By Caren Bohan
CHICAGO (Reuters) - President-elect Barack Obama has chosen seasoned regulator Mary Schapiro to lead the U.S. Securities and Exchange Commission, an agency that has come under fire after the Wall Street meltdown exposed lapses in its oversight.
Two Democrats familiar with the selection process said Obama is prepared to name Schapiro as chairwoman of the commission. An announcement is expected at a press conference Obama plans to hold in Chicago on Thursday at 9:45 a.m. central time (1545 GMT).
Schapiro is chief executive of the Financial Industry Regulatory Authority, a self-regulatory body for the securities industry. She served as an SEC commissioner for six years, then became chairman of the U.S. Commodity Futures Trading Commission in 1994 during the Clinton administration.
Schapiro, a lawyer, is a member of the board of directors of Duke Energy Corp and Kraft Foods Inc.
If nominated by Obama and confirmed by the U.S. Senate as SEC chairwoman, Schapiro would take over an agency that has faced withering criticism as the financial crisis has shaken the confidence of investors.
On Wednesday, current SEC Chairman Christopher Cox, a California Republican, said he was concerned about the agency's failure to examine activities of Wall Street broker Bernard Madoff, who is accused of a $50 billion securities fraud.
The Madoff case is believed to be one of the biggest case of financial fraud in history. It has had ripple effects on Wall Street as investors dumped shares of firms that had exposure to losses because they did business with Madoff.
Madoff's activities were flagged at least as early as 1999 and repeatedly brought to the attention of SEC staff, who never recommended that commissioners take action.
Cox said he asked the agency's inspector general to probe the agency's conduct in the case.
CALLS FOR DRAMATIC REFORM
In September, the SEC's inspector general faulted the agency for failing to adequately supervise big investment bank Bear Stearns before it collapsed.
Some lawmakers have called for a dramatic overhaul of the agency. Under some scenarios, the SEC would be merged with the Commodity Futures Trading Commission, which regulates commodities.
Cox has come in for plenty of blame for the SEC's perceived lapses but critics also say budget cuts at the agency have hindered its ability to carry out its enforcement mission.
Former Democratic SEC Commissioner Roel Campos, who is part of the team advising Obama on financial issues, praised Schapiro as "a regulator's regulator."
"She has more experience in all aspects of securities regulation than almost anyone," Campos said.
The choice of Schapiro, a regulatory insider, for the SEC job, was in some ways a cautious move by Obama. He might have come in for criticism if he had instead chosen someone steeped in Wall Street experience who might have been viewed as tainted by the financial crisis.
FINRA is the largest non-governmental regulator for all securities firms doing business with the U.S. public. The group conducts examinations of securities firms, sets and enforces rules governing conduct of the industry, and administers a dispute resolution forum for investors.
Michael Swartz, a partner at law firm Hennigan Bennett & Dorman in Santa Monica, California, said he was not bothered by Schapiro's insider status.
He said she might be "well-suited" to looking at whether the SEC is in need of an overhaul because of her years of working as a regulator.
(Additional reporting by Rachelle Younglai and Kevin Drawbaugh in Washington; Gina Keating in Los Angeles and Emily Chasan in New York; editing by Eric Walsh and Todd Eastham)
