step up oversight. “I think we have really drilled into the consciousness of the SEC staff the tragedy that is the Madoff situation,” she said. “That sort of cultural and emphasis shift along with rulses, technology, training and skill sets, I think, will help us.”