On April 6, 2009, Chairman Mary Shapiro, head of the Securities and Exchange Commission, telegraphed her upcoming regulatory priorities to the investor and financial community at a speech before the Council of Institutional Investor’s Spring 2009 Meeting.

Chairman Shapiro define the SEC’s principle responsibility – investor protection – as a challenge of ensuring that capital markets are both fair and efficient.

She listed her top four priorities in implementation of this charter:

1. Effectively structured markets.
2. Timely and reliable information.
3. Trustworthy professionals and intermediaries.
4. Strong enforcement.

Toward the first goal of ensuring that markets are structured effectively, Chairman Shapiro said her first efforts are these:

a. convene a roundtable of experts to get a range of advice on short selling
b. a proposed new rule limiting short sales in a down market.

Her first efforts to enhance disclosure and transparency would focus on the board of directors leadership and compensation strategies:

a. convene a commission in June to review enhanced corporate board disclosure of director nominee experience, qualifications, and skills
b. boards’ reasons for choosing a leadership structure
c. boards’ overall compensation approach (beyond simply the highest paid executives) and possible compensation consultants conflict of interest.

Chairman Shapiro said she believes there are three pillars of sound compensation practices:

-- effective governance of compensation
-- effective alignment of compensation with prudent risk taking
-- effective stakeholder supervisory oversight and engagement.

She also indicated she wants to increase proxy access to ensure that company owners have a meaningful opportunity to nominate directors.

Chairman Shapiro envisions tougher regulation of market professionals and intermediaries:

a. annual unannounced 3rd party audits of those professionals with custody of client assets
b. registration of hedge funds and hedge fund advisors
c. enhanced disclosure of credit agencies’ assumptions underlying their methodologies, their fees received from securities issuers, and factors that could change ratings. (In fact, The SEC convened an SEC Roundtable on Credit Rating Agencies on April 15, 2009.)
d. enhanced oversight of the credit default swaps market, including greater reporting requirements and record-keeping rules.
e. enhanced disclosure and investor protections for municipal securities
f. enhanced disclosure for asset-backed securities.

The SEC’s Enforcement arm will be strengthened, including new internal training for enforcement staff. More details about her efforts to strength enforcement were covered in her February 6, 2009 speech before the Practicing Law Institute’s "SEC Speaks in 2009 Program.

Noteworthy was the fact that, a year later (January 13, 2010), Robert Khuzami, Enforcement Director of the SEC announced five new SEC investigative chiefs, putting manpower behind the promises of tougher SEC market regulation of fraud.

Thoman A. Sporkin: Office of Market Intelligence, a new office: responsible for Internet enforcement, tips and referrals

Bruce Karpati and Robert Kaplan: Asset Management unit: responsible for investigations involving Investment Advisors, Investment Companies, Hedge Funds, and Private Equity Funds

Daniel Hawke: Market Abuse unit: responsible for insider trader cases, large-scale market abuses and complex market-manipulation schemes by institutional traders, market professionals, and others.

Kenneth Lench: Structured and New Products unit: responsible for complex derivatives and financial products, including credit default swaps, collateralized debt obligations, and securitized products

Cheryl J. Scarboro: Foreign Corrupt Practices unit: focused on violations of the Foreign Corrupt Practice Act, which prohibits U.S. companies from bribing foreign officials for government contracts and other business.

Elaine C. Greenberg: Municipal Securities and Public Pensions unit: responsible for large municipal securities market and with public pension funds including: offering and disclosure fraud; tax or arbitrage-driven fraud; pay-to-play and public corruption violations; public pension accounting and disclosure violations; and valuation and pricing fraud.

At a time when both houses of Congress can't seem to get their act together, it is refreshing to see Mary Shapiro following through on her promises for a tough new cop on the securities marketplace beat.