A Lehman Brothers bankruptcy examiner's report will help securities regulators in their investigation of large financial firms involved in the Wall Street meltdown, a top regulator said on Wednesday.

Securities and Exchange Commission Chairman Mary Schapiro, testifying at a congressional hearing, provided scant details on who and what the agency is probing.

But Schapiro said the report would be helpful to us.

She was asked what the SEC was doing to investigate Lehman Brothers and its auditor, Ernst & Young, after a report found the investment bank used accounting gimmicks before it filed for bankruptcy in September 2008.

It is safe to assume that we are looking at the conduct of a number of firms, Schapiro told a House appropriations subcommittee without naming Lehman or Ernst & Young.

The SEC was the primary regulator of Lehman Brothers and the other largest investment banks including the now defunct Bear Stearns.

Schapiro, who was not SEC chairman at the time of the investment bank's collapse, said the SEC's program to supervise investment banks was flawed from the start because it was voluntary regulation and inadequately staffed.

We were ill suited because of our disclosure and enforcement mentality, she said, adding that the SEC is trying to address the agency's shortcomings.

The 2,200-page report from a court-appointed examiner alleges that an accounting gimmick known as Repo 105 was used for the sole purpose of manipulating Lehman's books.

The examiner also said there was sufficient evidence to support a possible claim that Ernst & Young had been negligent and that Lehman could pursue claims against the firm for professional malpractice.

SEC ASKED TO LOOK AT COMPANIES' EU EXPOSURE

Representative Mark Kirk asked Schapiro if the SEC would ask large U.S. financial firms to publicly disclose their exposure to Greece, Spain and Portugal.

Greece's borrowing costs have jumped in recent months, forcing the Greek government to take tough measures to tighten its budget and seek financial aid. There are also fears that Spain and Portugal are shouldering unsustainable debt burdens, raising concerns that investors will demand higher interest rates on loans.

Schapiro said U.S. companies already have obligations to disclose material information, or information an investor needs to know in order to buy a company's stock. However, Schapiro said the SEC can look at the disclosures.

She also said the SEC now has a special unit dedicated to continuously looking at the financial statements of the largest financial firms.

SEC TOLD TO HELP THE ECONOMY

Representative Jose Serrano, who chairs the subcommittee responsible for financial services appropriations, told the SEC it has an obligation to address the economic problems caused by the securities market.

Too often, discussion of the SEC's responsibilities focuses narrowly on investor protection, Serrano said at the hearing on how the SEC has been using its funds.

The U.S. unemployment rate stands at 9.7 percent and has become one of the most pressing concerns for Congress and the Obama administration.

The SEC is in charge of policing markets, protecting investors and supervising thousands of financial players such as investment advisers and broker dealers.

(Reporting by Rachelle Younglai, editing by Tim Dobbyn, Bernard Orr)

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