Battered Enforcement Chief To Leave SEC

Feb 10 2009 | 3:12am ET

Just days after getting the dressing-down of a lifetime before a Congressional subcommittee, the Securities and Exchange Commission’s top cop announced plans to return to the quieter confines of private practice.

Linda Thomsen, who has served as director of enforcement at the SEC since 2005, will step down after 14 years at the regulator, the agency said yesterday. When, precisely, she will exit is still in question; the SEC said she will stay on for a time to assist in the transition.

Thomsen’s exit is only part of new SEC Chairman Mary Schapiro’s plan to replace the top management of the embattled regulator. On Saturday, Schapiro named David Becker the SEC’s new chief legal officer and senior policy adviser, and has charged Commissioner Elisse Walter, a fellow Democrat, to recruit candidates for other top posts at the agency.

According to Bloomberg News, Robert Khuzami, a former federal prosecutor currently wise Deutsche Bank, is the leading candidate to take over from Thomsen.

“Linda's achievements have been nothing short of extraordinary, even heroic, in an era of unprecedented challenges in our securities markets,” Schapiro said. Certainly, Thomsen’s tenure was a busy one—the past two years saw the second- and third-most enforcement actions in agency history—but Thomsen leaves amid accusations that the SEC, and its enforcement division in particular, dropped the ball as the economy plunged into freefall.

The agency’s failure to catch Bernard Madoff, accused of running the largest Ponzi scheme in history for decades, despite several probes of his firm, has cast a pall on Thomsen’s tenure. But Madoff’s alleged hedge fund fraud is not the first time hedge funds have brought opprobrium upon her head.

Last year, an internal report prepared by H. David Kotz, the SEC’s inspector general, blasted the agency’s handling of an insider-trading investigation of hedge fund Pequot Capital Management. Kotz recommended disciplinary action against her, but the SEC’s chief administrative law judge declined to impose it. A Senate investigation also faulted her handling of the Pequot case.

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