* Elisse Walter known for aligning with Schapiro
* Observers wonder how she will distinguish herself
* Veteran regulator, two-time cancer survivor
* Favors muni reforms and SRO for investment advisers
By Sarah N. Lynch
WASHINGTON, Nov 27 For the past four years,
Elisse Walter stood out at the U.S. Securities and Exchange
Commission for her deep loyalty to SEC Chairman Mary Schapiro.
Now the veteran regulator and SEC commissioner - one of two
Democrats on the SEC - is m oving to the fore at the powerful
agency, taking over the chairmanship after Schapiro steps down
next month. The promotion is prompting regulatory watchers to
talk about whether Walter will blaze her own path.
"She has been very loyal to Mary Schapiro, and there are
times when I thought she prioritized her loyalty to Mary over
sometimes even her own positions on an issue," said Barbara
Roper, the director of investor protection for the Consumer
Federation of America.
"It will be interesting to see what she is like when she
comes out of Mary's shadow. Will it be more of the same? Or ...
will her own style and views become more apparent?"
Walter's and Schapiro's strong working relationship has
carried through their closely intertwined career paths to their
nearly uniform agreement on controversial regulations.
The two women first worked together at the SEC, when
Schapiro started there as a commissioner in 1988 and Walter
worked as a deputy director in the Corporation Finance Division.
They later worked together at the Commodity Futures Trading
Commission and the Financial Industry Regulatory Authority
before returning to the SEC, where they served side by side.
With just one exception, Walter has publicly voted for all
of the regulations championed by Schapiro - from the
controversial "proxy access" rule later overturned by a U.S.
appeals court to rules that force companies to disclose if their
products contain certain African conflict minerals.
Walter's only public dissent was over a rule creating a
central database that stores every trade order, execution and
cancellation. Walter argued that the rule was too weak.
For the most part, the financial services sector and the
legal community are not expecting many surprises when Walter
takes over the agency's reins next month after Schapiro steps
down from her post.
"She will pursue the agenda that Schapiro started," said
Thomas Sporkin, a former top SEC enforcement attorney now with
Buckley Sandler, a financial services law firm. "Essentially you
are handing off the mantle to somebody who has the same agenda."
That would probably mean moving full steam ahead with
finalizing Wall Street reforms required by the Dodd-Frank Act of
2010, including adding transparency to the derivatives market
and revamping oversight of credit rating firms.
It could also mean trying to advance Schapiro's own
initiatives, including reworking the structure of U.S. markets
to ensure that high-frequency traders don't get an unfair edge
over ordinary investors.
But Walter is facing a challenge that Schapiro did not for
most of her tenure - trying to win support for reforms from an
SEC split between two Democrats and two Republicans. Even if
President Barack Obama moves quickly to nominate another
commissioner, it is expected to take months to secure Senate
"The SEC chairmanship is a difficult job any way you cut it,
and at least as it stands right now, she is dealing with a
four-person instead of a five-person commission," said David
Tittsworth, the executive director of the Investment Adviser
Association. "I don't think her job was made any easier by the
fact that you lose Schapiro."
SMART AND TOUGH
Walter, 62, is a Brooklyn-born Democrat who has spent most
of her career as a financial regulator.
With an undergraduate degree from Yale and a law degree from
Harvard, Walter has a reputation as a smart and accomplished
attorney with a deep knowledge of the industry.
She is well respected in SEC circles, including by those who
tend not to agree with her liberal-leaning regulatory
philosophy, and many say she's been accessible to interest
Former Republican SEC Commissioner Paul Atkins, who has
known Walter for 22 years, said her deep SEC background will be
"There is a lot of promise there," Atkins said. "If she
draws on all of that, I think she can do a great job."
Walter joined the SEC as a commissioner in July 2008, a
tumultuous time in both the agency's history and her personal
life. About a month into her tenure, Walter was diagnosed with
ovarian cancer. It was the second time in her life she had
fought can c er. She had successfully beaten breast cancer during
her career at the CFTC in the 1990s.
Walter underwent treatments at the same time as the SEC was
dealing with the collapse of investment bank Lehman Brothers and
acute criticism for not uncovering Bernard Madoff's decades-long
$65 billion Ponzi scheme.
Today, Walter is in good health, with no signs of cancer.
Though her SEC term technically expired in June, she will be
able to continue serving at least until the end of December
Walter has been coy about whether she wants a longer
appointment as the head of the SEC, and the White House is said
to be looking at other replacements with potentially more name
Among those names are Sallie Krawcheck, a former top
executive at Bank of America and Citigroup, and
Treasury official Mary Miller, who spent 26 years at T. Rowe
FAVORS MORE MUNI DISCLOSURE
Although Walter's policy positions have mostly been in
lockstep with Schapiro's, Walter found her niche at the SEC.
She is probably best known for championing potential reforms
for the U.S. municipal market. Earlier this year, she played a
leading role in the rollout of a new report by the SEC calling
for new measures to bolster investor protection, such as forcing
states and cities to disclose more financial information.
Scott Lilienthal, a partner in Hogan Lovells and president
of the National Association of Bond Lawyers, said Walter has
demonstrated a willingness to be flexible on new rules for the
muni market. He described her as "pragmatic."
POSSIBLE FIDUCIARY FIGHT
Another area in which she's been vocal is the oversight of
Two years ago, Walter dissented on a key SEC study that laid
out three potential ways to enhance the oversight of investment
advisers because of a lack of resources at the SEC.
Walter said the study lacked balance and failed to address
the many benefits of self-regulation - an option staunchly
opposed by investment advisers, who believe it would add an
onerous layer of regulation by a brokerage watchdog that doesn't
intimately understand the advisory industry.
Her views on the issue have made "a lot of advisers
nervous," said Knut Rostad, the president of the Institute for
the Fiduciary Standard, a group designed to promote and protect
the investment advisory fiduciary standard that already exists.
"Given what she has done on the SRO (self-regulatory
organization) issue might lead one to believe she may be more