S.E.C.’s Co-Chief of Enforcement Is Leaving

The Wall Street regulator who oversaw and closed some of the most prominent investigations into the financial crisis announced his departure from the Securities and Exchange Commission on Friday, a move that could portend a subtle shift in the agency’s enforcement agenda.

George Canellos, who was co-chief of enforcement at the S.E.C., will leave after a tenure that covered one of the most significant periods in the agency’s 80-year history. Mr. Canellos joined in the wake of the 2008 crisis, after the agency’s failure to detect Bernard L. Madoff’s Ponzi scheme made it a symbol of regulatory incompetence.

Nearly five years later, as the agency has regained its footing, Mr. Canellos leaves behind a productive yet complicated legacy.

He presided over an onslaught of insider trading cases, a crackdown that ensnared some of Wall Street’s most vaunted hedge funds, including SAC Capital and the Galleon Group. Mr. Canellos, a former federal prosecutor in Manhattan who is now expected to join a private law firm, also helped reverse a policy at the agency that allowed defendants to “neither admit nor deny wrongdoing.”

But some critics â€" at the agency and elsewhere â€" questioned whether the S.E.C. could have done more after the crisis to hold Wall Street accountable. The decision by Mr. Canellos and others to close investigations into former executives of Lehman Brothers, the firm whose 2008 collapse came to epitomize excess on Wall Street, ignited a contentious debate at the S.E.C. And much to the dismay of certain S.E.C. investigators, he argued against a handful of cases at the center of the mortgage crisis.

Other S.E.C. officials, however, sided with Mr. Canellos, questioning whether those cases were winnable at trial. And on Friday, Mr. Canellos received a statement of praise from the agency’s chairwoman, Mary Jo White.

“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,” Ms. White, a former United States attorney in Manhattan, said.

It is unclear whether Mr. Canellos’s co-chief, Andrew J. Ceresney, will strike a harder line with Wall Street now that he is the enforcement division’s sole leader. But some colleagues expect at least a subtle change. Although they are friends with similar pedigrees â€" both former defense lawyers who served as federal prosecutors in Manhattan under Ms. White â€" Mr. Ceresney and Mr. Canellos had their own agendas and priorities.

When Ms. White named the co-chairs in April, some S.E.C. employees were taken aback. It was rare, if not unprecedented, for the enforcement unit to be run jointly, and some colleagues privately predicted that Mr. Canellos would leave the agency by the end of 2013.

But ultimately, the shared role appeared to smooth the transition at the enforcement unit. In some cases, for example, Mr. Canellos filled in for Mr. Ceresney, who was recused from investigations involving JPMorgan Chase and other big banks that he represented in private practice.

Mr. Canellos’s next step is unclear. The S.E.C. statement announcing his departure said that Mr. Canellos, 49, “has not yet made future career plans.”

That said, he is all but certain to spin through the revolving door. Friends say Mr. Canellos has been weighing a return to private practice in New York, where his wife and baby reside. Mr. Canellos, who would commute weekly between New York and Washington while at the S.E.C., was previously a partner at the white-shoe law firm Milbank, Tweed, Hadley & McCloy.

At the S.E.C., Mr. Canellos started as the director of the agency’s New York office. He moved to Washington in 2012 to become deputy of enforcement under Robert Khuzami, another onetime protégé of Ms. White. When Mr. Khuzami left the agency early last year, Mr. Canellos, a graduate of Columbia Law School whose legal acumen was highly praised, became his successor.

In a statement on Friday, Mr. Canellos praised his colleagues and emphasized “the unparalleled skill, judgment, and sense of fairness” at the S.E.C.

Some S.E.C. investigators, however, felt he was too fair. When supporting the decision to forgo charges stemming from Lehman’s demise â€" arguably the agency’s biggest case after the crisis â€" Mr. Canellos clashed with Mary Schapiro, the agency’s chairwoman at the time who often challenged Mr. Canellos to explain how executives at the center of the biggest bankruptcy in United States history could avoid a single civil charge. A report by Lehman’s bankruptcy-court examiner, she noted, accused the executives of using an accounting gimmick to “manipulate” Lehman’s balance sheet.

In the last year or so, the S.E.C. also struggled with whether to charge the big banks that sold troubled mortgage securities to investors. Even after warning Goldman Sachs, Wells Fargo and Credit Suisse that enforcement actions were possible, the S.E.C. closed or shelved the cases.

Mr. Canellos, frequently with support from Mr. Khuzami and the agency’s litigators who would have had to try the cases in court, concluded that some of the banks did not cross a legal line. The banks’ statements to investors, they argued, were not “materially” misleading.

Despite the perceived caution, the agency under Mr. Khuzami and Mr. Canellos filed a record number of enforcement cases. All told, the S.E.C. filed 169 actions against companies and individuals tied to the crisis, including mortgage-related cases involving Goldman Sachs and JPMorgan.

Colleagues also credit Mr. Canellos with revamping the S.E.C.’s “admission of wrongdoing” practice and the policy for how companies use social media. And the enforcement division’s ties to other regulators, once somewhat strained, improved in recent years.

“In the regulatory community, George was extremely well thought of,” said David Meister, the former enforcement chief at the Commodity Futures Trading Commission.