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'Dangers' of CDO Markets Chief Priority for SEC: Khuzami

Strong enforcement presence in CDO markets is a chief priority of government regulators, Robert Khuzami, the Securities and Exchange Commission’s director of enforcement, told CNBC Tuesday.

“In the CDO world, there’s a lack of price transparency, a lack of liquidity, a lack of governance controls…all the safeguards that you rely upon to make sure that investors are protected are often not there,” Khuzami said. “And that’s why a strong enforcement presence is critical.”

Khuzami, who joined the SEC in 2009 after several years as general counsel of Deutsche Bank , said his enforcement division has created several new units of supervision, including structured products and municipal markets, to track and regulate potential abuses.

“We took a hard look at ourselves and frankly asked ourselves what every public agency should ask itself—how can we do our job better?” Khuzami said.

The SEC's top cop declined to comment on what is perhaps the agency's most high-profile active case—its suit against financial heavyweight Goldman Sachsbut noted that despite the levels of risk often assumed in complicated Street trades, “securities laws are designed to protect all investors.”

“It’s no defense to claim that your client was a sophisticated investor,” Khuzami said.

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