Schapiro: ‘Light touch’ philosophy is out at SEC

The Securities and Exchange Commission is seeking key input “in great granular detail” from the financial industry as it works on more than 100 rules in connection with financial regulatory reform, SEC Chairman Mary Schapiro said Monday. The agency will oversee areas of rulemaking that include over-the-counter derivatives, fiduciary responsibility and corporate disclosure requirements, among others. Schapiro said several multidisciplinary task forces are pushing out proposals at a good clip. She spoke Monday to an overflow crowd at the annual SIFMA meeting in New York. “I view it as one of the most important things we are doing right now,” she said, adding that it was “critically important” to get it right. The SEC, she said, has reached out to industry experts and investors to get input on the process. “Cumulatively, we’ve collected tens of thousands of comment letters” on the Dodd-Frank rulemaking proposals, she said. Schapiro, who has been SEC chairman just shy of two years, said the “light touch” regulation that was the norm when she joined the SEC is disappearing as the agency moves away from the previous philosophy that the markets will self-correct. The agency is determined to make sure its focus is on “protecting investors and making sure markets operate with integrity,” she said, whether that involves enforcement, rulemaking or policy writing. Schapiro also was asked about May 6, when the Dow declined 573 points and then recovered most of that in a span of several minutes. Such extreme volatility “scares people,” she said. “We have to get to the bottom of fixing the fragmented and loose structure of our markets that contributed to that.” Several things were implemented to reduce chances of such volatility going forward, including a halt to trading singular stocks if a key stock moves more than 10% in five minutes. If that happens, trading is temporarily halted. Since installed, the breakers have been triggered about a dozen times, she said. The SEC also established erroneous trade break rules and is looking into more robust regulation of high-frequency traders and the role of algorithms that can cause market disruptions. “We can’t have a system in which investors are afraid,” she said. “That’s a terrible thing for this country.” Write to Kerry Curry.

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