In her first two weeks on the job, the Securities and Exchange Commission’s new chairman wasted no time making changes aimed at bolstering the agency’s enforcement and called for a “serious self-evaluation” of the way it operates.

As promised, Mary Schapiro, in her first speech as SEC chairman, announced the end of the Commission’s two-year “penalty pilot” program, which required the enforcement staff to obtain special approvals in cases involving civil monetary penalties for public companies as punishment for securities fraud.

In Feb. 6 remarks before the Practising Law Institute’s “SEC Speaks in 2009” Program, Schapiro said the pilot program introduced significant delays in bringing corporate penalty cases, discouraged staff from arguing for a penalty in some cases and resulted in smaller penalties in others.

At a time when the SEC needs to be deterring corporate wrongdoing, she said the “‘penalty pilot’ program sends the wrong message.”

“Those who break the law and take advantage of investors need to know that they will face an unrelenting law enforcement agency in the SEC,” Schapiro said. “... No one should be heard credibly to question whether enforcement is a priority at the SEC.”

To speed up the process for approving formal orders of investigation, Schapiro also called for the commission to return to a prior policy that allows for the approval of formal orders, which allow the staff to use subpoena power to compel witness testimony and the production of documents,by written approval by the commission or by a single Commissioner acting as duty officer on behalf of the Commission.

Currently, she said many formal orders are made subject to full review at a meeting of all five Commissioners, necessitating that they be placed on the calendar sometimes weeks in advance.

Schapiro said efforts to restore investor confidence demand that the SEC “engage in serious self-evaluation,” taking an honest look at “everything we are doing and how we do it.”

Schapiro also called for a “new era of responsibility” on Wall Street and throughout the markets to ensure that wrongs don’t occur in the first place and to help restore investor confidence. “There is much we can do to accelerate that process, including giving shareholders a greater say on who serves on corporate boards, and how company executives are paid,” she said.

Noting that investors are looking to the SEC to protect them, Schapiro said, “To do that well, we have to act swiftly to respond to market events, and that means we must be willing to change the way we do business.”

As for regulatory priorities, she said it’s “vital” that the SEC re-engage with investors by forming an “Investor Advisory Committee” to provide input about the issues that are most concerning to investors.

Other initiatives she said she plans to pursue as priorities include:

Improving the quality of credit ratings by addressing the inherent conflicts of interest credit rating agencies face as a result of their compensation models and limiting the impact of credit ratings on capital requirements of regulated financial institutions;

Reducing systemic risk to investors and markets by promoting—and regulating appropriately— centralized clearinghouses for credit default swaps;

Strengthening risk-based oversight of broker-dealers and investment advisers; and

Improving the quality of audits for non-public broker-dealers and promoting the safe and sound custody of customer assets by any broker-dealer or investment adviser.

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