As the new co-directors of the Enforcement Division at the U.S. Securities and Exchange Commission, long-time friends George Canellos and Andrew Ceresney have a formidable to-do list.

The former federal prosecutors say their top priority is combating fraud in all its guises, from insider trading to misstated financial records to dishonest investment advisers — not to mention implementing new rules under the Dodd-Frank Act. "We need to be a force to be reckoned with," the pair recently put it.

It's the first time in agency history that two people have jointly headed the Enforcement Division. With offices next door to each other, they've taken what Ceresney in an interview termed a combination of "partnership" and "tag team" approach to the workload, overseeing cases individually and sharing review for a handful of high-profile matters.

Appointed by SEC Chairman Mary Jo White in April, the two serve as the SEC's top cops in charge of the 1,300-person division. They trace their connection to White — and to each other — to the U.S. Attorney's Office for the Southern District of New York, which White led from 1993 to 2002.

Canellos started there in 1994, rising to become chief of the major-crimes unit before leaving to join Milbank, Tweed, Hadley & McCloy as a partner in 2003. Ceresney joined the office in 1998 after clerking for Judge Dennis Jacobs of the U.S. Court of Appeals for the Second Circuit, and became deputy chief appellate attorney. After White moved to Debevoise & Plimpton in 2002, he followed in 2003.

Canellos has held senior positions at the SEC since 2009, including director of the New York regional office, deputy director of the Enforcement Division and acting director after Robert Khuzami departed in January.

It's clear that the pair is highly regarded by their peers. "Both George and Andrew have absolutely outstanding reputations as lawyers," said Gibson, Dunn & Crutcher partner Lawrence Zweifach, former chief of the criminal division in the U.S. Attorney's Office for the Eastern District of New York.

Randall Fons, a partner at Morrison & Foerster who spent 18 years with the SEC in trial and directorship posts around the country, predicted the new leaders would energize the division.


"What enforcement people like to do is investigate cases and bring them," said Fons, co-chairman of the firm's securities litigation and white-collar defense group. "The signals sent by Mary Jo and George and Andrew, who are all former prosecutors…is that the enforcement program will have teeth, and be the focus of the agency."

Still, it won't be easy. Canellos and Ceresney take over at a time when they "have limited resources and more responsibility than the SEC has ever had in the marketplace," said White & Case partner Gregory Little, a former regional trial counsel with the SEC. "They have to come up with a way to bring the right cases against the right people at the right time."

Adding to the challenge, White recently announced that the agency would be more reluctant to allow defendants to settle without admitting wrongdoing. "We are going to in certain cases be seeking admissions going forward," she said during The Wall Street Journal's CFO Network Conference in June. "If you don't get them, you litigate them. What kinds of cases are those? To some degree, it can turn on how much harm has been done to investors, how egregious is the fraud."

Ceresney made it clear the division wouldn't shy away from going to trial if necessary. "For us to be able to have credibility, we need to be able to win at trial," he said. "We have an outstanding record at trial, and have talented lawyers who are not afraid to try cases." During fiscal year 2012 the SEC went to trial against 29 defendants and won 23 cases. To date during fiscal year 2013, SEC lawyers have won eight of 11 trials.

Canellos and Ceresney recently shared details about their plans for the division, responding in writing to a series of questions from The National Law Journal. The remarks below have been edited to conform to NLJ style.

NLJ: What are your top priorities as the co-directors of the Enforcement Division?

Canellos and Ceresney: Our top priority is to maintain a robust enforcement program — Mary Jo has termed it "bold and unrelenting"; we need to be a force to be reckoned with. This means making sure we can continue to detect and stop fraud, do it even more quickly and hold people accountable for their misconduct.We plan to increase the resources devoted to investigating misconduct related to the preparation of financial statements, issuer reporting and disclosure and audit failures. We also will continue to focus on market-structure issues to ensure fair trading and equal access to information in the securities markets. We will maintain our aggressive pursuit of investment advisers who are engaged in fraudulent conduct, who lack effective compliance programs and who breach their duty to their clients.

We are also very much focused on the critical role of the Enforcement Division in implementing new laws and rules, including those recently adopted or soon to be adopted under the mandate of the Dodd-Frank Act. These include rules governing rating agencies, registration of hedge fund advisers, the issuance of asset-backed securities and the operation of the swap market, to name a few.

Success across each of our program areas, and others, also requires that we remain strong at trial and win our litigated cases, and so winning at trial will remain a priority for the division.

NLJ: How will you share the job? Will each of you have primary responsibility for certain areas? Will you both be based in Washington?

Canellos and Ceresney: We are both based in Washington. We divide certain of the day-to-day duties, and retain shared responsibility for others. On cases, for the most part, we will mostly split up oversight, except for the highest-profile cases. On the management of the division, we try to divide and conquer when we can, as well.

NLJ: I understand you've known each other for years and worked together before. Can you comment on your relationship and prior experience together?

Canellos and Ceresney: We are old friends and colleagues, having first worked together in the Southern District of New York as assistant United States attorneys many years ago. We worked on investigations together and we found that we usually see things the same way. We both enjoy exploring creative investigative techniques, discussing points of law, digging down into the details and getting into the weeds. We also are both approachable and not big fans of hierarchy.

NLJ: How would you describe your philosophy of enforcement? How do you measure success?

Canellos and Ceresney: Our philosophy is to be very aggressive but fair. We want to move as quickly as we can, build strong cases, prevail at trial and send important messages with each of our enforcement actions. Successful enforcement actions result in sanctions that deter wrongdoing, protect investors and, where appropriate, include penalties and the disgorgement of ill-gotten gains that can be returned to harmed investors.

