1. In January 2026, regulators continue to focus on post-commitment period management fee calculations in private equity, viewing them as disclosure and conflict-of-interest risks tied to how advisers define “the base of the bill.” The SEC has warned that some private fund managers are not properly disclosing expenses—such as investment banking, legal, or financing costs—that increase deal cost bases and, in turn, elevate management fees charged to investors after the commitment period. In prior risk alerts, regulators stated that failures to follow disclosed fee calculation practices resulted in investors paying more in management fees than required under fund governing documents, particularly where advisers failed to reduce fee bases following asset sales, write-downs, or dispositions. Despite industry views that these fee mechanics are long-standing and widely understood, SEC examiners and enforcement staff continue to probe the issue. Since 2022, the SEC has brought multiple enforcement actions and has more cases in the pipeline, with examiners requesting detailed LPAs, audited financials, and transaction-level data to assess whether fee calculations align with disclosures. Although questions remain about the appetite of current SEC leadership to pursue highly technical enforcement cases absent clear investor harm, compliance sources report that post-commitment fees remain an active examination priority, and even unresolved or abandoned investigations can be costly and disruptive for private fund advisers.
2. On January 20, 2026, the SEC filed a civil complaint against Joel Sofia alleging he misrepresented his background and trading experience, falsely guaranteed clients would not lose money, and misled clients about using proprietary automated trading software. The SEC alleges Sofia’s trading caused three clients to lose between 61% and 89% of their starting balances—more than $1.6 million in total—and that he later stopped communicating with them. The SEC seeks permanent injunctions, an industry bar, and a civil penalty. This matter is being litigated. https://www.sec.gov/files/litigation/complaints/2026/comp26463.pdf
3. On January 20, 2026, the SEC announced the appointment of Keith Cassidy as Director of the Division of Examinations, following his service as Acting Director since May 2024. Cassidy previously led initiatives to strengthen the SEC’s national examinations program including the development of a risk-based examination projection model and the adoption of metric-driven frameworks to improve operational effectiveness and resource allocation. Cassidy brings extensive experience in technology-focused oversight having led the Technology Controls Program, overseen the CyberWatch Program and Cybersecurity Program Office, and served in senior roles involving legislative, intergovernmental, and national security coordination, reinforcing the SEC’s focus on risk-based, technology-informed examinations to protect investors and promote market integrity. https://www.sec.gov/newsroom/press-releases/2026-6-keith-e-cassidy-named-director-division-examinations
4. On January 20, 2026, the SEC instituted administrative proceedings against FamilyWealth Advisers, LLC and FamilyWealth Asset Management, LLC for using advisory agreements that included misleading hedge clause language that lead retail clients to believe they waived non-waivable legal rights, permitted assignment of advisory contracts without client consent, granted the advisers custody authority (including the ability to direct disbursements) without obtaining the required annual independent public accountant custody examination, and for failing to implement compliance policies and procedures reasonably designed to prevent these violations. The SEC imposed a cease-and-desist order, censure and assessed a civil penalty of $85,000 to FamilyWealth Advisers and $65,000 to FamilyWealth Asset Management. https://www.sec.gov/files/litigation/admin/2026/ia-6941.pdf?utm_medium=email&utm_source=govdelivery
5. On January 19, 2026, the SEC charged father and son investment advisers, Michael and David Sztrom and their company Sztrom Wealth Management, Inc., with defrauding advisory clients by creating the false impression that Michael Sztrom was associated with registered investment adviser Advanced Practice Advisors, LLC (APA). The SEC’s complaint alleges that the Sztroms provided investment advice to clients through Sztrom Wealth Management (SWM). As alleged, the Sztroms concealed from clients that Michael Sztrom was not associated with APA or any registered investment adviser and was not subject to compliance oversight by APA or any other firm. As alleged in the complaint, David Sztrom, without any disclosure to clients, also allowed Michael Sztrom to use APA’s clearing broker for client transactions. Furthermore, and again without disclosure to clients, Michael Sztrom impersonated David Sztrom on telephone calls with the clearing broker on at least 38 separate occasions, leading the clearing broker to terminate its agreement with APA. The Sztroms’ and SWM’s deception and multiple failures to disclose breached their fiduciary duties to clients. The complaint also alleges that David Sztrom allowed Michael Sztrom to access to confidential client information and to use his personal cell phone, instead of APA’s email system, to text advisory clients about their investments. This matter is being litigated. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-25010
