1. On February 25, 2026, the SEC issued an order instituting administrative proceedings against Madison Capital Funding LLC, a formerly registered investment adviser, for selling loans to private fund clients (“the Funds”) without reasonably determining whether those trades were at fair market value, contrary to its obligations under its advisory agreements and representations to investors. The SEC found that Madison Capital sold loans to its advisory clients at par value less the unamortized loan fee, without reasonably determining whether those trades were at fair market value. Madison Capital was ordered to pay a $900,000 civil penalty and was censured. Additionally, a Fair Fund was created for the penalties, and Madison Capital is barred from future violations of the Advisers Act. https://www.sec.gov/files/litigation/admin/2026/ia-6948.pdf
2. On February 25, 2026, the SEC instituted administrative proceeding against Ejiro Ode Okuma, a registered representative and investment adviser representative associated with Equitable Advisors, LLC. According to the SEC’s complaint, Okuma misappropriated more than $9 million from an elderly client who relied almost exclusively on him for financial matters. Okuma, without the client’s knowledge or consent, opened a brokerage account for one of the client’s trusts and transferred in more than $9 million in securities from the client’s other accounts. While establishing the new brokerage account, Okuma allegedly took several steps to conceal his continuing misappropriation, including authorizing the use of check writing from the account, setting up the log-in credentials for the account so that he could access and control the account, and creating an e-mail account to electronically impersonate the client. Okuma then misappropriated the client’s funds for his own benefit, including to build a multi-million-dollar residence, purchase vehicles, and buy vacation homes. The SEC has barred Okuma from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. https://www.sec.gov/files/litigation/admin/2026/34-104888.pdf
3. On February 24, 2026, the SEC announced significant updates to its Enforcement Manual, the first comprehensive revision since 2017, designed to enhance fairness, transparency, consistency, and efficiency in the Division of Enforcement’s investigative and enforcement processes. The updated manual will now be subject to annual review going forward. Key elements of the updated Enforcement Manual include:
- Uniform Wells Process: The manual emphasizes the importance of open, informed dialogue between enforcement staff and potential respondents. Recipients of a Wells notice — the formal notification that staff may recommend enforcement action — will now ordinarily receive four weeks to submit a Wells submission and will have a Wells meeting scheduled within four weeks of their submission with a member of senior enforcement leadership. This is intended to encourage meaningful engagement, provide clearer expectations on submissions, and promote consistency across offices.
- Simultaneous Treatment of Settlement and Waiver Requests: The updated manual reflects the SEC’s restored practice of permitting parties to request that the Commission consider settlement terms and any related waiver requests concurrently. This change aims to give respondents greater visibility into the collateral effects of settlements (such as disqualification consequences) and facilitate more efficient resolution of investigations.
- Framework for Cooperation and Penalty Consideration: New guidance details how cooperation will be evaluated, including its potential impact on civil penalty assessments, and reinforces more consistent internal collaboration during investigations.
- Other Process Enhancements: The updated manual also includes revised procedures for the formal order process, an updated framework for referrals to criminal authorities, and other changes to align enforcement practices with current Division best practices.
4. On February 18, 2026, Paul, Weiss, Rifkind, Wharton & Garrison announced that Antonia Apps, the former Deputy Director of the Securities and Exchange Commission, joined the firm as a partner in its Litigation Department. Apps joins the firm after serving in various senior roles at the Securities and Exchange Commission, including leading the agency’s New York Regional Office, the largest regional office, with more than 600 attorneys, accountants, investigators, securities compliance examiners, and other staff. During her tenure as Regional Director, the New York office brought more standalone enforcement actions and completed more examinations than any other Securities and Exchange Commission office nationwide. In January 2025, Apps was promoted to Acting Deputy Director of the Division of Enforcement, where she helped oversee all enforcement activities nationwide and managed a 1,300-person division responsible for investigations and trials. In April 2025, she was named Deputy Director of Enforcement, overseeing the enforcement program in the New York, Boston, Chicago, and Philadelphia regional offices
