built their tiny little cabins and they did it on their own, not with grants. >> we look at 14 men that ran for president and lost. go to our website/contenders to view the men that had a lasting impact on politics. >> it's a time to turn away from the occupation of overseas to the rebuilding of our own nation. america must be restored to her proper place in the world. >> cspan.org/thecontenders. >> she talked about how the pass enl of the dodd-frank bill helped to ensure the integrity of u.s. markets.

this is about 35 minutes. >> good morning, have happy to wi welcome you all to washington. for se speaks 2012. i'm the director of the enforcement division and i'm honored to serve as cochair as sec speaks along with my -- as cohosts, our principal job is one of timekeeping to get us off to a good start, let's move right into the program. the conference covers would days. today and tomorrow, and we will be presenting a number of panels from various sec divisions and offices to discuss, issues, developments, trends, cases, regulations in the sec's work over the past year. we have invited commentators, to give our views on each panel. many of them have previously

served as commissioners or in other capacities so they can offer perspectives from inside and outside the sec. over the course of the day, you'll hear from the sec's chairman, mary shapiro and from four other commissioners. aside from the session, we will be offering work shops, smaller break out sessions at the end of each day. the work hshops will give you a opportunity to ask questions about the staff. the staff will not take questions during the presentations but we encourage you to ask questions during the work shops. the views expressed by all the individual speakers of the commission staff during the conference will be this their own and not necessarily those of the members of the commission, and the commission and the

commissions offices. it's my distinkt honor to introduce you to mary shapiro. when she returned to the sec it was her fourth appointment to the commission. it's a testament to her talent and judgment that those appointments are evenly divided. two of them were by republican presidents and two by democrats. her talent for reconciling different sides of complex issues have become important. as we work to be more agile and effective. under her leadership, the ags has improved performance across the board, increased communications with financial markets stakeholders of all times and won broad support from

elected of officials on both ends of pennsylvania avenue. since returning she has brought a significant number of actions involving highly sophisticated products and transactions including many many, many arising out of the financial crisis. she launched a program ma combined more programs that ranks risk, thus allowing us to target examinations and protect investors. embraced market stability by dodd-frank, and working around the clock to implement an unpress didnu unprecedented rule making agenda. pulled in aging infrastructure

and allowed the sec to devote budget and staff to its core functions and inspired a new energy for a historic and important institution. she treats public service as a calling and accepts her responsibilities to markets and to investors not as a burden but as an opportunity. and that out look guides an ongoing search for opportunities to better protect investors and more effectively stabilize markets in ways that will make the financial system the pillar of a growing economy, her job is not about numbers, it's about people, about creating opportunities and building a more prosper us country for us all. please join me in welcoming someone who is a common to --

who is an honor to serve, mary shapiro. >> thank you, so much, rob, that was overwhelming and i'm not sure deserved at all, but i appreciate it. it's a pleasure for me to be here this morning. i look forwards to the conference every year as an opportunity to give a state of the sec review, in reviewing our recent activities and how the changes we have made will will benefit the market re regulate and the investors we protect. 20 years ago, when i first served the financial world was a very different place. the dow was inching towards the 3,000 mark and derivatives were barely a blip on the radar, a portable mack intosh weighed 16 pounds and all you could do on a cell phone was talk.

the biggest disruption was the black market crash of 1987. when the president asked me to return and serve as chairman, i knew the agency would be challenged on a level in which no sec had been challenged before. challenged to restore confidence in markets that had nearly self destru destructed and challenge to proof that -- given the scope of the financial crisis, and the fall out from the madoff scandal, it was not a surprise that some were kcalling for the agency to be disbanded. but the importance of the

mission was understood, to protect investors and ensure the integrity of our markets and the men and women of the sec were eager to meet those challenges head on and that was no surprise to me. from my earlier years with the sec, i knew well that the individuals who serve are a dedicated, and talented team, able and eager to rise to the occasion. i knew we had come through and i'm happy with how far we came. i am asking that anyone that has previously worked or works at the sec to stand and be recognized. [ applause ] >> thank you for your service. our commitment to evolve, helped to drive a consensus inside and outside the sec. that the better solution was not to shutter the agency but to

strengthen it. to demand more aggressive and efficient action from us and for us to embrace needed reforms and better adjust to the world we were operating in. that is what we set out to do. we invested in technology and human capital and significantly improving operations. we put in place a new operating strategy, rooted in an small business attitude, and executed on an agenda that would better protect investors and reduce the chances for a another systematic shock wave. i knew as we began to implement the strategy that every move would be watched by many eyes. what i did not understand was that the response to the crisis would lift the attention.

