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Robert Khuzami, a former terrorism prosecutor who revamped the Securities and Exchange Commission's enforcement unit, is stepping down from the agency after an aggressive four-year tenure, the New York Times DealBook blog reported yesterday. His departure signals the end of an important chapter in the history of the agency, which has been praised for taking significant actions against some of Wall Street's largest banks after the financial crisis but also scrutinized for not suing top bank executives at those firms. After joining the SEC in 2009, Mr. Khuzami reinvigorated the enforcement team, which was maligned for missing the warning signs of the financial crisis and Bernard L. Madoff's Ponzi scheme. In recent years, the enforcement division notched a record number of actions, many against banks at the center of the crisis.

The Supreme Court will hear arguments next week in a case that will determine how much time federal securities regulators have to impose civil fraud penalties, the Washington Post reported yesterday. In Gabelli v. SEC, two Gabelli Funds officials argue that the Securities and Exchange Commission waited too long to bring a civil case accusing them of authorizing an improper trading technique at their firm. The argument raises a question often debated in legal circles: When does the clock start ticking on civil fraud cases? Some courts have ruled that the SEC can only obtain civil penalties for fraud within five years of the violation taking place, as a lower court did in the Gabelli case. But in August, the U.S. Court of Appeals for the 2nd Circuit decided that time runs out five years after the SEC discovers, or reasonably should have discovered, the alleged fraud.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are among the first banks to register swap-dealer divisions under the Dodd-Frank Act, which requires higher capital, collateral and trading standards, Bloomberg News reported yesterday. The 65 trading units that have registered include the biggest banks in the U.S., U.K., France, Germany, Switzerland and Japan, according to the Commodity Futures Trading Commission. The list, which is expected to grow, reflects companies that had at least $8 billion in swap-dealing business in October and had to register by the end of last year.

Hedge fund Paulson & Co. was named as a defendant in a proposed revised lawsuit by ACA Financial Guaranty Corp. against Goldman Sachs Group Inc. over a collateralized debt obligation (CDO) called Abacus, Bloomberg News reported yesterday. Paulson conspired with Goldman Sachs to deceive ACA Financial, which provided financial guaranty insurance for the deal, ACA Financial said in papers filed yesterday in New York State Supreme Court in Manhattan. ACA Financial is seeking permission to file a revised complaint adding Paulson as a defendant. Goldman Sachs in July 2010 won court approval of a $550 million settlement with the U.S. Securities and Exchange Commission over claims that it misled investors in the Abacus CDO. Goldman Sachs failed to disclose New York-based Paulson’s role in selecting underlying securities or that Paulson had taken a short position against the CDO, the SEC said.

A group of pension funds that oversee more than $3 trillion in assets asked U.S. securities regulators to revamp rules on how corporate executives can trade their company stock, the Wall Street Journal reported today. In a letter sent on Friday to the Securities and Exchange Commission, the Council of Institutional Investors expressed concern that corporate insiders might be abusing their position by improperly profiting from trading their company shares while in possession of confidential information. In an analysis of trading by more than 20,000 executives since 2004, the Wall Street Journal last month found that 1,418 executives who traded their company stock in the week before news was announced averaged gains of 10 percent—or avoided losses of 10 percent—within a week of their trades. Executives are barred from trading based on important, nonpublic information.

High-frequency trading firms are fighting to fend off regulation as scrutiny of their practice of unleashing blizzards of orders coincides with repeated technical glitches in the markets, the Wall Street Journal reported today. As the firms work to convince policy makers their practices are benign or even beneficial, one of their primary tools has been research seeded by the industry itself, promoted by lobbying that has increased in recent years. Defenders say high-frequency trading keeps markets lubricated with a constant supply of buy and sell orders that enables all participants to trade more efficiently and get better pricing. Critics worry that the traders' order torrent makes markets more opaque, less stable and ultimately less fair. Concern has risen amid a lengthening list of unnerving market malfunctions: the "flash crash" free fall in May 2010, the bungled initial public offering in March of a computerized stock exchange, the poorly executed Facebook Inc. public offering in May on the Nasdaq Stock Market and Knight Capital Group Inc.'s August debacle.

UBS AG's interest-rate-rigging settlement this week is shining a spotlight on the arcane world of London's interdealer brokers, who appear to have played a key role coordinating banks' efforts to manipulate the London interbank offered rate (Libor), the Wall Street Journal reported today. These firms wear multiple hats. They act as middlemen between banks that are looking for trading partners. They are informal information clearinghouses for banks looking to gauge market appetite for various assets. And, it turns out, they can serve as conduits for allegedly illegal activity. U.S., British and Swiss authorities on Wednesday detailed an elaborate scheme in which UBS traders enlisted multiple brokerage firms to help orchestrate a multibank rate-rigging network. In exchange, the brokers received hundreds of thousands of pounds worth of compensation, authorities say. As part of its $1.5 billion settlement, UBS acknowledged wrongdoing.

Robert Khuzami, who led the U.S. Securities and Exchange Commission's enforcement division's pursuit of financial industry wrongdoing related to the subprime crisis, plans to step down as early as next month, Bloomberg News reported yesterday. Then-Chairman Mary Schapiro hired Khuzami in 2009 to help restore the agency's image after it was battered for missing Bernard L. Madoff's Ponzi scheme. He carried out the biggest shakeup in the enforcement unit's history, eliminating layers of management, expanding investigators' legal powers and creating five specialized units to police Wall Street. Under Khuzami, the SEC filed more than 130 cases related to the financial meltdown, including 57 actions against senior corporate officers. His investigators have taken aim at lenders who generated subprime mortgages as well as Wall Street traders and investment banks that bundled the home loans for hedge-fund managers who wanted to bet that house prices would collapse.

Securities and Exchange Commission Chairman Elisse Walter may hire as her top lawyer a former enforcement director from the main U.S. derivatives regulator, Bloomberg News reported yesterday. Geoffrey Aronow, a partner at law firm Bingham McCutchen LLP, has been interviewed by Walter and is the leading candidate to become the agency’s general counsel. Aronow would replace Mark Cahn, who is stepping down in January. As the chief lawyer at the agency, the general counsel plays a central role evaluating rules, advising the chairman and representing the SEC in legal disputes.