Securities Enforcement And Regulatory Developments From The SEC, CFTC, And PCAOB (Podcast)

This is the fourth in our 2026 Year in Preview series examining important trends in white collar law and investigations in the coming year.

2025 saw fundamental shifts in securities enforcement priorities in the first year of the second Trump Administration. The SEC and the financial regulatory landscape enters 2026 amid continued refocusing of policy priorities: a recalibration of regulatory actions surrounding compliance issues and ESG financial statement disclosures; a harmonized approach to cryptocurrency that differentiates between securitized and non-securitized digital assets and seeks to promote digitalization of other traditional securities; a revamp of the Wells Process; and continued emphasis on individual accountability; and as continued adjustment of administrative enforcement adjudication stemming from the Supreme Court's 2024 Jarkesy decision. Despite these new initiatives, recent enforcement actions under the new SEC leadership underscore that traditional fraud enforcement, including financial statement fraud, will continue to be a priority for the SEC in 2026.

The Big Picture

a. Enforcement in Traditional Fraud Areas Continues

Following Chair Gary Gensler's departure in January 2025, Commissioner Mark Uyeda stepped in as Acting Chair until Chair Paul Atkins was sworn in on April 21, 2025. Commissioner Uyeda was a vocal critic of the SEC's regulatory enforcement sweeps surrounding record keeping and of new proposed rules requiring ESG disclosures and began the shift in the SEC's current approach away from Chairman Gensler's more aggressive regulatory approach. Chair Atkins, for his part, spoke out against the prior administration's pursuit of large corporate fines and enforcement actions that "consume excessive Commission resources not commensurate with any measure of investor harm." Thus, under new leadership, the SEC signaled a return to bread-and-butter enforcement, focusing on fraud that directly harms investors, prioritizing insider trading, offering fraud, Ponzi schemes, market manipulation, and adviser fiduciary breaches over more novel or technical violations. The Commission's 2025 enforcement data reflects this "back to basics" approach: of at least 91 new enforcement suits filed from inauguration through September, nearly 33% targeted offering fraud or insider trading.

Illustrative actions underscore this trajectory. Throughout 2025, the SEC initiated actions against various individuals and companies for operating multi-million-dollar Ponzi schemes and defrauding investors. The Commission also charged individuals in an international insider trading ring that allegedly reaped about $17.5 million using coded and disappearing messages, with parallel criminal indictments unsealed in Massachusetts. These examples suggest that, looking forward into 2026, we can expect a continued emphasis on traditional fraud focusing on investor harm and a renewed attention to insider trading, accounting fraud, offering fraud and Ponzi schemes.

b. Moving Away From Regulation By Enforcement While Promoting Market Integrity

Under the SEC's new leadership, we expect a recalibration in enforcement priorities for companies: while the SEC continues to probe potential violations of accounting and auditing standards, companies should anticipate less emphasis on technical or minor violations, and more focus on clear-cut violations that amount to fraud or mislead investors. Chair Atkins has also signaled a commitment to provide businesses notice of technical violations before enforcement action. As he put it in a recent interview, the SEC is moving away from a "shoot first, ask questions later" approach and will not be "bashing down [a company's] door" over technical missteps without warning. The SEC also voted to end its defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions, with Chairman Uyeda calling those rules "costly and unnecessarily intrusive."

While enforcement actions related to earnings management have also declined in 2025, following several years of increased enforcement activity in this area due to the SEC's "EPS Initiative" (which applied data analytics to review financial disclosures for evidence of manipulation), the current SEC's approach remains unclear and we will watch how the SEC pursues earnings management cases in 2026.

However, the SEC's recalibration with respect to financial statement oversight does not mean that it is abandoning its traditional role of scrutinizing public companies' disclosures about their financial performance. On January 27, 2026, the SEC announced settled charges against a major public company and several of its former executives for materially inflating the performance of a key business unit by using accounting techniques to transfer operating profit from other business units to the underperforming unit. Although the SEC credited the company for its cooperation and remediation, it was still required to pay a civil penalty of $40 million, and its former executives also had to pay civil penalties and disgorgement—in one case, over $600,000 in total fines. The SEC's new Director of Enforcement, Margaret Ryan, touted this case as an example of the SEC stepping in to maintain "market integrity" for investors.

