A Woman's Touch at the SEC - Building Gender Balanced Business

• Mary Schapiro, the new head of the US Securities and Exchange Commission (SEC) may be quietly laying the groundwork for a tougher and more effective barrier against any future out of control risk-taking in Wall Street, suggests FT journalist Gillian Tett in her latest article.

• The SEC has appointed a “thorn in the side to the banking world” to a senior risk position. This is a reference to finance professor, Henry Hu, who is concerned currently about the “empty creditor” problem – where banks and hedge funds use credit derivatives “to hedge in ways that create perverse incentives to tip companies into default.”

• The Hu appointment is part of a wider pattern by which Schapiro (the first woman to run the SEC, appointed in January 2009) is widening the SEC’s talent pool to include not just academics like Hu but also former traders, bankers, and investors. Previously, the SEC was heavily staffed by accountants and lawyers.

• As a former student of social anthropology, Schapiro understands the importance of analyzing incentive structures to change financial behaviour – and recognizing the importance of incentives when creating policy. “Recruiting former traders and behavioural finance experts such as Hu is one part of a drive to do that.”

• The appointment of the likes of Professor Hu will help Schapiro ensure that the US government hands the job of regulating credit derivatives to the SEC (other regulatory bodies are competing for different patches).

• Although Scahpiro is not seen as a heavy-hitter in Washington circles, writes Tett, “her soft-spoken, pragmatic style is respected, and many of her ideas strike me as laudable common sense.”

Source: Insight: SEC gets tough on Wall St tribalism by Gillian Tett, Financial Times, June 25, 2009.