SEC's New York Chief Canellos Focuses on Sales to Institutional Investors

Date: Thursday, May 13, 2010
Author: Bloomberg

George Canellos, the head of the Securities and Exchange Commission’s Manhattan office, said he is pushing his staff to scrutinize products normally sold to institutional investors after the financial crisis showed that even sophisticated buyers need additional protection.

“The SEC is a little less willing to assume that if the product is sold to institutional investors we should be a little less concerned about it,” Canellos, 45, said in a May 11 interview airing today on Bloomberg Television. Such investors, which can include pensions and hedge funds, bought products before the crisis that later became worthless, he said.

Canellos, a former federal prosecutor, was appointed in June to head the SEC’s largest office outside Washington. He said he is expanding his staff while focusing on structured products, such as mortgage-backed securities, and on private exchanges including dark pools, which trade stocks without displaying quote information publicly.

“My highest goal has been to reorient both our examination program and enforcement program toward some areas that have not been the traditional focus,” he said. “Traditionally, the SEC has placed a great deal of emphasis on retail investors and sales practices directed at retail investors.”

Last month, the SEC sued Goldman Sachs Group Inc., the most profitable company in Wall Street history, for fraud in connection with sales of mortgage-linked securities to investors including Germany-based IKB Deutsche Industriebank AG. Goldman denies any wrongdoing.

“There are a number of investigations here in New York and elsewhere that focus on these types of products,” Canellos said, declining to identify them. “A great deal of work has been done in this area and will be done in this area.”