More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
The SEC’s top cop, Robert Khuzami, plans to leave the agency later this month after four years as its enforcement director, the SEC announced Wednesday.
Khuzami’s departure has been anticipated, and his name has appeared on the list of potential successors to current SEC Chairwoman Elisse Walter, who will likely only serve until the end of this year. Khuzami is the latest in a string of executives who have departed the agency since former SEC Chairwoman Mary Schapiro departed in December.
But Khuzami says he's unsure of where he’s going next, as he told the New York Times: “I don’t know what I’m doing next, but I loved the last four years and I’m sad it’s ending.”
The SEC credited Khuzami with a long list of achievements during his four years at the agency, namely filing scores of significant actions connected to the financial crisis and bringing a record numbers of cases involving insider trading and misconduct by investment advisors and investment companies.
Under Khuzami’s leadership, the Enforcement Division filed its most-ever cases in fiscal years 2011 and 2012 following the most significant restructuring in agency history spearheaded by Schapiro.
“Rob’s leadership and bold ideas transformed and reinvigorated the enforcement program,” said Walter, in a statement. “Under his direction, the division not only produced record results, but embraced changes that in the years to come will enable the talented staff to better protect investors through increased efficiency, expertise, and strategic focus.”
Khuzami said in the same statement that “I have spent half my career in public service, and nowhere is there the level of professionalism, skill and talent on such a large and coordinated scale as there is in the SEC’s Division of Enforcement. They have inspired me, educated me and motivated me to do my very best, and for that I am eternally grateful.”
After being named enforcement director in February 2009 by Schapiro, Khuzami is credited with prioritizing the Enforcement Division’s effort to pursue financial crisis misconduct. The division has since charged more than 150 individuals and entities with wrongdoing, including 65 CEOs, CFOs and other senior corporate officers. The financial crisis-related cases have resulted in $2.68 billion in financial relief for harmed investors, and 36 individuals have been barred from serving as officers and directors at public companies or from working in the securities industry.
High-profile defendants in SEC cases alleging wrongdoing during the financial crisis include Goldman Sachs, JPMorgan, Credit Suisse, Citigroup, State Street, Wachovia, Charles Schwab, and former top executives at Fannie Mae, Freddie Mac and Countrywide.
Khuzami has led the Division’s “most productive period” of insider trading enforcement as investigators cracked large-scale coordinated schemes involving Wall Street professionals, the SEC said. The Galleon Management/Raj Rajaratnam investigation has resulted in charges against 29 defendants including former McKinsey & Co. global head Rajat Gupta.
Since the beginning of fiscal year 2010, the SEC said it has filed 180 enforcement actions alleging insider trading by approximately 430 individuals and entities for illicit profits totaling $900 million.
Khuzami also created five specialized units within the division to focus on asset management, market abuse, structured and new products, foreign corrupt practices, and municipal securities and public pensions.
In addition to the all-time record number of 735 SEC enforcement actions in FY 2011 and another 734 actions in FY 2012, Khuzami led the division to record results in a number of specific enforcement areas.
The SEC filed 293 enforcement actions involving investment advisors in fiscal years 2011 and 2012, the most ever in a two-year period. There was a 60 percent increase in cases filed against broker-dealers in fiscal year 2011, and the number of filed actions increased another 19% in fiscal year 2012. The SEC also filed 17 actions related to municipal securities in fiscal year 2012, the most in a single year since 2004.
Prior to joining the SEC, Khuzami served as a federal prosecutor for 11 years with the U.S. Attorney’s Office for the Southern District of New York, including three years as chief of its Securities and Commodities Fraud Task Force.
Khuzami served as a law clerk for the Hon. John R. Gibson of the U.S. Court of Appeals for the Eighth Circuit in Kansas City, Mo. He received his J.D. from the Boston University School of Law, and graduated magna cum laude from the University of Rochester, where he was elected to Phi Beta Kappa.
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