it gives rise to needed debate about important issues and challenges us to be our best. but i worry that the habit of focusing on individual rules or actions disattracts from the big picture. what has been accomplished has been greater than the rules and cases we have brought. we have made it possible to carry out our goal. it's not that we accomplished a great deal, we are now fundamentally better equipped to perform at a lbetter level. we have carefully invested overdue budget increases in people and technology and improved our ways to make the most of our funds. when i returned to the sec, i

saw how much the staff was being asked to do and how little they were given to do it. although they received a bit of a budget growth in the beginning, disspite continued growth in the numbers, the number of employees fell and with oversight, examination and enforcement stretched to the limit, operations and i.t. needs were put on the back burner, and investments in new i.t. fell by half. during my term, we have approximabeen able to see a turn around, we want to grow and grow more efficient. growing in ways that expands capacity faster than the budget numbers were rising. we have broad ened our hiring approach, searching for recruits with specialized experience. we now have traders, asset

managers, academics, on staff. in addition to attorneys, economists and accountants, giving us a greater insight into the technology and practices that drive today's financial markets. we increase the training budget to more than double what it was in 2009. helping staff to keep pace with changes in the market. we significantly upgraded our case management system, overworked attorneys and and paralegals can take advantage of improved capabilities and we have a agency wide e-discovery tool that will allow us to parse evidence and drill down on key su subjects. we have been able to handle the thousand thes of tips and complaints that we receive year and upgrades are a allowing us to better compare the data more effectively, opening new

investigations, routing appropriate tips to existing investigations or discovering emerging trends that we need to be watching. together, with these wise investme investments, we have been finding ways to improve operations. within the various divisions and operations we have created executive positions to allow our professionals to focus their skills on mission critical work. we are out sourcing responsibilities like leasing and financial agency reporting to other agencies. and we are putting in place a number of -- after three years of intense effort, the sec has simply a sounder agency, deploying people and technology more effectively and maximizing

resources, it's part of an effort to be more effective for years to come. but it should not suggest in any way that our work is done. parallel to our investments in people and tools, we began to put in place a new approach. we wanted to be moving to diminish or head off threats and move rapidly without the need for top down guidance in every case. this approaches that grown and while we do not have time to discuss every office and division, i want to show a few examples of the efforts. one place to look is the division of corporation finance. it has been particularly aggressive in enhancing its structure and focus. in the last year, they established new groups to concentrate closely on three systematically critical facets

of the financial world. the largest financial stitutions, and capital market trends. these woffices are ensuring tha items that could, without the sun light of disclosure, turn into bad trends or dangerous practices. the disclosure teemps have been pro active in targeting issues which have potentially significant consequences, they have prompted companies to provide credit kaly information about the potential financial impact of cash from overseas. they have raised questions about whether companies are properly disclosing their litigation c contingencies and have stepped up scrutiny of relating

disclosure. they are issuing guidance where possible before inadequate or outdated disz closure practices harm investors. the staff issued guidance the way that financial services firms should disclose risk to foreign debt, helping to provide investors with adequate financial information, even as that situation remains very fluid. and the staff issued guidance issuing company's obligations to risk cybersecurity and attacks, clearly a growing concern of investors. in reviewing the most recent waive of ipos, problem recognition practices were stopped. the risks were stopped before being able to take risk again. they acted swiftly when the right of the investors to have

their day in court was threatened by objecting to a provision that was in the documents connect with the company's ipo, the results of these changes are not always eye catching but we are convinced that increased focus on these sectors is a necessary shift in a crisis world, we know that our effort says to provide guidance has proved helpful to many companies. and we believe based on our own review of disclosure statements that investors are getting information that is both more complete and more relevant than in the past. perhaps the areas in which changes and organization and approach have been most apparent are in our enforcement and examination units. in boerkts new leadership managed significant organizational changes and just as important, encouraged an aggressive and pro active approach. over the last would years, ocs

put in place, a new national examination program. the has brought changes in the way that examination teams are assembled. oc now precisely manages examiner skills with the unique challenges each examination offers. and examination materials are standardized. and working with the division of risk, strategy and financial innovation, the program expands the use of risk-based targets. better targeting and more effective examinations are paying off, over the last two years, 42% of examines have identified sniff kpant findings, up by a third since 2009. and over that same period, the percentage of exams has risen by half, one such referral involved a fund that came into our sites because of our risk based

program. there was a failure that cost investors more than $200 million. thanks to the work of the enforcement staff, the fund agreed to a settlement returning all the money to wronged investors almost before they knew they had been wronged and paying a $25 million penalty. meanwhile the enforcement division led by today's other cochair, revamped its operations putting additional talented attorneys back on the front lines, creating specialized units and streamlining procedures. these reforms are producing record results. last year, the sec brought a record, 7 enforcement action -- and we have obtained orders for $208 billion in penalties, and what is most satisfying for all

