FEW ATTORNEYS HAVE HAD A CAREER AS BROAD
and varied as Robert Khuzami’s, which
has ranged from private practice to federal prosecutor to bank general counsel to
enforcement director at the U.S. Securities and Exchange Commission.
As an assistant U.S. attorney in Manhattan (1990-2002), Khuzami spent three
years as chief of the securities and commodities fraud task force. He then was
litigation chief and later general counsel
for the Americas at Deutsche Bank until
2009, when he joined the SEC as director of enforcement for four years in the
wake of the financial crisis. He now is a
partner at Kirkland & Ellis’ government
and internal investigations group.
Corporate Counsel talked with Khuzami about enforcement and regulatory
trends. Excerpts from our interview,
edited for clarity and length, follow.
CORPORATE COUNSEL: As a former federal
prosecutor and chief of SEC enforcement, describe how enforcement changes
from one administration to another.
ROBERT KHUZAMI: A large percentage of
what goes on in the Justice Department
and the SEC and with other regulators
continues unabated as administrations
come and go. You are talking about prosecuting individuals and companies for
illegal behavior. For the most part those
are things that are bipartisan. Nobody is
in favor of people breaking the law.
Budget constraints are the real consideration. There’s a hiring freeze on, and
as individuals leave their posts and those
positions can’t be filled, that will have a
slow but sure impact over time on what
the agencies do. Some of that may be
compensated for by increased efficiencies,
or a forced prioritization.
But you do have to keep in mind that
these agencies—particularly the SEC with
an enforcement division of maybe 1,300
people—are responsible for regulating
tens of thousands of investment advisers,
transfer agents, broker dealers and public
companies, as well as individuals. So they
were already significantly outgunned.
There are some things that are likely to
get some additional assessment or analysis
to at least see if those policies will continue.
Under the prior SEC administration you
saw an emphasis on first-ever cases. I think
there’ll probably be some closer scrutiny
on bringing cases for the first time in certain areas. And there’s a possibility that
alternative ways of communicating to
companies in the regulated world on what
kind of behavior is acceptable and what is
not might be made through other means.
That can be through guidance, or FAQs or
speeches or 21A reports [which publicize
the facts uncovered in an investigation] or
CC: Despite billions of dollars in fines and
penalties against banks in the past several
years, President Donald Trump has called
for major changes in the Dodd-Frank Act.
Do you think that is wise?
RK: I don’t think that re-examination
and reconsideration of Dodd-Frank is
inappropriate. First, a majority of the
fines and penalties against banks relates
to conduct that occurred before Dodd-Frank was passed, or before the underlying rules were written and implemented.
So, to some degree, the final story on the
effectiveness of Dodd-Frank remains to
I do think the legislation, as well as
other post-crisis developments, has been
instrumental in putting banks back on
solid footing, and starting the process of
restoring the faith of the public, investors,
employees and clients in our financial
institutions. In the end, I don’t agree that
a wholesale abandonment of Dodd-Frank
is wise, but a close examination of certain
provisions is certainly appropriate.
CC: What changes do you see under the
new attorney general, Jeff Sessions?
A REGULATORY ROADMAP FROM A BELTWAY INSIDER
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