5. On February 17, 2026, the SEC approved a Plan of Distribution relating to a previously established Fair Funds in an administrative proceedings against Merrill Lynch, Pierce, Fenner & Smith Incorporated and Harvest Volatility Management LLC. In September 2024, the SEC found that from March 2016 to April 2018, Harvest Volatility executed options transactions under its Collateral Yield Enhancement Strategy at levels materially above those authorized in client Investment Management Agreements, resulting in client overexposure, higher fees, and financial losses, and that Merrill Lynch failed to adequately notify certain clients of that overexposure. The SEC previously ordered Merrill Lynch to pay $2,000,000 in disgorgement, $800,000 in prejudgment interest, and a $1,000,000 civil penalty, and ordered Harvest Volatility to pay $2,500,000 in disgorgement, $1,000,000 in prejudgment interest, and a $2,000,000 civil penalty, for a total of $9,300,000, and created Fair Funds to distribute the monies to harmed investors. The approved plan provides for distribution of the Net Available Fair Fund to investors based on management fees paid for investments in the strategy that exceeded contractual limits during the relevant period. https://www.sec.gov/files/litigation/admin/2026/34-104851.pdf
6. On February 13, 2026, the SEC filed an administrative proceeding against Thomas Corsaro for fraud and misappropriation of funds. Corsaro, a former investment adviser representative and registered representative, was sentenced to 48 months in prison following his guilty plea to mail fraud charges. Corsaro defrauded eight investors by misrepresenting that he would invest their funds in securities. Instead, he used the funds for personal expenses, including cashing checks mailed by the investors. In addition to the prison sentence, Corsaro was ordered to pay $1.45 million in restitution. The Securities and Exchange Commission barred him from associating with any broker, dealer, investment adviser, or other financial entity, with any reapplication subject to certain conditions. https://www.sec.gov/files/litigation/admin/2026/34-104841.pdf
7. On February 13, 2026, the SEC filed an administrative proceeding against Kenneth Welsh, a former registered representative and investment adviser representative with Wells Fargo, for wire fraud and investment adviser fraud. The SEC’s complaint disclosed that Welsh misappropriated customer funds to pay personal credit card bills and used fraudulent checks to buy gold and pay for personal expenses. In a related civil action, a consent judgment was entered against Welsh permanently enjoining him from violations of the federal securities laws. As a result of his criminal activities, Welsh was sentenced to 44 months in prison. In addition to the prison sentence, the SEC barred Welsh from associating with any broker, dealer, investment adviser, or other regulated financial entities. If he seeks reentry into the industry, it will be subject to specific conditions, including compliance with the SEC’s order and potential restitution. https://www.sec.gov/files/litigation/admin/2026/34-104839.pdf
8. On February 12, 2026, the SEC approved amendments to FINRA Rule 3220, commonly known as the Gifts Rule, which governs gifts and gratuities provided by broker-dealers and their associated persons. The primary changes include:
- The annual per-recipient gift limit will rise from $100 (in place since 1992) to $300 to reflect inflation and modern business costs.
- Related limits in FINRA’s Non-Cash Compensation Rules will be updated to align with the new $300 threshold.
- The amendments formally incorporate existing interpretive guidance into the rule text, clarifying valuation, aggregation, and supervisory obligations regarding gifts.
- The amendments explicitly confirm that the Gifts Rule does not apply to gifts to individual retail customers or gifts from a member to its own associated persons, helping eliminate prior uncertainty around these scenarios.
FINRA has indicated it will announce the effective date of the amended rule in a forthcoming regulatory notice.
9. On February 11, 2026, the SEC obtained a final judgment by default against Bluesky Eagle Capital Management Ltd. in connection with charges that it made material misrepresentations and unsubstantiated statements in a Form ADV filed with the SEC. The SEC’s complaint alleged that Bluesky Eagle falsely represented in its December 2023 Form ADV that it was an Exempt Reporting Adviser, a public company operating from office space in New York City, managed $10 million in assets in the United States, advised a private fund, and that a separate registered investment adviser reported information about that private fund on its own Form ADV. According to the complaint, the manager of the identified New York office space had no knowledge of Bluesky Eagle or its executives, the separate registered investment adviser had not reported any such private fund, the SEC found no reporting of the purported fund in other SEC filings, and a search of the Commission’s public company database yielded no information regarding Bluesky Eagle. The SEC also alleged that Bluesky Eagle failed to respond to requests to substantiate the information in its Form ADV. The final judgment permanently enjoins Bluesky Eagle from violating Sections 204(a) and 207 of the Investment Advisers Act of 1940, bars it and its owners and executive officers from filing a Form ADV as an Exempt Reporting Adviser and orders the firm to pay a civil penalty of $1,182,254. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26484
