President Obama has selected a new chair of the SEC, Mary Schapiro, to replace Christopher Cox. Schapiro, in turn, has selected a new nationwide director of the Division of Enforcement — Robert Khuzami, a former federal prosecutor and chief of the securities fraud unit at the U.S. attorney’s office in Manhattan. This is an interesting and unusual choice. Previously, the SEC’s nationwide enforcement director has come from the ranks of the SEC enforcement staff itself — e.g., Linda Thomsen, Dick Walker, Bill McLucas and Gary Lynch. So what message is Schapiro sending by choosing a former federal criminal prosecutor to head the SEC’s enforcement division?
The choice likely portends major operational changes at the division. Typically, the SEC’s enforcement staff casts a wide net in its investigations, obtaining documents and taking sworn testimony from all individuals with any possible connection to the events being investigated. This wide net, in turn, is one reason why SEC investigations are so lengthy — often ending years after the events under investigation.
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