Alex Wong/Getty ImagesMary L. Schapiro, right, and Elisse B. Walter at a meeting of the Securities and Exchange Commission last year.

Mary L. Schapiro spent four years at the Securities and Exchange Commission trying to shake the regulator’s past.

In one of the countless grillings she faced, Ms. Schapiro was slammed at a Congressional hearing in 2010 for missing the signs of Bernard Madoff’s Ponzi scheme, a fraud that took place under her predecessors.

But the S.E.C. chairwoman was ready. As always, she came to Capitol Hill armed with three copies of her testimony and a stack of handwritten note cards, reminders that included details of the agency’s overhaul efforts and even responses to long-forgotten missteps, like when employees were caught watching pornography.

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“Coming to an agency that was in dire straits, this level of preparation was needed to force all of us to be on top of our issues,” Ms. Schapiro, 57, said in a recent interview.

As her bruising tenure comes to an end, Ms. Schapiro, who stepped down on Monday, leaves behind a stronger S.E.C., an overhaul characterized by her attention to detail and meticulous preparation.

While the agency still faces its share of challenges, Ms. Schapiro, the first woman to hold the top spot full time, has revamped the management ranks, revived the enforcement unit and secured more funding from a budget-conscious Congress.

A self-described pragmatist, she has also won over critics and embraced a cautious style that made her a steady hand during periods of tumult, like the May 2010 stock market flash crash.

Still, the makeover is not complete.

The agency must now grapple with the increasingly complex products and rapid-fire trading that dominate Wall Street. Ms. Schapiro’s conservative nature has also drawn fire from consumer advocates, who were hoping for a louder voice more critical of the financial industry. She was slow, they argue, to combat a new law that loosened investor protections and has trailed other regulators in writing rules for Wall Street.

“At a time when we needed an aggressive chairman of the S.E.C., I saw someone who was not pushing back,” said Bart Naylor, an analyst at Public Citizen, a consumer advocacy group.

On Monday, President Obama named Elisse B. Walter, a Democrat who became an S.E.C. commissioner in 2008, the new chairwoman. Ms. Walter, a longtime ally of Ms. Schapiro, is expected to carry out a similar agenda. In a somewhat surprising move, Ms. Walter will take over the top spot, rather than stepping into an interim post. Her appointment does not require Congressional approval because she was previously confirmed as a commissioner.

The White House is expected to nominate another agency chief in the near future, said a person briefed on the matter. Mary Miller, a senior Treasury Department official, is a likely candidate, others briefed on the matter said. Sallie L. Krawcheck, a former top executive at Citigroup and Bank of America, is also in the running, the people said.

Unlike some past S.E.C. chiefs, Ms. Schapiro is not expected to head into private legal practice. Instead, analysts say she is more likely to land at a university or research center.

Ms. Schapiro joined the government straight out of law school. In 1980, she started as a trial lawyer for the Commodity Futures Trading Commission, an agency she later ran under President Bill Clinton. She ultimately headed the Financial Industry Regulatory Authority, or Finra, Wall Street’s self-regulatory group. In 2008, Ms. Schapiro left Finra with a healthy $7 million-plus payout that included pension and deferred compensation.

She inherited a mess at the S.E.C. Critics contended that Christopher Cox, her predecessor, left an agency with low morale that was ill-prepared to cope with the financial crisis. An early plan by the Obama administration called for the S.E.C. to be broken up into a number of different agencies.

At a staff meeting in 2009, she warned that “everyone needs to work harder or this agency could become extinct.” She also circulated letters from Mr. Madoff’s victims.

“We had never been spoken to like that before, and it was exactly what we needed,” said Thomas A. Sporkin, a former enforcement official at the agency.

Ms. Schapiro directed much of her early attention on the beleaguered enforcement unit. In her first week, she accelerated the investigative process by scrapping a Cox-era policy that required enforcement lawyers to seek permission from the five-member commission before opening an inquiry. She also prompted the unit to merge more than 70 tip lines into one. To lead the unit, Ms. Schapiro tapped Robert Khuzami, a former federal prosecutor.

Over the last two years, the unit has filed a record number of actions and brought 129 cases against people and firms tied to the crisis. In 2010, the S.E.C. won a landmark fraud case against Goldman Sachs, netting a record fine in excess of $500 million. Even so, detractors contend that the S.E.C. has not moved aggressively, noting the agency has yet to charge a top bank executive in the crisis.

As the enforcement unit gained its footing, Ms. Schapiro courted its main critics, like Harry Markopolos, a fraud investigator who raised concerns about Mr. Madoff but was ignored. He initially argued that Ms. Schapiro was too soft to turn around the agency.

She then invited Mr. Markopolos to her office for tea, promising him that she would adopt a whistle-blower program at the agency, which was created last May. She also pushed through tougher controls for investment advisers like Mr. Madoff.

“I went in one of her biggest skeptics and left one her biggest supporters,” Mr. Markopolos said.

Ms. Schapiro, a political independent, had some success on Capitol Hill as well. Politicians initially vowed to limit the S.E.C.’s funding. Eventually, Ms. Schapiro, who often made special visits to her critics before a hearing, squeezed out a roughly 50 percent budget bump. Mr. Cox, her predecessor, called this an “enormous achievement.”

But the consensus-driven approach has constrained the agency’s efforts, some contend. Other regulators have outpaced the S.E.C.’s rule writing under the Dodd-Frank Act, the sprawling crackdown passed in response to the crisis. Ms. Schapiro notes that Dodd-Frank forced the S.E.C. to adopt more rules than any other agency.

Ms. Schapiro has also fended off complaints that she took a passive stance with the Jumpstart Our Business Startups Act, a deregulatory effort aimed at increasing investment in small businesses. The so-called JOBS Act rolled back securities regulations.

Ms. Schapiro wrote a letter to lawmakers opposing the act, an effort that produced some wording changes. But she publicly addressed the issue just once, in a passing reference during a speech to journalists. She did not discuss the law Act a week later when speaking to an influential audience attending a conference hosted by the Securities Industry and Financial Markets Association, Wall Street’s lobbying group. The JOBS Act was proposed and signed into law this year in the span of just four months.

“Confrontation is not in her DNA,” said Arthur Levitt, the agency’s chairman under President Clinton.

Even when Ms. Schapiro adopted an aggressive posture, Washington’s political machinery could derail her efforts. Ms. Schapiro wanted money market mutual funds, which played a central role in the crisis, to adopt bolder safety measures like holding cash reserves. The proposal, resisted by the industry and three of the agency’s five commissioners, was never taken to a vote. “It was more important for the future of the regulator to get things done rather than make a lot noise,” Ms. Schapiro said.

She refuses to characterize the money market battle as defeat, saying she decided instead to refer the issue to the Financial Stability Oversight Council, which recently proposed a number of reforms. “In the face of overwhelming industry opposition, she would not compromise to issue something weak,” said the Treasury secretary, Timothy F. Geithner, who runs the council.

Ms. Schapiro confided in staff members that the fight over money market reform left her “exhausted.” Ms. Schapiro told Mr. Geithner in March that she was hoping to leave her post to spend time with her oldest daughter, who left for college this fall. That plan was shelved after President Obama called Ms. Schapiro and asked her to stay until after the election.

Ms. Schapiro would not speculate about her next steps, saying only that she was now finding time to volunteer at a local animal shelter. “The job was incredibly rewarding, but I have no idea what is next.”

Article source: http://dealbook.nytimes.com/2012/11/26/schapiro-head-of-s-e-c-to-announce-departure/?partner=rss&emc=rss