SEC too important to keep in limbo

Although President Barack Obama's appointment of Elisse Walter as chairman of the Securities and Exchange Commission last week will provide a degree of continuity at the regulatory agency, it also raises questions about how effective the SEC will be for the near future. On the plus side, she was already a commissioner, and her term does not expire for another year, so the administration doesn't have to go through a potentially bruising and drawn-out confirmation process in the Senate. Ms. Walter also is obviously well-versed on SEC issues and is, by most accounts, capable and well-respected by the securities and investor communities. Her selection also gives Mr. Obama a year to find someone else to lead the SEC, if that is what he wants. Almost from the moment he announced her appointment, political wags opined that Ms. Walter is filling in only until Mr. Obama can find someone he likes better. Ms. Walter wasn't named an “interim” or “acting” chairman, but observers said that that is only because the administration didn't want to tag her as a lame duck and limit her ability to do her job. Unfortunately, perception is more important than a title, and if people perceive her as a placeholder, that is how they will treat her. That could be especially true at the SEC itself. After Chairman Mary Schapiro leaves this month, the SEC will be split 2-2 between Democrats and Republicans. Unless they can find common ground, they may not accomplish much. That would be a shame because the SEC has a lot on its plate. In addition to the many rules it needs to adopt to implement the Dodd-Frank financial reform law, it is dealing with issues vital to financial advisers and investors. Chief among them: a uniform fiduciary standard for advisers and brokers, and a recommendation on whether investment advisers should have their own self-regulatory organization. Of course, Mr. Obama already could be looking for Ms. Walter's replacement, as some anonymous sources close to the administration claimed in news reports last week. Let's hope that is the case. Not to prejudge Ms. Walter's tenure, but her selection is widely seen as a continuation of Ms. Schapiro's stewardship, as they were close allies. Although the SEC under Ms. Schapiro has done many things right, including stepped-up enforcement actions against adviser malfeasance, it also has had a fair share of critics — many of them in Congress — who claim that it hasn't been as effective as it should be.

BREAKING LOGJAMS

A new chairman would have the opportunity to reinvigorate the SEC and improve relations on Capitol Hill. From a practical standpoint, a new chairman, as a fifth member of the SEC, also could break logjams that might result from 2-2 votes. A handful of candidates already have been mentioned. They include Richard Ketchum, chairman and chief executive of the Financial Industry Regulatory Authority Inc.; Robert Khuzami, the SEC's enforcement director; and Sallie Krawcheck, former head of wealth management at Bank of America Merrill Lynch and the Smith Barney unit of Citigroup Inc. Yes, Mr. Obama would have to spend some political capital and lobby hard to ensure that his nominee survived challenges from Senate Republicans and was confirmed. But isn't that part of the job of the president we just re-elected: to provide leadership and get things done? If Mr. Obama chooses to shy away from this responsibility, it will be up to the members of the SEC to put the nation's interests before those of their party. They will have to come together in a spirit of bipartisanship and work on behalf of the investors they are sworn to serve and protect.