RTTNews - In the wake of a wrenching year for investors, U.S. Securities and Exchange Commission Chairman Mary Schapiro updated the Senate Appropriations Committee subcommittee on financial services and general government on progress made in the first five months of 2009, and what still needs to be done to shore up the embattled regulator.

In her prepared remarks Schapiro reiterated changes that have been made at the agency to reinforce focus on investor protection, moves necessary to repair deeply shaken market confidence.

Changes include ending a two-year penalty pilot program. The program had placed unnecessary hurdles in front of SEC staff pursuing cases that sought fines against public companies that violated the law, Schapiro said.

The SEC has faced criticism in the wake of the financial crisis and several high profil scandals, most notably the $65 billion Ponzi scheme operated by Bernard Madoff.

Schapiro showed progress, noting that the Division of Enforcement has been working diligently. She noted that since the end of January, the division has filed at least 34 emergency temporary restraining orders, while in the same period in 2008 they only filed 12.

However, she added that there have been important questions raised in the wake of the Madoff scandal, particularly in the SEC's handling of tips. In a congressional hearing earlier this year, a top whistle-blower in the Madoff scandal accused the SEC of blatantly ignoring his detailed warnings of the now-infamous $50 billion Ponzi scheme. Appearing before a Congressional panel investigating the alleged scheme, Harry Markopolos said that the SEC has investigative ineptitude.

He alleges that despite nearly 10 years of communication with the regulatory body, the SEC did not take action, and only one official understood the alleged Ponzi scheme and the threat it posed to the public.

Because nothing was done, I became fearful for the safety of my family until the SEC finally acknowledged, after Madoff had been arrested, that it had received credible evidence of Madoff's Ponzi scheme several years earlier, Markopolos said in his written testimony.

Schapiro noted this, stating that the lack of agency response is something we must learn from, and I am committed to addressing it.

Former Chairman Cox asked the SEC Inspector General to look into what happened, what failed to happen, and to report back to the Commission, she added. We expect to receive the IG report this summer and will promptly take all appropriate actions and address any remaining shortcomings.

However, it is clear that the SEC must improve how it processes tips, she said, adding that they are in the process of creating a better system.

As the SEC looks to fill regulatory gaps, Scapiro told lawmakers that the SEC needs more staff to properly do its job.

I believe additional resources are essential if we hope to restore the SEC as a vigorous and effective regulator of our financial markets, she said.

In his 2010 budget, President Barack Obama is requesting a total of $1.026 billion for the agency, a 7 percent increase over the 2009 funding level.

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