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, three people with knowledge of the matter said.

Khuzami, 56, notified SEC Chairman Elisse Walter of his decision earlier this month, according to the people, who asked not to be identified because the matter isn’t public. Walter has yet to choose a replacement, the people said.

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.

He oversaw some of the biggest settlements in SEC history. Goldman Sachs Group Inc. agreed in July 2010 to pay $550 million over claims it misled investors about a mortgage-linked investment; Citigroup Inc. reached a $285 million settlement and JPMorgan Chase & Co. forfeited $154 million for their roles in similar deals.

Seeking Expedience

At the same time, Khuzami’s tenure has seen criticism from lawmakers, judges and investors who say the agency hasn’t been aggressive enough in holding top executives accountable for practices that led to a taxpayer bailout of the banking industry. U.S. District Judge Jed Rakoff, who presided over SEC cases against Citigroup and Bank of America Corp., has accused the agency of balking at bringing tough cases against high- ranking individuals in favor of reaching expedient settlements.

Khuzami, who didn’t immediately return an e-mail seeking comment, had been mentioned as a potential candidate for SEC chairman. The current chairman, Walter, took over this month though her term at the agency has expired and she is required by law to leave at the end of next year.

Discussing Replacement

Walter has been discussing who to name as Khuzami’s successor with the other three commissioners, the people said. One issue that may become a sticking point is whether it would be appropriate for her to name a permanent, rather than an acting, enforcement chief since it is unclear how long she will run the agency.

Khuzami, the people said, has pushed for his deputy George Canellos to become the next head of the division.

A former federal prosecutor in New York who went on to work as a top lawyer at Deutsche Bank AG, Khuzami was a strong defender of the SEC’s enforcement record and argued it brought as many cases as the law allowed.

He said that many of the ill-fated investment decisions made before and during the financial crisis didn’t amount to securities fraud. He also defended the agency’s policy of not requiring firms to admit wrongdoing when settling allegations, saying that such a stance would lead to protracted litigation and drain the enforcement program of resources.

‘Top-to-Bottom Scrub’

After arriving at the SEC in March 2009, Khuzami spent the first several months of his tenure reorganizing the division. The process started with “a top-to-bottom scrub” of its operations, he said in an August 2009 speech marking his first 100 days on the job. He likened the overhaul to changing tires on a moving car.

Aside from financial crisis investigations, Khuzami reoriented the enforcement division to take a more aggressive approach to identifying misconduct in new areas. The specialized units he formed are taking a deeper look at asset managers and using data-intensive analysis to root out market manipulation and insider trading.

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