6. On January 16, 2026, the SEC instituted administrative against Engaged Capital, LLC, a registered investment adviser, for failing to disclose material conflicts of interest arising from its involvement in a special purpose acquisition company (SPAC) transaction. The SEC found that Engaged Capital invested client assets in private investments in public equity transactions that were necessary to complete a SPAC business combination and that increased the potential value of founders’ shares and warrants previously held by Engaged Capital, its personnel, and its clients, without adequately disclosing these conflicts. As a result, Engaged Capital was censured, ordered to cease and desist from future violations, and agreed to pay a civil money penalty of $200,000. https://www.sec.gov/files/litigation/admin/2026/ia-6940.pdf
7. On January 15, 2026, the SEC announced that J. Russell “Rusty” McGranahan was named General Counsel of the SEC. In this role, McGranahan will serve as the SEC’s chief legal officer, overseeing legal advice and guidance to the Chairman, Commissioners, and agency staff. Jeffrey Finnell, who served as Acting General Counsel, will continue at the SEC as Deputy General Counsel. McGranahan brings more than 30 years of legal and financial services experience, most recently serving as General Counsel of the U.S. General Services Administration. His prior roles include General Counsel of Focus Financial Partners, where he led the firm through its 2018 IPO and 2023 going-private transaction, and senior legal positions at BlackRock. His appointment signals continuity in senior leadership as the SEC advances its rulemaking agenda and capital markets initiatives under Chairman Paul Atkins. https://www.sec.gov/newsroom/press-releases/2026-5-j-russell-mcgranahan-named-sec-general-counsel?utm_medium=email&utm_source=govdelivery
8. On January 15, 2026, the SEC’s Division of Investment Management updated its Frequently Asked Questions regarding Marketing Compliance to provide additional SEC staff guidance on the application of amended Rule 206(4)-1 under the Investment Advisers Act of 1940. The updated FAQs clarify several recurring compliance issues for registered investment advisers, including transition timing to the amended Marketing Rule, the presentation of gross and net performance, use of interim performance information shortly after calendar year-end, extracted performance, portfolio characteristics, model fees, and the calculation of gross and net internal rates of return. The SEC Staff reiterated that advisers must either fully comply with the amended Marketing Rule or continue complying with the prior advertising and cash solicitation rules until transition and emphasized that gross and net performance must be calculated using the same methodology and time period to avoid misleading presentations. The FAQs also address newer interpretive positions including when advisers may present extracted or characteristic data without corresponding net figures, provided that total portfolio gross and net performance is prominently disclosed, and when the use of actual fees versus model fees could raise concerns under the rule’s general prohibitions. In addition, the update provides guidance on compensated testimonials and endorsements, clarifying when self-regulatory organization final orders may constitute disqualifying events and outlining specific conditions under which SEC staff would not recommend enforcement action. The FAQs underscore the SEC staff’s continued focus on substance over form in marketing compliance and reinforce expectations that advisers maintain policies, disclosures, and performance presentations that are not materially misleading and are aligned with current regulatory guidance. https://www.sec.gov/rules-regulations/staff-guidance/division-investment-management-frequently-asked-questions/marketing-compliance-frequently-asked-questions
9. On January 12, 2026, the SEC announced the appointment of Paul Tzur and David Morrell as Deputy Directors of the Division of Enforcement, strengthening leadership across the SEC’s regional enforcement program. Mr. Tzur joined the SEC on January 6, 2026, and will oversee enforcement activities in the Chicago, Atlanta, and Miami Regional Offices. Mr. Morrell joined on January 12, 2026, and will oversee enforcement activities in the New York, Boston, and Philadelphia Regional Offices. The announcement highlights both appointees’ extensive backgrounds in federal prosecution, complex litigation, and public service, and reflects the SEC’s focus on enhancing enforcement leadership to support its investor protection and market integrity mission. https://www.sec.gov/newsroom/press-releases/2026-4-paul-tzur-david-morrell-named-deputy-directors-division-enforcement?utm_medium=email&utm_source=govdelivery
