New SEC Chairman Mary Schapiro may preside over revolutionary changes in the scope of the SEC’s responsibilities. Historically, Schapiro has shown no reluctance to expand her jurisdiction. As head of the NASD, Schapiro was a key backer of combining the NASD and NYSE regulatory functions to create the new FINRA.
Moreover, under Schapiro’s leadership, FINRA supported the SEC’s controversial Rule 151A (see Spotlight on 151A, and Uncertain Times for Indexed Annuities), which will have the effect of subjecting many sellers of indexed annuities to FINRA regulation for the first time. Similarly, FINRA has recently sought to expand the obligations of broker-dealers with respect to business activities that are conducted by their registered representatives outside the auspices of the broker-dealer firm. Finally, Schapiro and FINRA proposed to expand their functions to include serving as a self regulatory body for investment advisers.
Congress may well decide to combine the SEC and the Commodities Futures Trading Commission (CFTC), as part of financial markets re-regulation in response to the current debacle. On paper, at least, no person would seem more qualified than Schapiro to head the combined entity; and, in that role, her experience in the NASD/NYSE combination would doubtless stand her in good stead. She would have the further advantage of her former experience as a CFTC chairman (in addition to her long experience as a securities regulator, including a previous stint as an SEC commissioner).
If she were to head a combined SEC/CFTC, Schapiro’s regulatory turf would in some respects be wider than what she currently rules at the SEC alone. In other respects, however, the SEC’s jurisdiction may be decreased. Various re-regulation plans currently under consideration contemplate that significant functions that the SEC currently performs might be best reallocated to a different agency.