The Securities and Exchange Commission is shaking up its enforcement division, establishing five priority areas, including one pointed directly at hedge funds and private equity firms.
The agency, and in particular its enforcement arm, have taken a beating in the press and on Capitol Hill for its failure to detect Bernard Madoff’s $65 billion Ponzi scheme and other alleged frauds. The SEC has responded with what it calls the most significant reorganization of the enforcement division since it was created nearly 40 years ago.
Of particular interest—or concern—to alternative investment managers will be the new specialized asset management unit, which will have hedge fund and p.e. probes under its purview. The new unit is headed by Bruce Karpati, founder and head of the SEC’s Hedge Fund Working Group and a former assistant regional director in its New York office, and Robert Kaplan, formerly assistant director of the enforcement division.
The SEC has also set up specialized units tackling market abuse, structured and new products, foreign corrupt practices, and municipal securities and public pensions. It has also created a market intelligence office to collect, analyze and monitor the tips and referrals the SEC receives.
“These specialized 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 increase in expertise throughout the division,” SEC enforcement chief Robert Khuzami said. “And 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.”
