“It’s hard to decide when you start your tenure in a job like that, how to set your priorities, because it’s not easy to predict what’s going to come your way,” said David Kornblau, a former SEC enforcement attorney who is now a partner at law firm Covington & Burling LLP. Enforcement, he said, is “fundamentally reactive.”
When Khuzami joined the agency in 2009, the SEC was being pilloried for failing to stem practices that contributed to the financial crisis and for missing Bernard Madoff’s multibillion dollar fraud. Within a year, he eliminated a layer of management, created specialized units and set up a system to triage and vet the scores of tips coming into the agency.
Record Actions
Since then, the agency has touted record numbers of enforcement actions as evidence that Khuzami’s overhaul made division more efficient and productive.
Those gains, however, came mainly from a jump in routine administrative proceedings against people who had already been found guilty of fraud and delisting of delinquent companies -- actions that require minimal investigation compared to original cases. Excluding those cases, the number of new actions in 2011 and 2012 trailed output in 2009, the year before the division was restructured.
Ceresney faces the challenge of appearing aggressive even as the pipeline of cases slows. For the first half of this fiscal year, the number of cases is about 23 percent lower than last year.
“When Khuzami took over, the SEC was in a different place,” said Steve Crimmins, a former SEC attorney who is now a partner at K&L Gates in Washington. “It’s a challenging period, but it’s not the crisis.”