The takeaway is not that enforcement is softening across the board; rather, it is becoming more targeted. Indeed, the retreat from a more aggressive regulatory strategy may result in a shift of resources toward more classic financial statement cases, resulting in a potential uptick in such cases in 2026. Cases most likely to be brought in 2026 will likely feature clear deception, concrete investor impact, or straightforward breaches of accounting and auditing standards.

c. The Investment Services Industry Should Remain Vigilant

One of the most immediate and notable shifts under acting Chair Uyeda and Chair Atkins has been the move away from enforcement sweeps pursuing regulatory violations. Under the prior administration, the SEC conducted sweeps of the investment industry targeting violations of record keeping requirements. Alongside sweeps for violations of the SEC's Marketing Rule concerning unsubstantiated fund performance claims in advertising, these broad enforcement actions resulted in significant penalties. Chair Atkins has made it clear, however, that the Commission will move away from these enforcement sweeps that "consume[] excessive Commission resources not commensurate with any measure of investor harm."

This shift in focus should not be confused with a laissez faire approach to the investment services industry. Enforcement actions in the latter part of 2025 after Chair Atkins assumed his position in April signal that in 2026, the SEC will focus on investigating insider trading under classic theories of breach of trust and fiduciary duties and misappropriation of material nonpublic information (MNPI). For example, in September 2025, the SEC filed charges against an equity trader for trading on MNPI that he acquired from his firm about secondary public offerings. The SEC pursued a classic theory against the trader of breaching his duty of trust to his employer by misusing confidential information. On January 29, 2026, the court entered final judgment permanently enjoining the defendant from violating the Securities Acts and imposing a civil penalty and disgorgement plus prejudgment interest. See SEC v. Squillante, No. 3:25-cv-01457-SFR (D. Conn. filed Sept. 5, 2025). In another case also filed in August, the SEC charged a former investment relations manager for tipping his friends with MNPI about public biotechnology companies. The tippees who profited on trading on the information were also charged, and the court entered final judgment permanently enjoining them from violating the charged provisions and authorizing the court to determine at a later date the amount of disgorgement, prejudgment interest, and civil money penalties that each defendant shall pay. See SEC v. Yedid et al., No. 1:25-cv-06704 (S.D.N.Y. filed Aug. 18, 2025).

In a similar vein, the SEC continues to scrutinize investment advisors who become privy to information about an offering but short sell during the restricted period ahead of the offering in violation of Rule 1-5 of Regulation M.

In addition, we expect that in 2026, the SEC will continue the approach of previous administrations of scrutinizing practices of investment advisors that result in hidden costs and fees. Last year, the SEC investigated advisors for conflicts of interest related to undisclosed fees. In August 2025, the SEC charged two investment advisors for failing to disclose fees and incentives in connection with fee-based investment services.

d. Increased Focus on Individual Accountability
Since taking office, Chair Atkins has signaled a shift toward individual accountability for securities violations, believing that penalties targeting culpable individuals provide the needed deterrent impact (perhaps even more effectively) without imposing collateral damage on shareholders. Whether a focus on individual accountability will actually result in a shift away from significant corporate penalties remains to be seen. Of note, the resolution listed above for financial statement manipulation against a public company—which included significant penalties against its former executives—also included a $40 million civil penalty against the company.

Hot Trends and Cases for 2026

a. Crypto-Policy: From "Regulation-by-Enforcement" to "Project Crypto" and a Coherent Token Taxonomy

In 2026, the SEC continues its shift from enforcement-led boundary setting to rulemaking, exemptive relief, and interagency policy-anchored by Chairman Atkins's "Project Crypto" and a formal "token taxonomy." In 2025, the SEC closed or dismissed high-profile crypto matters for policy reasons, signaling that guardrails will come from guidance and notice-and-comment, not through enforcement actions. That reset alongside the newly-launched Crypto Task Force, designed to introduce regulatory and enforcement clarity, establishes 2026 initiatives to review cryptocurrency distributions, custody, trading, and the classification of tokenized securities.

