Elisse Walter took over as chairman of the Securities and Exchange Commission from Mary Schapiro last Friday, and advisers are already buzzing about her potential actions as head regulator in the new year.
While it is unclear how long she will serve, what is clear is the leadership approach Ms. Walter will use.
Her approach is to be forthright in defending her positions while listening to the other side, according to people who have sat across the table from her.
David Tittsworth, executive director of the Investment Adviser Association, has traveled to the SEC's Capitol Hill headquarters to talk to Ms. Walter about oversight of investment advisers.
The two couldn't be farther apart on the topic.
Ms. Walter is a strong advocate of a self-regulatory organization to oversee advisers, arguing that the SEC lacks sufficient resources to do the job itself.
Mr. Tittsworth contends that an SRO represents a costly layer of additional regulation that threatens the viability of small advisory firms. He and other adviser advocates support a congressional increase in the SEC budget to fund adviser examinations.
“She doesn't try to soft-pedal her views on an SRO, and neither do I. I respect her for that,” Mr. Tittsworth said.
“She has strong views, and she's good at expressing them,” he said. “She's fun and funny and smart.”
President Barack Obama designated Ms. Walter, 62, to take over as chairman from Ms. Schapiro, who served nearly four years in that role.
Ms. Walter can serve until her commissioner term expires next year. In the meantime, Mr. Obama may nominate a permanent chairman, as well as a candidate to fill the commissioner seat that Ms. Schapiro vacated.
Each position requires what could be a difficult Senate confirmation.
As Ms. Walter's first full week as chairman begins, speculation about a possible successor is already under way. Sallie Krawcheck, former president of global wealth and investment management at Bank of America Corp.; Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc.; Robert Khuzami, director of the SEC's enforcement division; and Ms. Walter herself are all considered contenders for the long-term position of SEC chairman.
Mellody Hobson, president of Ariel Investments LLC, is being mentioned as a candidate for Ms. Schapiro's commission seat.
Ms. Walter and Ms. Schapiro formed a tight bond during their time together on the SEC, usually voting in tandem. They also were colleagues at Finra, where Ms. Schapiro served as chief executive and Ms. Walter was an executive vice president.
Although their regulatory approach is similar, their styles differ. Ms. Walter, a two-time cancer survivor, tends to be pugnacious, while Ms. Schapiro was low-key.
“Mary Schapiro was a consensus builder,” said Paul Auslander, chief executive of American Financial Advisors Inc. and president of the Financial Planning Association. “Elisse Walter is a cause fighter.”
In addition to an adviser SRO, another area where she has waged a battle is on municipal bonds. Ms. Walter wants the market to be more transparent and for the SEC to exert more oversight.
She also is wary of a pending rule that would allow public advertising for private-placement stock offerings.
On other issues, Ms. Walter is a Rorschach test. Advocates tend to see in her someone who comes down on their side of the issue.
For instance, Marilyn Mohrman-Gillis, managing director of public policy and communications at the Certified Financial Planner Board of Standards Inc., is confident that Ms. Walter's support for the “harmonization” of adviser and broker regulations doesn't mean that she will water down fiduciary duty.
“I anticipate that she would advocate for a fiduciary standard consistent with Dodd-Frank,” Ms. Mohrman-Gill said, referring to the financial reform law.
Even though Ms. Walter is likely to pick up the mantle of money fund reform that Ms. Schapiro laid down, industry opponents are hopeful that she will meet them halfway.
“She's expressed a desire to work out a compromise position that preserves the essential characteristics of money funds as an investment vehicle while simultaneously addressing some of the concerns that banking regulators have articulated about the products,” said Susan Wyderko, chief executive of the Mutual Fund Directors Forum.
If Ms. Krawcheck becomes SEC chairman, the mutual fund industry will have its hands full.
Since leaving Merrill Lynch more than a year ago, she has come out as a strong proponent of reform. It is one of the ways Ms. Krawcheck raised her profile on regulatory issues, putting herself in a position to be the SEC nominee.
She is trying to “engineer inevitability,” said Mark Calabria, director of financial services regulation studies at the Cato Institute.
“It's hard to see the Democrats go after her,” Mr. Calabria said. “I doubt Republicans will go after her, either.”
Ms. Krawcheck, 48, would bring a fresh perspective to the SEC, said Kirk Michie, a partner at Triton Pacific Securities LLC.
“Sallie Krawcheck may be from Wall Street, but she's not of Wall Street,” said Mr. Michie, who worked at Sanford C. Bernstein & Co. LLC when she was an analyst there. “She was never the play-along, boys' club executive.”
The SEC needs an infusion of outside blood to change its lawyer-dominated culture, said Alan Davidson, chief executive of Zeus Securities Inc. and head of the Independent Broker-Dealer Association.
“The fact that [Ms. Krawcheck] comes from the industry should be a plus, not a minus,” Mr. Davidson said. “We need someone there who understands the industry.”
Mr. Davidson said he wants Mr. Ketchum, 62, to stay at Finra because he has improved the organization.
“He's done a good job at Finra. He's listened to the membership,” Mr. Davidson said.
“You can talk to him, and he's reasonable. He's the easiest to work with I've seen in my career,” Mr. Davidson said.
Sometime next year, advisers will find out whether there will be a full-term SEC chairman with whom they can work.
(To return to the Power 20, click here.)