NLJ: What's most exciting about the opportunity to serve as enforcement co-directors? What do you see as your biggest challenge?

Canellos and Ceresney: Most exciting to both of us is the opportunity to work with an outstanding group of attorneys, accountants, industry and market specialists and other staff. These colleagues have demonstrated such tenacity, creativity and innovation in pursuing enforcement investigations and litigation. And they have done so in the face of so many challenges, including major resource restraints and uncertainties. And we have the full support of the commission in our efforts. The biggest challenge may be ensuring that the division remains nimble in order to keep up with technological developments in the marketplace and new products and business practices. Over the next few years, we will continue to focus on leveraging technology to improve our abilities to detect fraud and assess risks in the marketplace.

We now have a forensics lab in Washington, and we are doing amazing things — CSI-type things — in order to use the latest technologies to uncover the latest frauds. Our forensics lab can retrieve computer and Internet information that allows our investigators to follow along the path of the fraud keystroke by keystroke. We are developing computerized modeling to review issuer filings and identify areas for investigation. We are using quantitative expertise to identify complex trading schemes and potentially abusive trading practices.

NLJ: Do you anticipate making organizational changes to the division?

Canellos and Ceresney: The Division today is well organized, having undergone significant change over the past few years, including the creation of our five specialized units. Our specialized units have harnessed additional expertise and increased our institutional knowledge in high-priority areas. Still, we are always looking for ways to better accomplish our mission and enhance our program.

Most recently we announced three new initiatives that will build on the division's ongoing efforts to concentrate resources on high-risk areas of the market and bring cutting-edge technology and analytical capacity to bear in our investigations. The Financial Reporting and Audit Task Force will expand and strengthen our efforts to detect and prosecute violations involving false or misleading financial statements and disclosures. The Microcap Fraud Task Force will develop and implement long-term strategies for detecting and combating fraud in the microcap market, especially by targeting "gatekeepers," such as attorneys, auditors, broker-dealers and transfer agents. The Center for Risk and Quantitative Analytics will employ quantitative data and analysis to profile high-risk behaviors and transactions, and support initiatives designed to detect misconduct, increasing the division's ability to investigate and prevent conduct that harms investors.

These initiatives will make us even more proactive in our efforts to identify and detect fraud. Our enforcement program must evolve to ensure that we continue to perform at a high level and remain effective.

NLJ: It's been reported that the number of cases in the pipeline is down and that fewer investigations were opened in 2012 than 2011. Is this a concern for you?

Canellos and Ceresney: The numbers of formal orders of investigation that we have obtained are not down year over year. However, the number of filed enforcement actions is off from last year. Over the years, we have experienced peaks and valleys in the number of actions we file. The number is influenced by many factors, including the economy, the complexity of cases we investigate, personnel changes, devotion of resources to litigation efforts and our charging decisions — such as whether multiple defendants are named in a single complaint or in multiple complaints.

The raw number is obviously not a real measure of the program's effectiveness. In assessing the effectiveness of the program, we consider the quality of our cases, the breadth and effect of the actions pursued and the remedial and behavioral impact of our filed matters. And measured against these things, the quality of our cases continues to be extremely high, indeed as high as ever.

NLJ: How much of an issue might conflicts be? Will it be helpful that if one of you is conflicted out, the other could possibly step in?

Canellos and Ceresney: As co-directors, we have great flexibility in how we approach each issue and each case, so that if one of us is recused the other can handle the matter. In addition, we have a top-notch chief counsel, Joe Brenner, and an experienced team of senior officers across the division, so our work to pursue investigations and protect investors won't be slowed down by potential conflicts.

NLJ: Any message for members of the ­securities bar? What do you hope they'll keep in mind when dealing with the Enforce­ment Division on your watch?

Canellos and Ceresney: Self-reporting and cooperation remain important for issuers, industry participants and the securities bar. Self-reporting has long been a key feature of our enforcement program, and we will continue to credit those issuers and regulated entities who police themselves and reach out to the staff with prompt reporting. We also have a cooperation program designed to encourage greater cooperation by individuals and companies involved in our investigations and enforcement actions.

We have a wide spectrum of tools to facilitate and reward meaningful cooperation, from reduced charges and sanctions to taking no action at all. The program gives our staff access to high-quality, first-hand evidence, resulting in stronger cases that can shut down fraudulent schemes earlier than otherwise would be possible, and has proven valuable in a wide range of cases.

When we bring an enforcement action, members of the securities bar should be aware that we intend to take full advantage of our penalty authority and all other remedies to ensure that wrongdoers are held accountable. We will continue to work closely with our criminal and regulatory counterparts, as well as international regulators and criminal authorities, to make sure that cases that should be criminal cases are prosecuted.

Finally, we will be nimble and move as quickly as we can. We have sent the message to the Enforcement Division that it is critical for us to move as quickly as possible and that we should not let settlement discussions significantly delay the filing of any action.

NLJ: What do you like to do when you're not at work?

Canellos and Ceresney: Each of us is a dad, and it's the most important job we have. When we're not at work, we enjoy spending time taking care of and hanging out with our kids, including going to soccer games, baseball games and reading bedtime stories. Beyond work and family, we are both avid readers and, when there's time, Andrew is a runner, and George has recently developed a passion — though not a skill — for golf.

Jenna Greene can be contacted at