At the center of the SEC's new approach is "Project Crypto." The plan harmonizes oversight and regulation of digital assets, in order to provide clear guidance on classifying various assets (such as stocks and bonds that trade like other crypto assets on blockchain), to differentiate between non-securitized and securitized digital assets, and to promote the distribution of earnings in digital asset securities. Chairman Atkins instructed staff to allow exemptions during rulemaking, including proposals to let "super-apps" operate under a single license and to allow SEC registrants to list non-security crypto assets alongside traditional securities.

A planned "token taxonomy" underlies the new policy. Chairman Atkins previewed a framework that treats most tokens as not inherently securities, though some distributions can be investment contracts under the traditional Howey test. SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). The taxonomy would distinguish "digital commodities" or "network tokens," "digital collectibles," "digital tools," and "tokenized securities," with only the last category considered securities as representations of traditional financial instruments in blockchain. The framework recognizes that investment contracts can end; secondary trading of non-security tokens is not per se a securities transaction once issuer promises lapse.

Interagency coordination on crypto assets will continue to increase in 2026. The SEC and CFTC issued joint statements on spot crypto (i.e., crypto assets that are bought and sold at their current market prices) and aim to reduce red tape by enabling portfolios with SEC and CFTC-regulated holdings to avoid duplicative compliance filings with both agencies. SEC staff are designing disclosure regimes, exemptions, and safe harbors for various crypto ventures to smooth the path for digital token traders to operate in the U.S. under a clear regulatory backdrop. Together with the taxonomy, these steps aim to reshore capital formation and provide bright-line tests for when assets are securities and when they involve an investment contract.

According to a speech by Chair Atkins on the digital finance revolution, Project Crypto is expected to bear the following fruit in 2026. First, a proposal or policy statement crystallizing the token taxonomy, with clear examples demarcating the boundaries between digital tokens treated as commodities and those regulated as securities. Second, updated guidelines for financial advisers regarding best practices for safekeeping clients' crypto assets ("custody rule modernization"), building on the 2025 state trust company no-action letter. Third, rules or exemptions enabling "super-apps" and side-by-side trading of non-securities and crypto asset securities on SEC-regulated platforms, plus pathways for tokens tied to investment contracts to trade on non-securities platforms under appropriate oversight. Each aims to replace ad hoc enforcement with durable market-structure rules that can keep lawful innovation onshore.

b. FCPA

In June 2025, the Department of Justice issued guidelines for the prosecution of new investigations and cases under the Foreign Corrupt Practices Act ("FCPA"). The guidance explicitly noted a shift away from FCPA cases based on lower-value business courtesies. Previously, the SEC had pursued such cases as books and records violations under the FCPA. In 2025, however, the SEC did not initiate any new FCPA enforcement actions and its senior FCPA leadership departed. The SEC's approach to the FCPA in 2026 remains uncertain. A more detailed discussion of what to expect in 2026 regarding anticorruption enforcement and the FCPA can be found here.

c. Disgorgement

As 2026 unfolds, we are closely following how the Supreme Court will define the contours of the SEC's disgorgement authority. In 2025, federal appellate courts further split over what the SEC must prove to obtain an award of disgorgement as a remedy, which the SEC typically seeks in civil enforcement actions to return "ill-gotten gains" from securities laws violations. The Supreme Court has previously recognized that disgorgement functions as a penalty and is thus subject to a five-year statute of limitations, see Kokesh v. SEC, 581 U.S. 455 (2017), and instructed that the SEC could obtain disgorgement as "equitable relief" only if it does not exceed the wrongdoer's net profits and disgorged funds are returned to victims, see Liu v. SEC, 591 U.S. 71 (2020).

