King & Spalding Bets on FINRA Vets Despite Some Enforcement Declines

(Courtesy photo.)

Four former FINRA officials, including three who left the organization in the last month, have all joined King & Spalding as partners in its government matters practice in New York, the firm announced this week.

The new hires include Mirella deRose, Russell Johnston, Richard Margolies and Michael Watling, all of whom were senior counsel within the enforcement department at the Financial Industry Regulatory Authority, Wall Street’s nonprofit self-regulator. Johnston, Margolies and Watling joined King & Spalding directly from FINRA, while deRose joined from Lewis Baach Kaufmann Middlemiss, where she was counsel.

King & Spalding’s group hiring comes at a time when several data points point to an overall decrease in enforcement activity lately. FINRA fines dove to $64.9 million in 2017 from $173.8 million the prior year, according to FINRA statistics. Looking at prosecution levels, one analysis in May from Syracuse University’s Transactional Records Access Clearinghouse showed white-collar prosecutions were the lowest in 20 years.

But Dixie Johnson, deputy leader of King & Spalding’s government matters practice, said the firm's practice hasn’t seen any drop in demand or business, and its hours and cases have increased in the last few years. She said the SEC’s enforcement statistics demonstrate that for regulated entities, “enforcement has remained very strong and I don’t think that’s going to change.” Johnson noted the SEC imposed more in penalties in 2018 than in 2017.

In King & Spalding's case, Johnson pointed to demand in accounting and financial disclosure cases while noting some enforcement trends she has observed, including “creative undertakings” in some settlements, such as requiring infrastructure changes within entities.

Russell Johnston, one of the new King & Spalding partners, declined to comment in an interview about whether he had seen any changes in FINRA enforcement in recent years or how the organization handled matters. But he pointed to an “ongoing focus in areas where investors are most at risk” and demand in matters involving anti-money laundering and fintech.

Johnston deflected questions about what led the group to leave the agency at the same time, emphasizing instead why the group was attracted to King & Spalding. He cited a collaborative environment at the firm, strong leadership, existing expertise and the opportunity to work with a team with deep knowledge about FINRA.

The four former FINRA attorneys have a combined 18 years of experience at the organization, the firm said.