U.S. SEC nominee promises "laser" focus on fraud

Mary Schapiro stands during a news conference as President-elect Barack Obama introduced her as his choice to head the Securities and Exchange Commission, in Chicago, December 18, 2008.

WASHINGTON (Reuters) - President-elect Barack Obama's pick to head the U.S. Securities and Exchange Commission told lawmakers she would reinvigorate an agency beset by regulatory missteps and blamed for missing one of the biggest investment frauds in history.

Mary Schapiro, a veteran regulator, was greeted warmly on Thursday by members of the Senate Banking Committee, which is expected to swiftly approve her nomination.

If confirmed by the full Senate, she would take over an agency blamed for failing to help prevent the biggest financial crisis in decades and criticized for missing Bernard Madoff's alleged $50 billion fraud.

"I think the agency has to have a laser-like focus on fraud and investor protection," Schapiro told the committee.

Schapiro has spent more than two decades regulating financial markets with a resume that includes chairing the Commodity Futures Trading Commission and six years as an SEC commissioner.

"With investor confidence shaken, it is imperative that the SEC be given the resources and the support it needs to investigate and go after those who cut corners, cheat investors and break the law," she said.

For nearly two hours she answered questions ranging from international accounting standards to hedge fund registration, which she favors.

In her testimony she raised the possibility of placing SEC examiners at credit rating agencies and said one of the first things she would do if confirmed would be to "take the handcuffs off" the SEC's enforcement division.

She said a single set of global accounting rules would be beneficial but warned against a "race to the bottom" in standards and expressed concern about the independence of the International Accounting Standards Board.

Schapiro said she would make sure that any regulatory overhaul preserved the SEC's commitments to investor protection, transparency, accountability and disclosure.

Currently the chief executive of the Financial Industry Regulatory Authority, Schapiro was asked what the broker-dealer watchdog could have done to discover Madoff's fraud -- which was not uncovered until his sons told authorities he had confessed.

FINRA late Wednesday said it investigated 19 trading complaints about Madoff's broker-dealer firm but they did not relate to the investment advisory issues involved in the alleged fraud.

On Thursday, Schapiro repeated FINRA's defense that the broker-dealer watchdog did not have the authority to examine Madoff's investment adviser business.

Schapiro would be the 29th chairman of the SEC as it enters its 75th year after a number of embarrassing regulatory lapses.

Under current SEC Chairman Christopher Cox, the five largest U.S. investment banks -- which the SEC supervised under a voluntary arrangement -- have either collapsed or reorganized.

Many see Schapiro as someone who will help heal the SEC, and she has been widely praised by both industry and investor groups.

"I would think we need to move her, we need to get her nomination out as soon as legally we can," Richard Shelby, the top Republican on the banking committee, told reporters after the hearing.

(Additional reporting by Karey Wutkowski; Editing by Tim Dobbyn)