The current circuit-split centers on whether the SEC must prove investor pecuniary harm to obtain disgorgement under 15 U.S.C. § 78u(d)(5) and (d)(7), a question the Supreme Court agreed to decide in Sripetch v. SEC this term. In Sriptech, the Ninth Circuit agreed with the First Circuit's holding in Navellier that the SEC was not required to prove investors suffered a monetary loss to obtain disgorgement. SEC v. Sripetch, 154 F.4th 980 (9th Cir. 2025), cert granted Sripetch v. SEC, No. 25-466, 2026 LX 33103 (Jan. 9, 2026); SEC v. Navellier & Assocs., Inc., 108 F.4th 19, 41 (1st Cir. 2024). The Second Circuit has held, however, that the SEC must prove that investors suffered monetary loss before disgorgement is available. SEC v. Govil 86 F.4th 89, 106 (2d Cir. 2023).

The petitioner in Sripetch asked the Supreme Court to resolve the split, highlighting the nationwide consequences. The SEC urged review as well and defended a profits-focused understanding that does not require investor loss. In the Supreme Court, the question presented is whether a showing of investor pecuniary harm is a prerequisite to disgorgement in SEC civil actions, potentially setting up a decision that could impact the SEC's enforcement strategies moving forward.

d. Wells Process

The coming year will put in practice the SEC's revamped approach to the Wells process, which Chair Atkins has framed as an essential extension of due process rather than a bureaucratic hurdle, with reforms intended to deliver more time, transparency, and meaningful engagement before the Commission decides whether to pursue an enforcement action. The Wells process is the mechanism by which respondents are informed of the charges the Enforcement Division Staff intend to recommend to the Commission. Respondents then have an opportunity to provide their position on why charges should not be pursued before the Commission makes a final enforcement decision. The changes discussed below reposition Wells practice as a consequential advocacy stage.

Enforcement Staff must provide at least four weeks for respondence to submit Wells submissions after being notified of intended charges by the Staff—formally moving the baseline beyond the commonly used two-week timetable. The Staff must be "realistic" about timing in light of case complexity and are expected to grant reasonable extensions where appropriate. Staff are also directed to provide greater access to the evidentiary basis for the contemplated charges, including the investigative file consisting of transcripts and key documents—a practice often described as a "reverse proffer"—subject to statutory and programmatic confidentiality limits. These procedural safeguards are designed to sharpen the issues, improve accuracy, and ensure the Commission benefits from adversarial testing before it acts.

The Commission has also restored the direct review of all Wells submissions by the Commissioners in both settled and litigated matters, reversing prior practices that sometimes filtered or limited what reached the Commission. In addition, senior Enforcement Division leadership has been directed to meet with defense counsel prior to making recommendations. In parallel, Chair Atkins endorsed the use of pre-Wells "white papers," which allow parties to address factual or legal issues pivotal to the investigation earlier, potentially obviating a Wells notice. Under the refined framework, these white papers will also be reviewed by the Commissioners.

These Wells reforms operate alongside a broader organizational centralization within the Division of Enforcement—replacing Regional Directors with Deputy Directors and consolidating oversight—which is intended to produce greater consistency across SEC offices.

Practically, we expect respondents to make more robust use of the expanded record access and additional time to craft targeted submissions that address factual gaps, legal infirmities, and policy considerations. We also anticipate wider deployment of white papers in matters where early correction of the Staff's working theory could avoid unnecessary investigative costs.

e. Shadow Trading Theory

Enforcement of "shadow trading" has been a hot topic since the SEC advanced the theory in 2024 in SEC v. Panuwat, and 2026 is expected to finally bring some clarity to the SEC's view of its scope and application. Shadow trading is a novel insider trading theory in which a person with material non public information about Company A trades in the securities of Company B—a competitor or comparable company whose value is likely to be affected. In Panuwat, the SEC alleged that Panuwat, then head of business development at Medivation (a mid-sized, oncology focused biopharma company), purchased short term, out of the money stock options in Incyte Corporation (another mid-sized, oncology focused biopharma company) just days before the announcement that Pfizer would acquire Medivation at a significant premium. According to the complaint, Panuwat knew that investment bankers had cited Incyte as a comparable company in discussions with Medivation and anticipated that the Medivation acquisition would likely lift Incyte's stock price.

