SEC enforcement chief to step down

US Securities and Exchange Commission enforcement chief Robert Khuzami plans to leave the agency at the start of the new year, Bloomberg news and others report, citing multiple people with knowledge of the matter.

Robert Khuzami

Former SEC chairwoman Mary Schapiro hired Khuzami in 2009 to help repair the agency’s image following the notorious Bernie Madoff Ponzi scheme missed by regulators. In his first 100 days in office Khuzami revamped the enforcement division’s structure and operations, creating five “specialised units” that would keep the agency up to speed with complicated market transactions and practices. 

For private equity firms, the key takeaway from the overhaul was the creation of an “Asset Management” unit, which hired specialist investigators to oversee the private funds market. Under the leadership of Bruce Karpati and Robert Kaplan (who has since joined New York law firm Debevoise & Plimpton), the team took closer looks into issues of valuation, complex structures and conflicts of interest related to private equity funds. 

The enforcement division is responsible for investigating possible violations of federal securities laws, including insider trading and fraud. Under Khuzami’s vision, the Asset Management unit created close ties with the SEC’s Office of Inspections, Compliance and Examinations, which within the agency has greater expertise in investment advisors and companies. Sources say this collaboration has led to “smarter” investigations into private equity firms. Chief compliance officers have told PE Manager in the past that the agency has taken greater strides in hiring examiners and enforcement personnel with specialist knowledge in private equity and other markets. 

According to Bloomberg, Khuzami is pushing for his deputy George Canellos to become his successor. Current SEC chairwoman Elisse Walter has reportedly not yet chosen a replacement.

Canellos became the division’s deputy director in June following a three year spell as regional director in New York. While there, Canellos was responsible for the largest concentration of SEC-registered financial institutions. This included more than 4,000 investment banks, investment advisors, broker-dealers, mutual funds and hedge funds, according to a SEC statement.

The SEC declined to comment.