SEC Chairman Plans to Hire Steven Peikin to Run Enforcement Division -- Update

By Dave Michaels 

WASHINGTON -- Securities and Exchange Commission Chairman Jay Clayton will hire a former prosecutor and veteran litigator from his former law firm to run enforcement at the markets regulator, according to people familiar with the matter.

Steven Peikin, who has worked for years at Sullivan & Cromwell LLP where Mr. Clayton was a partner before entering government, will become co-director of the enforcement division, the people said. Stephanie Avakian, who has served as the SEC's acting enforcement director, is likely to remain at the commission as co-director.

The decision to hire two top managers for the SEC's enforcement division would ease some of the issues created by Mr. Peikin's past work for Wall Street. Mr. Peikin has done high-profile defense work for Barclays PLC and Goldman Sachs Group Inc., including a stint where he helped represent Goldman during a U.S. Senate investigation of its trading and warehousing of key manufacturing commodities such as aluminum. Under SEC ethics rules, he would be barred for one year from supervising any cases that affect Goldman or other clients of Sullivan & Cromwell.

Mr. Peikin, a graduate of Harvard Law School, leads the criminal defense and investigations group at Sullivan & Cromwell. His work as both a government lawyer and defender of big banks could spark criticism from Democrats who mistrust the SEC's revolving door. Former colleagues say his background as a prosecutor should ease any concerns that he would take it easy on companies and financial executives.

From 1996 to 2004 he was an assistant U.S. attorney in Manhattan, where he oversaw the Southern District of New York's securities and commodities task force. During that era, Mr. Peikin earned headlines for his prosecution of star technology banker Frank Quattrone, who was convicted of obstructing a government investigation and witness tampering, although an appeals court later threw out the judgment.

Mr. Peikin's experience as a prosecutor spanned the period when the government pursued several major executives for accounting fraud. Mr. Peikin participated in the prosecution of WorldCom Inc. Chief Executive Bernard Ebbers, who was convicted and sentenced to 25 years in prison, according to a disclosure in a 2005 New York Law Journal article that he wrote.

"He has a lot of experience and encyclopedic knowledge of the securities laws, and I think he's going to be aggressive and tough without being unhinged," said Aitan Goelman, a former enforcement director for the Commodity Futures Trading Commission who worked with Mr. Peikin when both were federal prosecutors.

More recently, Mr. Peikin was part of the defense team for futures trader Michael Coscia, who became the first U.S. trader criminally convicted of spoofing, a fraudulent trading strategy. Spoofing, which became illegal under the 2010 Dodd-Frank Act, involves placing orders that one doesn't intend to fulfill, in an effort to trick other traders into altering their prices in a direction that benefits the spoofer. Mr. Coscia's case is now pending before a federal appeals court.

Former SEC Chairman Mary Jo White, who stepped down in January, also recruited co-directors of enforcement when she took over leadership of the regulator. The move made it easier for her choice as enforcement director, Andrew Ceresney, to join the agency because he, too, faced the need to recuse himself from working on cases that involved clients of his former law firm, Debevoise & Plimpton LLP. Ms. White also worked at Debevoise & Plimpton before taking over the SEC, which she ran from 2013 to early 2017.

Ms. Avakian joined the SEC in 2014 as deputy director of enforcement under Mr. Ceresney. She became acting director after Mr. Ceresney returned to Debevoise as co-chairman of its litigation department.

While it is unusual for a new SEC chairman to retain a director hired by a predecessor, Ms. Avakian is viewed by SEC staff attorneys as a strong manager who would provide continuity and understanding of SEC procedures that Mr. Peikin lacks, since he has never worked at the agency.

It isn't clear how soon Mr. Clayton plans to announce the decision. He has already hired other SEC directors who historically have a lower profile than the director of enforcement.

One question facing Mr. Peikin and Ms. Avakian will be how they leverage the SEC's powers to extract big financial penalties from corporations that settle claims of wrongdoing. Speaking to the Senate Banking Committee in March, Mr. Clayton suggested that regulators could achieve more by suing individuals rather than fining companies.

--Michael Rothfeld contributed to this article.

Write to Dave Michaels at [e-mail]

(END) Dow Jones Newswires

May 26, 2017 17:15 ET (21:15 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.