Underscoring the magnitude of problems in the current financial regulatory system, President-elect Barack Obama took the unusual step of nominating a new S.E.C. chairman before he's even finished appointing his cabinet. He named Mary Schapiro as his pick.

Schapiro, an attorney, is currently the head of the Financial Industry Regulatory Authority, which is the primary self-regulatory agency for the brokerage industry. It's the place you turn to when you think your broker has ripped you off, and it's where registered brokers get guidance on best sales practices. Its arbitration process has long been criticized for favoring brokers over investors, although that's something Schapiro has worked to change under her leadership.

Stepping into the S.E.C. just weeks after the revelation that it failed to uncover Bernard Madoff's alleged $50 billion Ponzi scheme will be no easy task. After seeing the collapse of two large Wall Street firms this year, nearly everyone agrees that the regulatory system as it currently stands is broken.

In late October, Schapiro spoke on a conference panel about the changes needed to fix the problems. She advocated a two-tiered regulatory system with a "twin peaks" structure, consisting of a market stability regulator and a business conduct regulator. The market stability regulator would have broad enforcement powers while the business conduct one would serve as a watchdog to ensure that banks and brokerages are meeting certain standards. She cited the success of such a system in places like the Netherlands, Australia, and New Zealand.

The first order of business that Schapiro as S.E.C. chair would likely tackle would be whether a merger of that agency with the Commodity Futures Trading Commission makes sense. Obama nominated former Treasury undersecretary Gary Gensler to head the C.F.T.C.

The C.F.T.C. has come under scrutiny as lawmakers are pushing for greater oversight of the credit default swaps market, the financial instruments that have been an integral part of this credit crisis. A combination of the two agencies has been proposed by current S.E.C. chairman Christopher Cox and Treasury Secretary Henry Paulson.

Of course, critics are already lining up opposite Schapiro. Some believe should would not be tough enough for the role, and others are already raising the point that Madoff's firm has been registered with FINRA since it was formed in 1960.