Other than recriminations flying back and forth between Senate Democratic leaders and House Republican leaders over the impending fiscal cliff, for the most part, few creatures are stirring in Washington over the holidays.
Generally, that's the time the SEC makes major personnel announcements. The next one may come late in the afternoon this week: Robert Khuzami, director of the Division of Enforcement, is reportedly leaving.
His departure would mark the fourth major SEC staff exit in the last few weeks, following the heads of the Divisions of Corporation Finance and Trading and Markets and the agency's general counsel.
Personnel issues are rising up the already crowded agenda of the new chairman, Elisse Walter. Since she took over from Mary Schapiro on Dec. 14, Ms. Walter has appointed Lona Nallengara as the acting director of Corporation Finance and John Ramsay as acting director of Trading and Markets. Ms. Walter also elevated Paul Beswick to the position of chief accountant, a role he had been filling on an acting basis since July, when James Kroeker left the agency.
Ms. Nallengara had been serving as deputy director for legal and regulatory policy in Corporation Finance, while Mr. Ramsay had been the deputy director of trading and markets.
If Ms. Walter follows a similar pattern, she may appoint George Canellos, deputy director of enforcement, as the acting director of the division. A former director of the SEC's New York office, Mr. Canellos has been at the center of several high-profile SEC enforcement cases as the head of that pivotal outpost.
Even with an able acting director in charge, the departure of Mr. Khuzami will bring uncertainty to a marquee function. Ms. Schapiro has touted the overhaul of enforcement operations – and the division's record-setting performance – as highlights of her nearly four-year tenure.
As she begins her difficult assignment in charge of an increasingly political commission that is split, 2-2, among Republicans and Democrats, Ms. Walter has the added responsibility of major human resources decisions.
“In some ways it's a challenge, and in some ways an opportunity,” F. Joseph Warin, a partner at Gibson Dunn & Crutcher LLP, said in a recent interview. “It provides her with an opportunity to pick her own team.”
Seamless communication between the chairman and division directors is critical.
“You need people with whom you can have short-hand discussions to move the chairman's agenda forward,” Mr. Warin said.
Ms. Walter may already have been able to have such conversations with Mr. Khuzami, given that she served as an SEC commissioner during Mr. Khuzami's nearly four-year tenure as head of enforcement. It's unclear whether putting a new enforcement director in place will give Ms. Walter a boost.
What it likely will do, however, is narrow the field for the permanent SEC chairmanship. Ms. Walter, who was designated chairman by President Barack Obama, can serve, without Senate confirmation, through the end of her appointment as a commissioner late next year.
In the meantime, Mr. Obama may nominate someone to be chair for a full five-year term. The favorites had been Ms. Walter, former Bank of America Merrill Lynch chief executive Sallie Krawcheck and Mr. Khuzami. By leaving, Mr. Khuzami either is removing himself from contention or signaling that the process will take a long time and is stepping away for a while before coming back.
My bet is that it's the former situation. If you're going to be tapped to head the agency, why not stay there and continue pursuing high-profile cases and garnering kudos?
Mr. Khuzami's departure would add one more question mark to the SEC's future.