of us is that we returned -- us is that we return said more than $2 billion to investors. we will have the ability to return larger sums to wronged investors in the future. in the area of financial crisis related as cases we charged companies goldman sachs, country wide can a wide and fannie mae and freddie mac. and of course, it should come as no surprise that there are more cases to come there were significant gains from the performance inquiry. an effort that searches for hedge fund advisers whose claimed returns are unusual

enough to raise a red flag. in december, as a result of one of the sweeps, we charged four hedge fund advisers for inflating returns and over valuing assets and other actions that materially miss h lly misl harmed investors. we are working together through different initiatives to target various types of misconduct. and these initiatives will again, be particularly important to our efforts to detect fraud before complaints are received. one can clearly draw lines from the restructuring and results. one unit created, the asset management unities, took the time to survey a group of firms that were actively communicating through social media. in the process, they learned about the various approaches firms were using. getting a sense of those were that were legitimate and those that may not be.

shortly thereafter, a staff member noticed something irregular in the operation of an illinois based adviser, and in short order, it was uncovered that the adviser was offering fictional securities through various media websites, garnering significant attention from multiple buyers. the agency acted before investors were harmed we sued them last month and halted and fraud. but rather than just stopping there, enforcement teamed up with oc, the investment management division and on the same day that we shut down the fraud, we released two publications, one that will help investors recognize and avoid similar scams and another that will keep investment advisers. it's hard to quantify the results of efforts like this, to

know how much savings will not be poured in and we think it's important that this aggressive and coordinated approach is yielding superior results across the agency and will continue to do so going you forward. yet another priority in recent years has been rededicating ourselves to investor protection mission. that strengthens the regulatory structure. that is why, even before dodd-frank, we set out to address the strength of money market funds, to insist on meaningful information on municipal securities and require more information from investment advisers. with the passage of dodd-frank, our responsibilities have expanded dramatically and i'm

proud of the across the board progress we are making with the mandates. of the more than 90 mandatory rule making provisions the sec proposed or adopts rules for more than 3/4 of them. and we have completed 12 studies called for by congress. we could talk for hours about dodd-frank, but let me touch on a highlights. in the area of corporate governance, we have dealt with pair chute arrangements. we have adopted new rules that resulted in approximately 1200 hedge fund and other private advisers regular are stered with the sec and we established a whistle blower program that is providing the agency hundreds of higher quality tips helping us us to avoid dead ends and at the

same time, moving companies to enhance their own internal compliance programs. in another area response to the melt down of the mortgage-backed securities market, the sec proposed rules that will protect investors by increasing dramatically, visibility, underlyiunder lie -- to keep skin in the game, giving them an incentive to double check originators under writing practices and change the ratings of agencies who misrating structure was fuel to the fire. a new regulatory regime will be built for over the counter derivatives. in october of 1993, i addressed a conference for the foundation

of research and international banking and finance about potential problems and at the time i said, nothing will kbrupt t kbrupt -- will interrupt the progress of derivatives than unregulated actions in that market. i was concerned that this potentially useful financial innovation may present risk for various reasons, including the weak or nonexistent capitol clearing mar clearing markets. and while others shared the concerns, in 2000, congress specifically excluded most derivatives transactions from regulation. and by mid 2008, as a

conquestions of the major backed securities market collapse was echoing throughout the financial system, the value of the derivatives market increased more than 100 followed of $700 million. dodd-frank addresses the challenges of the derivatives market that are under scored of the event of 2008, by bringing them into the daylight. we are working with the ftc that strengthen the rules of the financial system. by increasing centalized clearing of swaps and ensuring that margin and capital requirements reflect the true risks of the products. improving transparence of the product aassisting price discovery mechanisms and

increasing security based swap disclosure, mitigating conflicts of interest and improving our ability to police the markets. it's my hope in the near term, that record keeping requirements and others will be improved. we are beginning to transition to the adoption phase, as a first step, i expect final rules that define who will be covered by the new regulatory regime and what will constitute a security based swap to come forward. finalizing these regulatories will be a first step and this will subject -- beyond this this, the commission staff is continuing to develop a plan for exactly how the rules will be put into effect. the plan smo establish oon appropriate time line and

sequence fimplementation and wil avoid a big bang approach. and at all stages of implementation, those subject to the new rogue tore requirements will be given ads yet time to comply. while some issues are sand-alone concerns, issues in title seven cut across the entirety of our implementation, among the most important, given the global nature of the derivatives market is the international impact of our rules. we are working very hard to coordinator with our foreign countser parts to help achieve consistency among approaches to derivatives regulation and there's been significant progress on the international level. our cross border approach must strike a balance between sufficient regulatory oversight and the reality of on a global marketplace, a one-size fits all approach is not feasible or desireable. in the near term issues will be