SEC Names Enforcement Chief, Creates New Unit : Securities: The agency will expand its focus. It will now go after financial institutions that bilk investors.
The chairman of the Securities and Exchange Commission named a senior agency lawyer as its new enforcement chief Tuesday and announced the creation of a new unit to investigate stock sales by savings and loans and their parent companies.
In appointing William G. McLucas to the second-most powerful post at the regulatory agency, SEC Chairman Richard C. Breeden praised him as the enforcement chief for the “decade of the ‘90s.”
Breeden left no doubt that the first priority for the new chief will be attacking stock fraud by financial institutions that bilk investors, a sharp expansion of the agency’s normal concentration on Wall Street. He said the new unit would target financial fraud at savings and loans and banks.
While Breeden did not mention specific cases, the SEC is investigating the sale of $200 million worth of junk bonds to 22,000 investors by American Continental Corp. through its Irvine-based thrift, Lincoln Savings & Loan.
In an interview, McLucas said the new unit will start out with a staff of 25 and be expanded if the initial inquiries indicate a greater need.
“We have a number of situations that we are concerned about and we are trying to identify the problems,” McLucas said. “We intend to focus on the generic area of financial institutions--thrifts and banks.”
He said investigators will concentrate on situations in which financial institution holding companies sell stock directly to investors through their branches without using underwriters to examine the deals for soundness and legality. That method was used by American Continental to market its bonds. Many investors have said they thought the bonds, now basically worthless, were federally insured investments.
In congressional testimony last month, Breeden was sharply critical of the way thrift regulators handled the Lincoln Savings case, particularly the sale of bonds through Lincoln’s branches. However, the thrift regulators in turn criticized the SEC for not moving to stop the bond sale.
Before Breeden took the SEC helm in August, he was the chief White House architect of the rescue plan for the savings and loan industry, so he got a first-hand view of the problems there.
“The commission’s mandate to protect investors remains an essential element in preserving the integrity and efficiency of America’s capital markets,” Breeden said Tuesday.
McLucas stressed that the commission will be “doing something to restore the confidence of the small investor and to make sure that confidence is retained in the market.”
Along with fraud at financial institutions, McLucas said he wants to increase the scrutiny of brokerage houses and the practice of account “churning,” in which brokers earn excessive commissions by trading customers’ holdings more often than necessary.
McLucas, 39, has been one of three associate directors running the enforcement division since director Gary Lynch resigned last summer to go into private law practice. All three were top candidates for the post. The others, John Sturc and Joseph Goldstein, were also praised by Breeden.
SEC insiders said McLucas got the nod because he had demonstrated strong management skills. He was given high marks for a four-month stint when he rescued the high-profile New York regional office from turmoil after its administrator left.
“Bill has superb management skills, and he is well liked by the people who report to him,” said Lynch, now in private practice in New York. “He has got the ability to organize and motivate a large staff.”
McLucas has been an enforcement attorney at the commission since 1977 and handled numerous high-profile cases. Among them were the conviction of Singer Co. Chairman Paul A. Bilzerian on securities and tax fraud charges and the guilty plea to securities violations of former Los Angeles brokerage executive Boyd L. Jefferies.
