What’s All the Fuss About Schapiro?

By the time you read this, Elisse Walter (at least temporarily) has replaced Mary Schapiro as chairman of the SEC. Walter may or may not be a lame-duck chairman; her five-year term as an SEC commissioner doesn’t end until next July, but she can serve until year-end 2013 without additional Congressional approval. To my mind, Schapiro did a more than adequate job at the SEC. Her heart always seemed to be where most advisors wished an SEC leader’s would be: concerned about the end investor (see: fiduciary standard for all advice-givers). However, she was also someone who realized the importance of a healthy but ethical financial services business to the country and to consumers. Could she have done a better job politically? Maybe. Or maybe being SEC chairman is a thankless job when you mix together a sharply divided Congress, a financial crisis, runaway trading technology and a recession-cum-anemic recovery.

For advisors, however, the person chairing the SEC pales in importance to the examiner who comes to visit them. If the tales told by most advisors over the years (and similar ones told by broker-dealer executives about FINRA examiners) are accurate, many of those examiners don’t know much of anything about the businesses they are auditing.

In the first of a compliance roadshow series presented by Tom Giachetti, Greg Friedman and Tim Welsh in New York on Nov. 28, those complaints got an airing. First, Giachetti spoke of how compliance has changed since Dodd-Frank. The SEC is getting tougher in its exams, he reported, on everything from accurately defining your AUM to making sure you have accurate and up-to-date whistleblower, pay-to-play and custody rules. States are “very punitive now” in their advisor audits, said Mr. Giachetti (who writes the regular Compliance Coach column for this magazine and heads the securities practice at the law firm Stark & Stark), even though examiners from the “states make the SEC [auditors] look like Mensa members.”