The new top cop at the U.S. Securities and Exchange Commission is viewed as the best hope in years to root out financial fraud and convince fuming investors that the regulator that missed Bernard Madoff's massive fraud is up to the job.

Former federal prosecutor Robert Khuzami was picked to lead the SEC's enforcement division at a time when investor confidence had been shattered during the worst financial crisis in decades.

It was bad enough that trillions of dollars evaporated from global markets and the government had to rescue Wall Street firms, but then it emerged in December that the SEC had failed to uncover Madoff's $65 billion Ponzi scheme despite warning signs and complaints.

This glaring lapse triggered a wave of criticism from lawmakers, who have publicly slammed the SEC and demanded a more aggressive approach.

Bringing him on board is a good sign that the SEC is returning to its role as a strong cop on the beat and an aggressive regulator of our capital and financial markets, said Senator Jack Reed, the Rhode Island Democrat who chairs the banking subcommittee on securities which oversees the SEC.

SEC Chairman Mary Schapiro announced her selection of Khuzami in February, less than a month after she was sworn in. As part of her effort to reinvigorate the enforcement division, Schapiro has also launched a review of how the SEC handles the hundreds of thousands of tips it receives every year.

Khuzami, 52, has vowed to work swiftly and strategically and is taking a hard look at how the enforcement division operates. One week into the job, Khuzami told Reuters in an interview on April 3 that a compelling case can be made the SEC needs more resources.

At the same time, he said that does not relieve us of our obligation to use our resources as efficiently as we can and examine our own processes and get more out of the same.

Khuzami declined to talk about how he would reform the SEC's enforcement division but said he has laid out some broad general themes to staff, and will be studying specific proposals in the coming days and weeks as to how best to achieve them.

Khuzami arrives with a reputation for being fearless, well organized and focused.

Former and current law enforcers, as well as former SEC Chairman Harvey Pitt, say Khuzami is the right person to revitalize the enforcement division.

Khuzami has a reputation for being a tough securities fraud prosecutor, which is what the public, (Congress) and the commission now want, said Russell Ryan, a former assistant director of enforcement at the SEC who is now in private practice at law firm King & Spalding.

Khuzami served as a federal prosecutor for 11 years with the U.S. Attorney's office for the Southern District of New York, where he prosecuted complex securities cases and dealt with everything from insider trading, Ponzi schemes and accounting fraud, to organized crime infiltrating securities markets.

He also prosecuted the Blind Sheik Omar Abdel-Rahman in what was then the largest terrorism trial in U.S. history. Ten defendants were convicted of operating an international terrorist organization responsible for, among other things, the 1993 bombing of the World Trade Center.

Khuzami led the securities and commodities fraud task force at the attorney's office for three years, increasing coordination and joint prosecution of securities fraud cases.

In 2004, Khuzami became general counsel for the Americas at Deutsche Bank -- a role he said will help him in his current role as enforcement chief.

It should hardly come as a surprise that knowing how products are developed and traded, knowing how transactions are executed, knowing how institutions operate makes you a better enforcer, Khuzami said. In an investigation, you need to separate fact from fiction, or you will get sidetracked and delayed.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)

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