In April 2024, Panuwat was found liable for insider trading under the shadow trading theory. The case was appealed to the Ninth Circuit in November 2024, and appellate briefs have now been filed. In its appellate brief, the SEC seemingly retreats from an overarching "shadow trading" theory, instead hanging its hat on a breach of contract theory based on language in Panuwat's agreement prohibiting the use of any of Medivation's material nonpublic information to trade in the securities of another publicly traded company. This pivot aligns with the new administration's focus on bread-and-butter fraud and suggests that non-contractual shadow trading theories may take a back seat for now.

f. PCAOB

The PCAOB enters 2026 amid significant changes that will impact inspections and enforcement in the year ahead. The SEC approved a 2026 PCAOB budget of $362 million, a 9.4% decrease year over year, with notable reductions to Board member compensation, while the SEC reassesses the Board's strategic plan and operations. Substantively, the effective date of QC 1000—the PCAOB's "landmark" quality control standard modernizing firm-wide systems, including annual evaluations and an external quality control function for the largest firms—was deferred one year to December 15, 2026 after stakeholder feedback on implementation burdens. Meanwhile, legal headwinds remain significant: the Supreme Court's decision in SEC v. Jarkesy, see infra, constrains in-house penalty adjudications. Ongoing "John Doe" challenges to the PCAOB's disciplinary process through in-house adjudication based on the Supreme Court's SEC v. Jarkesy decision and other constitutional arguments, potentially threaten PCAOB's adjudicatory pathway, given the PCAOB's lack of statutory authority to litigate in federal court. These dynamics follow a turbulent 2025 in which PCAOB Chair Erica Williams resigned, and after soliciting candidates for all PCAOB Board seats, the SEC appointed Demetrios Logothetis as Chairman and three officials in the Trump Administration to the remaining Board seats on January 30, 2026.

Against this backdrop of a reduced budget and increased SEC scrutiny, audit firms should expect a measured shift in PCAOB enforcement with the focus remaining on critical audit failures. The amended contributory liability standard (Rule 3502)—lowering the scienter threshold from recklessness to negligence—may provide fodder for increased enforcement activity, although as we have stated previously, the PCAOB may lack a statutory basis to amend this threshold. Market participants should also plan for inspection focus influenced by QC 1000's frameworks, including risk-based design and governance enhancements, despite the delayed effective date, as the Board and staff integrate the standard's concepts into interim supervision, remediation expectations, and root-cause analyses. Finally, the SEC's 2026 budget order underscores a heightened SEC check on PCAOB stewardship of the accounting support fee, which could affect the pace and scope of PCAOB programs over the coming year.

g. Update on Jarkesy

After the Supreme Court held in SEC v. Jarkesy, 603 U.S. 109 (2024) that the SEC could not pursue civil monetary penalties through an administrative action – part of a larger trend of decisions curtailing administrative authority – the future of the SEC's in-house enforcement appeared uncertain.

A recent district court decision, however, declined to extend Jarkesy's holding to the SEC's use of administrative courts to pursue securities industry bans. Nonetheless, continued attempts to expand Jarkesy are expected, and the decision has already been applied to a number of other agencies, including the Department of Labor, the FCC, and the FAA.

h. Potential Semi-Annual Reporting Changes

The SEC has announced its plan to propose rules that would reduce financial reporting requirements from quarterly to semi-annually. As Commissioner Uyeda recently noted, the plan, if adopted, would bring the U.S. into alignment with foreign jurisdictions, including the United Kingdom and European Union, which both have semi-annual reporting requirements. Proponents of semi-annual reporting argue this will reduce regulatory oversight and expenses associated with quarterly reporting and allow investors to focus on longer term performance. Detractors suggest this may reduce transparency.

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This past year saw a turbulent reshaping of financial regulatory policies and securities enforcement. That said, in the coming year we expect the SEC to continue on the path forged in 2025. The Agency and peer regulators are potentially signaling new guidance pertaining to cryptocurrency and block-chain trading, and will likely maintain enforcement of traditional fraud while avoiding novel prosecution strategies to encourage innovation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.