[ by Melanie Gretchen and Howard Haykin ]

Mary Schapiro, SEC Chairperson until 12/14/12, is trading 3 decades of policing Wall Street for a new mantle and identity.  Early last month, Mary was invited to join the Board of General Electric.  Now, we learn that the former regulator is headed for the Promontory Financial Group, as chairwoman of that consulting firm's governance and markets practice.   

The Washington, D.C.-based Promontory Financial Group, which guides banks and other financial firms through regulatory scrutiny, has 14 offices and affiliates worldwide.  It's roots are deeply embedded in government, and since its creation in 2001, Promontory has been a popular stomping ground for ex-regulators.  Besides having ties with the SEC, the firm recruits a significant number of employees from the Office of the Comptroller of the Currency.  Eugene Ludwig founded Promontory after briefly serving as comptroller under President Bill Clinton.

Difficult Times For The Key Players.   Mary Schapiro received high marks for her nearly 4 years as Chairman of the SEC.  Her term began in January 2009, as the financial crisis was winding down, but at the onset of a new wave of insider trading along with unprecedented changes in the financial markets.  She also came in right after Bernie Madoff turned himself in for having run a decades-old Ponzi scheme.  That event focused world-wide attention on the years of deficient and ineffective securities oversight by the SEC.  

Ms. Schapiro hit the ground running - she cleaned house and staffed the SEC divisions with take charge individuals, like Enforcement's Robert Khuzami.  It was to her credit that Mary Schapiro equipped SEC staffers with bigger and better technology, improved communications among divisions, and introduced out-of-the-box skillsets that revamped the way the SEC approached market oversight and surveillance. 

Unfortunately, Mary Schapiro and her legacy took a beating during her final months in office.  She spent a lot of political capital in her efforts for money market reform - something Mary Schapiro truly believed in.  However, in the end, Ms. Schapiro failed to get the needed support of her Commissioners and assistance from allies like Treasury Secretary Tim Geithner came too late - as the nation became embroiled in a tight Presidential elections. 

Now, with her spirits renewed after several months away from the Washington scene, Mary Schapiro is being called upon to aid Promontory at a most difficult time.  The firm was roundly criticized for its so-called botched review of foreclosures.  Under orders from the comptroller’s office, big banks hired Promontory and other consultants to determine whether homeowners had been wrongfully evicted.  The consultants burned through $2 billion of billings over a span of 14 months. 

Promontory, which examined loans for Wells Fargo, Bank of America and PNC, was blamed for relying on contract employees and lowballing the amount of harm homeowners experienced.  Fed up with delays and inefficiencies, the comptroller’s office ultimately scrapped the review in January, in favor of a multibillion-dollar settlement deal directly with the banks.

It is hoped that Mary Schapiro helps deflect the mounting scrutiny of the firm and adds a boost to its corporate governance practice, which advises public companies on managing risk.  Without knowing exactly how much she will earn at Promontory, Ms. Schapiro is clearly financially secure in her post-SEC life.  She'll be earning more than the $165,000 annual salary she made at the SEC, and she can expect fees of $250K as a G.E. Director - all of which is in addition to the $7 million-plus payout she received from FINRA upon leaving for the SEC.  She also will be receiving pension and deferred comp.

Just another happy ending to a Washington, D.C., story. 

For further details, go to [Dealbook, 4/2/13].

To contact Melanie Gretchen: melanie@compliance-insights.com.