[ by Melanie Gretchen ]

Imagine a "black hole."  Now imagine you're SEC Chairman Elisse Walter, on the job less than a month, and you're tasked with having to replace one of the agency's most influential officials - departing Enforcement Director Robert Khuzami. 

In fact, given the number of departures throughout the agency, it would appear that Ms. Walter's biggest task in 2013 will be filling senior vacancies.  Aside from the sudden departures of Chairman Mary Schapiro and Enforcement's Robert Khuzami, the SEC needs new Directors for its Divisions of Trading and Markets and of Corporation Finance.  Oh, and did we mention that Chairman Walter's term is scheduled to end December 31, 2013?

Replacing Robert Khuzami.  Replacing the departed Enforcement Director will be, perhaps, the Agency's largest challenge.  It is Mr. Khuzami - more so than former Chairman Mary Schapiro - whom many credit with having helped the SEC step out of its own 'black hole', one largely created by the agency's malaise during the onset of the financial meltdown and a series of Ponzi schemes that essentially operated in full view of the agency staff.  

Mr. Khuzami, with his imposing presence and piercing stare, helped reorganize the management ranks, fashioning specialized units to track complex corners of Wall Street, and apply aggressive "take no prisoners" prosecutorial tactics to civil cases.  In recent years, SEC Enforcement has notched record numbers of actions, many involving global banks at the center of the crisis. 

Yes, his shoes will be awfully hard to fill.  The short list of replacement candidates include George Canellos, Mr. Khuzami's current deputy, and Enforcement's chief litigation counsel, Matthew Martens.

But the challenge doesn't end with the selection of a successor to Mr. Khuzami.  The new Director of the Enforcement Division can look forward to:

• increasingly influential rapid-fire trading firms that, by some accounts, introduced instability to the stock market;

• questionable negotiating tactics, fueled by complaints that the agency's headline-grabbing settlements let Wall Street off the hook - e.g., the agency's 2010 $150 million settlement with Bank of America over lax public disclosures, a deal described by Federal Judge Jed Rakoff as being "half-baked justice at best;"

• questions about the future of the unit, because of other distractions at the SEC, brought on by the recent departures of Chairman Mary Schapiro, the Director of Trading and Markets, and the Director of Corporation Finance.

The new year, 2013, will be quite interesting.  Have a seat and take in the action.

[SEC Press Release 2013-3, 1/9/13]