Andrew J. Ceresney, director for the SEC’s enforcement division, and two other key departures are underscoring the exodus from the regulator.
Andrew Ceresney, director, SEC Division of Enforcement
The exodus from the SEC continues as Andrew J. Ceresney, director for the SEC’s enforcement division — the largest division of the regulator — will be leaving his post by the end of the year after a four-year term that set enforcement action records.
After he leaves the SEC, it is not known what Ceresney’s next position will be.
Stephanie Avakian, deputy director of the SEC’s Enforcement Division, will take over as the acting director, SEC officials say.
Avakian joined the SEC in June 2014 from the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, where she was a partner in the firm’s New York office and a vice chair of the firm’s securities practice. She previously worked in the SEC Enforcement Division as a branch chief in the New York Regional Office, and later was as a counsel to SEC Commissioner Paul Carey.
SEC officials have noted that during his time as head of the agency’s largest division, Ceresney had significant cases “across the entire spectrum of the securities industry.” During his tenure, the SEC filed more than 2,850 enforcement actions and obtained judgments and orders totaling more than $13.8 billion in monetary sanctions. In addition, the regulator also charged more than 3,300 companies and over 2,700 individuals, including many CEOs, chief financial officers (CFOs), and other senior corporate officers.
The enforcement actions also include “first-of-their-kind cases” and a first-ever admissions policy for a civil law enforcement agency, according to SEC Chair Mary Jo White, in a prepared statement. “And I am very grateful for his wise counsel, impeccable judgment and expertise,” White says.
The division’s actions under Ceresney involved all priority areas, including:
- Issuer Reporting and Disclosure and Gatekeepers: The division filed more than 370 issuer reporting and disclosure cases and more than 210 accountant-related Rule 102(e) proceedings;
- Market Structure and Complex Manipulation Schemes: The Enforcement Division filed cases against seven firms operating “significant Alternative Trading Systems” such as the ATSes from Barclays Capital Inc.; Credit Suisse Securities (USA) LLC; and ITG and its affiliate AlterNet Securities. In addition, “in a groundbreaking action,” the SEC filed charges against hackers and traders “in and outside the U.S. for allegedly hacking into multiple newswire services to steal hundreds of corporate earnings announcements and trading on this information before it was publicly released, generating more than $100 million in illegal profits.”
- Insider and Abusive Trading: The division filed “more than 150 actions related to insider and abusive trading, including against a prominent hedge fund manager and his firm; two hedge fund managers and their source, a former U.S. Food and Drug Administration official; and a well-known Las Vegas gambler and his source, a corporate board member,” officials say.
- Investment Advisers and Investment Companies: The enforcement division filed “a record number of more than 475 investment adviser or investment company-related actions. These actions included 11 cases involving private equity firms and a significant conflicts of interest case against two JPMorgan wealth management subsidiaries,” officials say.
- Enforcement of the Foreign Corrupt Practices Act: “In the fiscal year that just ended, the Division filed 21 actions involving violations of the Foreign Corrupt Practices Act — the most in the SEC’s history,” officials say. “The FCPA cases filed in the last few years were highly impactful, including those against a hedge fund and its sitting CEO and CFO [chief financial officer], a Dutch telecommunications company, and three cases involving violations of the FCPA through hiring practices or the provision of valuable internships — against JPMorgan Chase & Co., Qualcomm Incorporated and BNY Mellon.”
- Complex Financial Instruments: “The Division filed a critical customer protection rule case against Merrill Lynch, the settlement of which involved admissions of wrongdoing and hundreds of millions of dollars in monetary sanctions; a first-of-its-kind settlement with a major ratings firm (Standard & Poor’s); and the first three sets of charges — against UBS AG, Merrill Lynch, and UBS Financial Services — involving misstatements and omissions by issuers of structured notes to retail investors,” officials say.
- Public Finance Abuses: The division filed charges against 72 municipal underwriting firms — “comprising approximately 96 percent of the market share for municipal underwritings” — and 71 municipal issuers and other obligated persons for violations in municipal bond offerings as part of the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative,” officials say.
- Microcap Fraud and Pyramid Schemes: The division created the Microcap Fraud and Pyramid Scheme Task Forces to take on these types of fraud that “primarily impact retail investors,” officials say.
In addition, the SEC says that Ceresney made “significant enhancements” to its investigative processes, settlement approaches, and trial program, officials say. In addition, the division “vastly increased its use of data and data analytics to detect and investigate misconduct.”
The division also reports that the whistleblower program “surpassed the $130 million mark for awards, and tips in fiscal year 2016 surpassed 4,200, rising over 40 percent from 2012, the first fiscal year the program was in place,” officials say.
Before joining the SEC in April 2013, Ceresney was a litigation partner in the law firm of Debevoise & Plimpton LLP and was co-chair of its White Collar Group, officials say.
In related news, the SEC reports that Chief Economist and Division of Economic and Risk Analysis (DERA) Director Mark J. Flannery will be leaving by the end of the month to return to his position as a finance professor at the University of Florida’s Graduate School of Business Administration.
Flannery has held the positions of chief economist and DERA director since September 2014 and has led economic analysis to support SEC rulemaking and developing sophisticated analytical tools to assist in risk assessment and enforcement activities, officials say. He has also represented the agency on the Financial Stability Board’s Standing Committee on Assessment of Vulnerabilities (SCAV), where he led discussions on the considerations and implications of stress testing asset managers, investment company redemption risk, and fixed income liquidity, among others.
In another key departure, Keith F. Higgins, director of the SEC’s Division of Corporation Finance, announced that he plans to leave the SEC in early January.
Since joining the SEC in June 2013, Higgins led the division’s implementation of significant rulemaking and other responsibilities under the Dodd-Frank Wall Street Reform and Consumer Protection Act, Jumpstart Our Business Startups Act (JOBS Act), and Fixing America’s Surface Transportation Act (FAST Act).
Higgins was also responsible for the division’s program to review the securities filings of thousands of issuers each year to facilitate capital formation and ensure that investors receive full and fair disclosure about the public companies in which they invest, officials say. He also guided the division’s efforts to provide interpretive advice to market participants about their obligations under the federal securities laws. “He led our extensive rulemaking efforts and has charted a course to make our disclosure system more effective for investors and companies,” White says in a statement.
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