SEC Rearranges its Enforcement Program

The Securities and Exchange Commission reorganized its enforcement division. Enforcement Director Robert Khuzami announced a new program announced the creation of new units.

First, the SEC are expanding the whisteblower program. They are calling it a “cooperation program.”

Then there are five new units in the enforcement division.

Asset Management Unit

The unit specializing in asset managers, including hedge funds and private-equity firms, is set to be jointly run by Bruce Karpati, who has run the agency’s hedge-fund working group for the past several years, and Robert Kaplan, another SEC veteran.

Mr. Karpati was founder and head of the SEC’s Hedge Fund Working Group, and has served as Assistant Regional Director for the New York Regional Office of the SEC. Earlier, he was a Branch Chief and Attorney in the Division of Enforcement at the agency. Previously, Mr. Karpati was an Associate at Dechert LLP in Washington, D.C..

Mr. Kaplan has served as Assistant Director of the SEC’s Division of Enforcement. He previously held positions as Assistant Chief Litigation Counsel and Senior Counsel/Staff Attorney in the Division. Earlier, he was an Associate with Morgan, Lewis & Bockius LLP in New York.

Market Abuse Unit

Daniel Hawke, head of the Philadelphia office, was selected to run the market abuse unit, which will focus on insider-trading and market-manipulation cases.

Mr. Hawke is Director of the SEC’s Philadelphia Regional Office. He joined the SEC’s Philadelphia office as Associate Regional Director, and previously served in the Washington, D.C. office as Branch Chief and Staff Attorney in the Enforcement Division. Earlier, he was a Litigation Partner at Tucker, Flyer & Lewis LLP in Washington, D.C.

Structured and New-products Unit

Kenneth Lench will run the structured and new-products unit, which will focus on derivatives and newly developed products.

Mr. Lench has served as Assistant Director, Branch Chief, Assistant Chief Counsel, and Senior Counsel/Staff Attorney with the SEC’s Division of Enforcement. Earlier, he was a Senior Attorney with the SEC’s Division of Corporation Finance, and an Associate with Sills Cummis P.C. in Newark, N.J.  (Mr. Lench I have the same college/law school combination:  J.D. from Boston University School of Law, and a B.A. from Brandeis University.)

Foreign Corrupt Practices Act Unit

Cheryl Scarboro will be named chief of the agency’s unit that investigates foreign bribery by corporations.

Ms. Scarboro has served as Associate Director, Assistant Director, Deputy Assistant Director, and Staff Attorney in the SEC’s Division of Enforcement. She also was Counsel to SEC Chairman Arthur Levitt, Jr.. Earlier, she was an Associate at Sutherland, Asbill & Brennan LLP in Washington, D.C.

Municipal-Securities and Public Pension Unit

Elaine Greenberg, a veteran of the Philadelphia office, has been tapped to run the municipal-securities unit. This will also include the new focus on pay-to-play.

Ms. Greenberg is the Associate Regional Director of the Philadelphia Regional Office of the SEC and has served as the Co-Chair of the Division’s national Municipal Securities Working Group. Earlier, she was Assistant Regional Director, Branch Chief, and Staff Attorney in the Philadelphia office.

Beyond these five new units there are two other initiatives.

Office of Market Intelligence

The SEC also created a new Office of Market Intelligence that will assume the responsibilities of the Internet enforcement unit and add new duties, such as handling tips and referrals. Tom Sporkin will lead this office.


The SEC also wants to encourage greater cooperation from individuals and companies in the agency’s investigations and enforcement actions. The new cooperation tools, not previously available in SEC enforcement matters, include:

  • Cooperation Agreements — Formal written agreements in which the Enforcement Division agrees to recommend to the Commission that a cooperator receive credit for cooperating in investigations or related enforcement actions if the cooperator provides substantial assistance such as full and truthful information and testimony.
  • Deferred Prosecution Agreements — Formal written agreements in which the Commission agrees to forego an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and to comply with express prohibitions and undertakings during a period of deferred prosecution.
  • Non-prosecution Agreements — Formal written agreements, entered into under limited and appropriate circumstances, in which the Commission agrees not to pursue an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and comply with express undertakings.