Wall Street's top cop has a lot to prove and its been taking no prisoners.

After enduring a thorough thrashing for its supervision of the now-defunct Bear Stearns and missing Bernard Madoff's $65 billion fraud, the Securities and Exchange Commission has made a near-180 degree turn to crack down on financial fraud.

Last week, the SEC filed charges against Bank of America, pursued its first naked short selling case and settled fraud charges with General Electric, as well as with former AIG executive Hank Greenberg.

Since SEC Chairman Mary Schapiro took the helm late in January, the agency has opened 525 investigations, a 10 percent rise over the same period last year.

It also filed 397 enforcement actions, a 30 percent jump from the year-ago period.

At this rate, Schapiro is on pace to at least match the agency's record number of 679 enforcement actions brought in 2003, when former chairmen Harvey Pitt and Bill Donaldson were in charge.

Also driving the SEC's new aggressiveness is Robert Khuzami, a former federal prosecutor chosen by Schapiro to fill the job of enforcement director.

Khuzami -- known as tough, organized and driven -- has planned dramatic changes, such as taking steps to speed up investigations by giving top enforcers more subpoena power.

This is the biggest shift in power from the commission to the staff in the history of the enforcement division. said Walter Ricciardi, a former SEC enforcement deputy director, now in private practice at the Paul Weiss law firm.

Khuzami, 53, led a securities fraud task force at the U.S. attorney's office. He is now shaking up the SEC, and upsetting some staffers, with plans to create new specialized teams to investigate cases and cutting the number of managers.

He has been quietly criticized for not getting to know staff or making the rounds among lawmakers -- a move SEC watchers say is crucial in Washington to get Congress on his side.


Current and former SEC staffers say the agency is under tremendous pressure from Congress to be more aggressive on fraud after investors lost billions of dollars.

SEC employees are also feeling the heat from inspector general David Kotz, who has issued a series of damning reports about the agency's oversight. He is due to soon issue another one detailing how the SEC missed Madoff's massive fraud.

One of Kotz's reports found that a top SEC enforcement official, David Nelson, failed to vigorously enforce securities laws in a 2003 investigation of Bear Stearns' pricing of collaterized debt obligations -- an accusation that was disputed by the SEC's administrative law judge.

No one wants to be the next Dave Nelson, said one current SEC staffer, who spoke on condition of anonymity because he was not authorized to speak on behalf of the commission.

Schapiro has managed to keep the Obama administration and Congress happy by responding quickly to their concerns.

For instance, lawmakers asked Schapiro to reinstate a decades-old uptick rule to restrict short selling and she responded promptly with proposed rules.

She has also cleaned house. Gone are the SEC's former directors of enforcement, Linda Thomsen, and compliance, inspections and examinations, Lori Richards. Both were excoriated at a congressional hearing earlier this year.

Now the agency, which was under the threat of extinction early in January after the Madoff scandal emerged, will get new power under a White House plan to reform financial services regulation. Lawmakers from both political parties are effusive with praise for Schapiro and Congress is eager to give the agency more money to pursue crooks on Wall Street.

(Editing Bernard Orr)