SEC Chair Mary Jo WhiteThe mission of the U.S. Securities and Exchange Commission (“SEC”) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. This sounds great, but how does the SEC actually carry out its mission? The answer lies in the SEC’s oversight and regulation function of the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. A key player in how the SEC exercises this function is the SEC Chair, essentially, the SEC’s chief executive.

On April 10, 2013, the SEC announced the swearing in of Mary Jo White as the 31st Chair of the SEC. So who is Mary Jo White? White is a former federal prosecutor, specializing in complex securities and financial institution frauds and international terrorism cases from 1993-2002. After working as a prosecutor, White became a partner at Debevoise & Plimpton where she represented high-profile clients, including JPMorgan Chase & Co, former Bank of America Corp. CEO, Ken Lewis, UBS AG and accounting giant, Deloitte & Touche LLP.

So what’s not to like? The confirmation from the Senate came with little dissent: it voted unanimously in her favor, and its Banking Committee voted 21-1 in her favor. The one nagging criticism of White stems from her ability to effectively navigate conflicting interests. Essentially, some critics fear that her ties to Wall Street will cloud the SEC’s decision-making with respect to these institutions’ behavior during the 2007-09 financial crisis.

Importantly, because of White’s vast experience as both a federal prosecutor and Wall Street defense lawyer, she must, as SEC Chair, recuse herself from investigating former clients for at least a year. Notably, after defending JPMorgan Chase for its role in the financial crisis, for example, White could have to sit out an SEC investigation into the bank’s recent $6 billion trading loss.

Even without consideration of White’s association with Wall Street, she takes over at the SEC at a time of transition, and is faced with grave challenges. According to many, the SEC has been “stuck in a rut” since former SEC Chair, Mary Schapiro, resigned in December of 2012, leaving the SEC’s five-member panel divided between two Democrats and two Republicans.  But White is starting to make changes.  Recently, she appointed Keith Higgins as the new Director of Corporation Finance and appointed acting director, Lona Nallengara, as SEC chief of staff.  Also, President Obama nominated two U.S. Senate aides to replace two SEC commissioners this past week.  Michael Piwowar is to replace SEC Republican Commissioner Troy Paredes, whose term is expiring in June, and Kara Stein is to replace SEC Democratic Commissioner Elisse Walter. 

The SEC has a substantial amount of work ahead as it seeks to both propose and finalize rules required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, particularly in the over-the-counter derivatives and credit-rating agencies arenas. Second, the agency has fallen behind on both finalizing capital-raising rules required by 2012’s Jumpstart Our Business Startups (JOBS) Act, which relaxes certain securities regulations to help small businesses raise funds and go public.

Thus far, not much is also known about White’s views on securities regulatory policy and how she will direct critical rule-making, including a controversial plan to reform the $2.6 trillion money market fund industry.  She has, however, indicated a flexible strategy to reforming money market funds, a move that has drawn scrutiny from investor advocates and liberal lawmakers.  In addition, White recently testified that she is focusing on congressionally mandated rule-making, and as a result, no one is working on political contribution disclosure rules.  There also appears to be a new enforcement focus on accounting fraud cases.  Further, a more recent decision to appoint two (as opposed to one) individual to share leadership of the agency’s enforcement decision, indicates that White is not afraid of potentially unpopular, or unprecedented, action.  

So how will White fare as SEC Chair?  There are high hopes on both sides of the aisle, but only time will tell.  White was confirmed by the Senate only for the remainder of her predecessor’s term, which gives her until June 2014.  The Senate has not yet voted on the additional five year term that was proposed.  With so little time confirmed at the moment, she will really needs to get things moving quickly.