Accounting Fraud

George Canellos, acting head of the division, said in February that investigators are looking into new ways of detecting accounting fraud, an area that has seen fewer enforcement actions in recent years. James Cox, a securities law professor at Duke University, said scrutiny of auditors and accountants is overdue.

“We have only seen the SEC be active against accountants with the Chinese reverse merger cases,” said Cox, referring to a string of cases involving China-based companies that bought public shell companies in the U.S. and reported false financial results. Inspections of auditors “repeatedly show an amazing lack of professional skepticism by accountants who repeatedly defer to very questionable applications” of the industry’s accepted accounting principles, he said.

The SEC has also struggled in recent years to show it has a grasp on increasingly fragmented markets dominated by electronic trading. While the agency has an investigative unit devoted to market abuse that recently brought novel cases involving exchanges and trading platforms, the area is still relatively unexplored, Sporkin said.

Future Focus

“Market structure is the clear future focus of the agency,” he said. “The investigations and resolutions of market structure issues today, such as high-frequency trading, the effect of dark pools on price discovery, and data latency, will help guide the new commission in formulating policies and writing rules.”

Ceresney, 41, graduated from Columbia University in 1993 and also completed a law degree in 1996 at Yale Law School, where he was essays editor of the Yale Law Journal. He was a law clerk for Michael Mukasey at the U.S. District Court for the Southern District of New York from 1997 to 1998 and then for Dennis Jacobs at the U.S. Court of Appeals for the Second Circuit the following year.

He served as a member of the securities and commodity fraud task force and major crimes unit in the Southern District of New York when White was U.S. Attorney, and then followed her in 2003 to Debevoise & Plimpton LLP, where she was a partner.

Possible Recusals

After taking office, Ceresney and White will both be expected to recuse themselves in cases involving many of Wall Street’s biggest players, since those firms were often clients at Debevoise. To address this, Ceresney may share the enforcement director role with acting chief Canellos for as long as a year, the people familiar with the matter said.