The Securities and Exchange Commission is creating the position of chief operating officer and looking to expand its ranks by 1,000 to better combat fraud.

“I have been disappointed to find that in some areas of our internal operations, we fall short of what the taxpayer has a right to expect of us,” SEC Chairman Mary Schapiro told the Senate Appropriations subcommittee.

The SEC has been criticized for missing the Bernard Madoff scandal, and the Obama administration has suggested moving some of its oversight, including that of policing mutual funds, into a new consumer financial regulatory agency.

Schapiro said the SEC would like to expand its ranks by 1,000 in fiscal 2011, up substantially from its current 3,500 employees. “My view is that I don’t want to create new gaps in the regulatory system,” Schapiro told senators. “Moving mutual fund regulation out of the SEC into another agency has the potential to do that.”

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