Barack Obama may have attracted tens of millions of television viewers to
watch his swearing in this week as the 44th US president, but if you work in
accountancy the person of direct interest is his new chief financial regulator,
Mary Schapiro, who takes over as chairman of the US Securities and Exchange
Picking someone to run the SEC is a crucial appointment for Obama. The
financial watchdog and its current chairman Christopher Cox have come in for
withering criticism for their failure to properly regulate collapsed banks, such
as Bear Stearns and Lehman Brothers, and the decision to ignore warnings about
Bernie Madoff, architect of a $50bn Ponzi scheme.
What Obama wants is someone to overhaul financial regulation from top to
bottom as part of efforts to restore confidence in the US financial markets.
What’s going to happen
What everyone wants to know is what Schapiro will do and whether it will
involve the merger of the SEC with the other big US financial watchdog, the
Commodity Futures Trading Commission (CFTC). But with that question come the
First, there is the US switch to international accounting standards. Will
Schapiro back the move or let the momentum generated by her predecessor slip?
The SEC has a roadmap now for conversion but does Schapiro have the time to
navigate it? Recent comments suggest not.
And there are two other problematic issues. A review recently told the SEC
there was little justification for measures to cap auditor liabilities; that’s a
bugbear for the UK, which would like a cap but considers one pointless unless it
also has US backing.
And then there’s fair value. A recent SEC examination concluded there was
little reason to overhaul the fair value regime.
If Schapiro’s immediate time is spent focused on restructuring US financial
regulation, and especially if Obama has signed off a merger of the SEC with the
CFTC, then senior UK regulators suspect she will place the accounting issues on
the back burner. One told Accountancy Age: ‘She will have to be brutal
Commentators say she knows all the issues and all the players, and is
considered a steady hand. But there are critics.
The most fervent claim that in her present job of running the Financial
Industry Regulatory Authority, the watchdog for US markets set up by the
industry itself, Schapiro has favoured business over the individual investor.
Who knows where an attitude like that would take you on the accounting
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