10. On February 11, 2026, SEC Division of Enforcement Director Meg Ryan delivered her first public remarks at the Los Angeles County Bar Association’s 56th Annual Securities Regulation Seminar, outlining her priorities and signaling a recalibration of enforcement focus. Director Ryan emphasized a return to core enforcement principles centered on fraud, particularly misconduct harming retail investors as well as traditional areas such as accounting fraud, insider trading, market manipulation and wash trading. She rejected suggestions that enforcement activity had been deprioritized, stating that claims the Division had been “tossed to the wayside” were “flat-out wrong.” For investment advisers, Director Ryan’s remarks are notable for their emphasis on proportionality and process. She highlighted the importance of procedural fairness in the Wells process, including meaningful opportunities for advisers to respond before charges are recommended. Her comments suggest that advisers who identify compliance weaknesses and promptly remediate deficiencies may find a more receptive audience within the Division, particularly in cases involving disclosure controls, fee practices and operational compliance issues that do not involve intentional misconduct. At the same time, advisers engaging in fraudulent conduct, misleading disclosures, or breaches of fiduciary duty should expect continued and focused enforcement scrutiny. https://my.lowenstein.com/e/xwk2stvj4tzegta/5ad8e59e-0f25-4757-9d9c-d81790197c15
11. On February 10, 2026, the SEC obtained a final judgment against Cutter Financial Group, LLC and its principal Jeffrey Cutter, in connection with breaches of fiduciary duties relating to annuity sales to advisory clients. Following a jury verdict, the court found that Cutter and his firm selling fixed index annuities to advisory clients without adequately disclosing their financial incentive to recommend those products over other investment options. The judgment orders Cutter Financial Group to pay a $100,000 civil penalty and Cutter to pay a $50,000 civil penalty, requires them to provide a copy of the judgment to all existing and new advisory clients for a period of five years, and enjoins them from future violations for five years. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26485
12. On February 10, 2026, the SEC instituted administrative and cease-and-desist proceedings against Barrington Asset Management, Inc. and its executive vice president and chief compliance officer, Gregory David Paris. Paris executed trades through omnibus accounts and allocated profitable day trades disproportionately to himself while allocating losing trades disproportionately to advisory clients. The SEC found that this conduct resulted in $78,490 in excess first-day gains to Paris and disadvantaged clients. The order further found that Barrington’s Form ADV Part 2A disclosures misrepresented that employee trading was reviewed regularly and that no employee would prefer his own interests over clients’. In fact, Barrington did not conduct any review of Paris’s trading and allocations. The SEC determined that respondents willfully violated Section 206(2) of the Investment Advisers Act of 1940. Respondent Paris was required to disgorge $78,490 alone with prejudgment interest of $31,048 and civil penalties of $40,000, https://www.sec.gov/files/litigation/admin/2026/34-104793.pdf
13. On February 5, 2026, the SEC’s Division of Economic and Risk Analysis (DERA) released two reports on active ETFs and fund mergers, along with updated statistics on municipal advisors,. Dr. Joshua White, SEC Chief Economist, noted that active ETFs are rapidly growing and now rival passive funds, marking a shift to more actively managed strategies. The reports also show that fund mergers generally lead to lower fees for investors. https://www.sec.gov/newsroom/press-releases/2026-17-sec-publishes-data-exchange-traded-funds-fund-mergers-updated-statistics-municipal-advisors-transfer
14. On February 5, 2026, the SEC filed charges against Marat Likhtenstein for orchestrating a Ponzi-like fraud targeting the Russian-American Jewish community. Likhtenstein, while acting as an investment adviser, raised more than $4.1 million from at least 15 clients by offering self-issued promissory notes with promises of high interest rates. Likhtenstein falsely assured clients that their funds would be invested in lucrative business opportunities. However, he misappropriated the funds, using $940,000 to make Ponzi-like payments to earlier investors, while spending approximately $3.2 million on personal expenses. The SEC seeks a final judgment requiring Likhtenstein to pay disgorgement, prejudgment interest, and civil penalties, as well as injunctive relief to prevent future violations. Without admitting or denying the SEC’s allegations, Likhtenstein consented to injunctive relief, with monetary relief to be determined at a later date. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26476
15. On February 4, 2026, the SEC filed a civil enforcement action in the U.S. District Court for the Northern District of Georgia against Ejiro Ode Okuma, a Georgia-based investment adviser. The SEC alleges that Okuma misappropriated approximately $9.8 million from an 81-year-old client who relied heavily on him for financial matters. According to the complaint, Okuma abused his access and authority by transferring client securities to unauthorized accounts, impersonating the client electronically, forging signatures, and moving funds to accounts he controlled, including through an affiliated entity. The SEC seeks permanent injunctions, disgorgement plus prejudgment interest, civil penalties, conduct-based relief restricting securities activity, and asset relief including turnover and liquidation of property and accounts traceable to the alleged fraud. Okuma has agreed to a final judgment that, subject to court approval, will permanently enjoin him from violating these provisions of the federal securities laws. The settlement also prohibits him from participating in the issuance, purchase, offer, or sale of any securities, except for transactions involving securities listed on national exchanges in his personal accounts. Okuma was required to pay $9,025,424 in disgorgement, $1,029,626 in prejudgment interest, and a $3 million civil penalty. https://www.sec.gov/files/litigation/complaints/2026/comp26474.pdf