Published on Jan 3rd, 2014 | Posted in Articles

The Securities and Exchange Commission today announced that George S. Canellos, co-director of its Enforcement Division, will leave the agency later this month after four-and-a-half years of service in senior leadership positions. 

Mr. Canellos has played a key role in numerous structural and enforcement policy changes and oversaw significant investigations and enforcement actions related to the credit crisis and insider trading.  He helped lead the agency’s nationwide enforcement efforts during two of its most productive years in 2012 and 2013 while serving as deputy director and co-director of the Enforcement Division.  Mr. Canellos came to the SEC in July 2009 as director of the New York Regional Office.

“George filled an incredibly important leadership role as head of the New York office and later in the top posts of the Enforcement Division,” said SEC Chair Mary Jo White.  “He helped to improve coordination between the enforcement and exam programs, streamline procedures to expedite investigations, and better integrate our investigative and trial functions.  Every day, he brought to work an intense enthusiasm for our mission, extraordinary intellect and experience, and a total commitment to fairness and the public interest.”

Mr. Canellos said, “The unparalleled skill, judgment, and sense of fairness that the SEC staff brings to every examination, investigation, and case is the source of the Commission’s greatest strength.  I have been honored and inspired by the opportunity to work with them and will be forever grateful for and proud of the public service we have performed as a team.”

A strong proponent of drawing expertise from the securities industry, Mr. Canellos led efforts to recruit numerous industry experts and academics to the New York office, including specialists in structured products, derivatives, and applied mathematics.

Enforcement actions supervised by Mr. Canellos included: 

  • Actions against Raj Rajaratnam and more than 30 others associated with New York-based hedge fund advisory firm Galleon Management LP for widespread and repeated insider trading in the securities of 15 companies generating illicit profits totaling more than $96 million.
  • The action against former McKinsey & Co. global head Rajat Gupta for illegally tipping Rajaratnam while serving on the boards of Goldman Sachs and Procter & Gamble.
  • Actions against hedge fund managers associated with S.A.C. Capital for perpetrating the most profitable insider trading scheme in history and against S.A.C. Capital’s founder Steven A. Cohen for allegedly failing reasonably to supervise those fund managers.
  • The first-ever action against the operator of a “dark pool” trading platform: Pipeline Trading Systems LLC and two of its top executives for failing to disclose to customers that the vast majority of orders were filled by a trading operation affiliated with Pipeline.
  • The $150 million settlement by Bank of America for failing to properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.
  • Actions against J.P. Morgan Securities, Credit Suisse Securities (USA), RBS Securities, and Bank of America for misleading investors in offerings of residential mortgage-backed securities (RMBS), thus far resulting in almost $570 million in sanctions.
  • Actions for fraud and breach of fiduciary duty against numerous financial institutions and senior executives who participated in the structuring and sales of collateralized debt obligations (CDOs), including CDO arrangers Merrill Lynch and UBS Securities and CDO collateral managers ICP Asset Management, NIR Capital Management, and Harding Advisory LLC.
  • Actions for fraud against two JPMorgan traders for concealing hundreds of millions of dollars of losses on the so-called “London Whale” derivatives trades and against JPMorgan Chase for misstating its financial results and lacking effective internal controls to detect and prevent its traders from fraudulently overvaluing investments.

After being named director of the New York office, Mr. Canellos was instrumental in its response to the revelation of the Bernard Madoff Ponzi scheme, overseeing investigations and fraud charges against 22 individuals and entities.  Mr. Canellos led the implementation of new approaches to examinations of investment advisory firms while more closely integrating the teams responsible for examinations of broker-dealers and investment managers.  Mr. Canellos formed a joint working group of examination and enforcement staff dedicated to investigating participants in the penny stock industry.

Mr. Canellos continued to lead change in these areas as deputy director, acting director, and co-director of the Enforcement Division in 2012 and 2013 while serving under SEC chairmen Mary Schapiro, Elisse Walter, and Mary Jo White.  Mr. Canellos helped develop and implement the restructuring of many aspects of the agency’s enforcement program under then-enforcement director Robert Khuzami.  In particular, Mr. Canellos helped create the cooperation program, streamline internal processes, select leaders of newly created specialized units, and reorganize staff into core and specialized units.

More recently, Mr. Canellos and Enforcement Co-Director Andrew Ceresney modified the SEC’s settlement policy, requiring defendants in some classes of cases to make admissions of wrongdoing.  They also launched the Financial Reporting and Audit Task Force, Microcap Fraud Task Force, and Center for Risk and Quantitative Analytics to ferret out risks and threats to investors.  Mr. Canellos has encouraged strong and effective collaboration with law enforcement partners, including criminal authorities as well as other federal and state authorities. He has served as co-chair of the RMBS Working Group of the interagency Financial Fraud Enforcement Task Force.

Prior to working at the SEC, Mr. Canellos served for six-and-a-half years as a litigation partner in the law firm of Milbank Tweed Hadley & McCloy.  For nine years, he was a federal prosecutor with the U.S. Attorney’s Office for the Southern District of New York, serving as chief of its major crimes unit, deputy chief of criminal appeals, and senior trial counsel for its securities and commodities fraud task force.  Mr. Canellos received his J.D. from Columbia University School of Law and graduated magna cum laude from Harvard College.

Following the departure of Mr. Canellos, who has not yet made future career plans, Andrew Ceresney will continue to serve as director of the SEC’s Enforcement Division.