SEC names unit heads, new enforcement measures

The US Securities and Exchange Commission (SEC) has named the heads of the five specialist investigation units and its market investigation unit – which were created last year, as it continued what it described as its biggest shake-up since its establishment in 1972.

Concurrently, SEC Enforcement Division director Robert Khuzami also announced new measures and tools designed to help the beleaguered agency, which has been criticised for missing massive fraud such as that perpetrated by Wall Street swindler Bernard Madoff, ferret out white collar crime earlier.

The appointments announced by the SEC include Thomas Sporkin, former deputy chief at the SEC’s Office of Internet Enforcement, who will take over the new Office of Market Intelligence. Bruce Karpati, founder and head of the commission’s Hedge Fund Working Group, and Robert Kaplan, previously an SEC enforcement division assistant director, will take charge of a unit focused on asset management.

A unit looking into large scale market abuses and manipulation will be led by Daniel Hawke, who was director of SEC’s Philadelphia office. Structured and new products will be overseen by Kenneth Lench, also formerly an assistant director at the SEC’s enforcement division. Cheryl Scarboro, previously an associate director in the SEC’s enforcement division, will head the unit focusing on violations of the Foreign Corrupt Practices Act, while Elaine Greenberg, former the associate regional director of the SEC’s Philadelphia regional office, will take up leadership of the unit scrutinising municipal securities and public pensions.

“These specialised units address both challenges through improved understanding of complex products and markets, earlier and better capability to detect emerging fraud and misconduct, greater capacity to file cases with strike-force speed and an increased in expertise throughout the division. By making connections between similar tips from different outside sources, our new Office of Market Intelligence will enable the division to better focus resources on those tips and referrals with the greatest potential for uncovering wrongdoing,” Mr Khuzami said.

Mr Khuzami also announced the agency will now authorise staff to use tools, inspired by those used by the Department of Justice and which were previously unavailable to them, in eliciting cooperation from companies and individuals during investigations.
They include cooperation agreements, which recommend the bestowal of credit for cooperation in investigations where substantial assistance has been rendered, and deferred prosecution agreements, where the agency agrees to forego for a limited period, any enforcement act provided the other party agrees to cooperate fully in an investigation and to comply with conditions either prohibiting or requiring certain actions.

Finally, SEC enforcement staff will be allowed to use non-prosecution agreements, in which the commission would agree to not prosecute an offender provided that they provide cooperation.

Mr Khuzami also said the SEC has also streamlined the process for submitting witness immunity requests to the Justice Department, as well as set out clearer guidelines on how it evaluates the cooperation provided by companies and individuals during enforcement investigations.