Nixing Pre-Approval Settlements Would Signal New SEC Chair Means Business

It’s the type of public announcement that would immediately signal a new direction for the Securities and Exchange Commission - one that would quickly put some pep back in the step of the SEC’s enforcement rank-and-file, and certify its new leader’s credentials in the eyes of a skeptical investing public. For these reasons, as well as others, many former and present SEC executives are hoping the new SEC chairman, Mary Schapiro, acts now (rather than later) and puts an end to the SEC’s settlement “preapproval” policy.

The preapproval policy has been a bone of contention for the commission’s enforcement rank-and-file, who since 2006 have been required to attain preapproval from SEC commissioners before pursuing any settlement penalties. The policy, many SEC staff members contend, has significantly hindered the morale and effectiveness of SEC enforcers.

“In the past (enforcers) would have to come in before settlement as a prerequisite to enforcement, and this was really just wheel-spinning, that slowed everything down and it was counterproductive in terms of effectiveness or public policy,” said Harvey Goldschmid, a former SEC commissioner.

Goldschmid said Schapiro has already indicated the preapproval process will be among the first procedures she will be taking a look at.

“There’s been no announcement,” said SEC Spokeman John Hiney.

Naturally, Schapiro will need time to first bring together her commissioners, and as a courtesy have them not necessarily “preapprove” the announcement, but preview its contents.