Chairman Schapiro announced yesterday that she will be stepping down as head of the Securities and Exchange Commission (SEC) in several weeks. Accompanying her announcement, was a nine-page list of her accomplishments during her nearly four-year tenure. Ms. Schapiro took over as SEC Chairman in January 2009, not a great time for the agency or the country. The task she undertook was, by any measure, not easy. Even viewed in the light of the difficulties she faced, the SEC's recent track record is not as impressive as the lengthy accomplishment list would suggest.
A closer look reveals that, in each major area--rulemaking, enforcement, and organizational structure, the SEC has fallen short in recent years. The SEC's Dodd-Frank rulemaking has proceeded very slowly and often without adequate analysis. According to law firm Davis Polk, the SEC has missed 50 rulemakings deadlines, or approximately half of its Dodd-Frank deadlines. Its first rule under Dodd-Frank was rejected by a court for inadequate analysis. Non-Dodd-Frank rulemaking has also been troubled. Although Ms. Schapiro claims success in the first phase of money market fund rulemaking, she chose not to work with her fellow commissioners to bring the second phase to fruition. Instead, she invited the Financial Stability Oversight Council to take over.
The accomplishment list cites a record 735 enforcement actions for 2011 and 734 for 2012. The number of enforcement actions on its own, however, is a meaningless measure of success; an action against a company for missing required filings with the SEC would have equal weight with a massive accounting fraud. Similarly, the list cites the more than $6 billion returned to investors since 2009, but that number fails to acknowledge that some of that amount stems from enforcement cases finished prior to Ms. Schapiro's tenure. In some cases, penalty money collected from shareholders through corporate penalties is simply returned to shareholders in a circular and costly SEC process.
Although some helpful structural reforms have been made at the SEC, the SEC is still struggling in many areas. As one example, a continuing embarrassment for the SEC--which regulates companies' financial reporting--was the Government Accountability Office's identification earlier this month of new and continuing significant deficiencies in the SEC's internal controls over financial reporting. Another example is the agency's failure to follow Dodd-Frank's lead and fold its troubled compliance office back into the rulemaking divisions, where it could most effectively accomplish its objective of raising standards of compliance in the industry.
Ms. Schapiro certainly has faced many excruciating challenges as chairman of the SEC, but a fair assessment of her tenure must acknowledge that she has left many of those challenges for the next chairman to handle.