10. On January 11, 2026, the U.S. Supreme Court agreed to review the scope of the U.S. Securities and Exchange Commission’s authority to obtain disgorgement in enforcement actions, a decision that could significantly affect the SEC’s ability to recover alleged illegal gains. The Court will consider whether the SEC must demonstrate identifiable investor harm or pecuniary loss in order to obtain disgorgement from individuals or firms found to have violated the federal securities laws. The case arises from an appeal by Ongkaruck Sripetch, who challenged a $3.3 million disgorgement order affirmed by the Ninth Circuit, arguing that disgorgement should be limited to circumstances where compensable investor harm can be shown. The review follows the Supreme Court’s 2020 decision limiting disgorgement to a wrongdoer’s net profits and requiring that such amounts be awarded to victims. Federal appellate courts have since diverged on whether proof of investor loss is required, with the Ninth Circuit holding that it is not, while the Second Circuit has required a showing of pecuniary harm. According to publicly reported data, disgorgement and related interest accounted for more than $6 billion in fiscal year 2024, representing a substantial portion of the SEC’s monetary remedies, before falling sharply in fiscal year 2025. Paul Atkins has previously expressed concern regarding large corporate monetary penalties. The U.S. Solicitor General has urged the Court to preserve the SEC’s ability to seek disgorgement without requiring proof of investor loss, asserting that disgorgement is a profits-based remedy designed to prevent wrongdoers from retaining illicit gains. The Court is expected to hear oral arguments in April 2026 and issue a decision by July 2026. https://www.advisorhub.com/supreme-court-to-review-sec-power-to-recoup-illegal-gains
11. On January 9, 2026, the SEC published a new notice extending the compliance deadline for the de minimis exception from swap registration for security-based swap dealers and major security-based swap participants to May 8, 2028. The delay permits SDs and MSSPs to avoid registration if their swaps business stays below certain thresholds. https://www.sec.gov/newsroom/speeches-statements/atkins-102925-statement-regarding-phase-termination-date-de-minimis-exception-security-based-swap-dealer
12. On January 8, 2026, the SEC published remarks by Brian Daly, Director of the Division of Investment Management, titled “(Re)Empowering Fiduciaries in Proxy Voting,” addressing proxy voting by registered investment advisers, including whether advisers must vote client proxies, how advisers can tailor or limit proxy voting authority by agreement with clients with full and fair disclosure and informed consent, and how advisers should evaluate the costs and benefits of voting versus not voting in the client’s best interest. The remarks also discuss advisers’ widespread reliance on proxy advisory firms including default voting settings, the risk that routine “vote all proxies” practices can become a box-checking exercise, and the need for advisers and fund boards to reassess whether proxy voting positions align with investment mandates—particularly for passive, index, quantitative, or systematic strategies—while emphasizing that advisers who do vote must do so on an informed basis and in the client’s best interest. The speech further notes the broader regulatory and policy focus on proxy voting including recent staff actions and an executive order referenced in the remarks, flags concerns about conflicts, transparency, and potential group-formation issues, and highlights the potential for artificial intelligence tools to support proxy analysis and voting recommendations if used with appropriate oversight, transparency, and auditability consistent with fiduciary duties. https://www.sec.gov/newsroom/speeches-statements/daly-remarks-nycba-proxy-010826
13. The SEC brought 30% fewer enforcement actions in FY 2025 than in FY 2024—a decline that coincided with the change in SEC administration. The findings, presented in the SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2025 Update released today by Cornerstone Research and the NYU Pollack Center for Law & Business, are based on SEC data available as of November 14, 2025. While a decline aligns with previous years in which there was an SEC administration change, FY 2025 stood out for its composition: outgoing Chair Gary Gensler oversaw 52 actions (93%), while only four were initiated under the new SEC administration—the highest and lowest respective totals for outgoing and incoming chairs during a transition year since at least FY 2013. After Chair Gensler stepped down in January 2025, Mark Uyeda served as acting chair until April when Chair Paul Atkins was sworn in. “What’s striking this year is not the overall decline, but when the actions occurred,” said Stephen Choi, a report coauthor and the Bernard Petrie Professor of Law and Business at New York University School of Law and Co-Director of the NYU Pollack Center for Law & Business. “Nearly all of this enforcement activity took place before the SEC administration change, with very few actions under the new administration. Our analysis helps us see the timing and composition of activity in ways that overall totals alone may not reveal.” The report analyzes information from the Securities Enforcement Empirical Database (SEED), which has tracked SEC enforcement actions filed against public companies and subsidiaries since FY 2010—a period that has seen four changes in SEC administrations. In addition to record activity levels, FY 2025 was notable for lower overall monetary settlements—$808 million, the lowest for any year in which there was an SEC administration change and the second lowest for any year in SEED.
14. On January 7, 2026, the SEC proposed amendments to its rules defining which registered investment companies, investment advisers, and business development companies qualify as small entities for purposes of the Regulatory Flexibility Act (RFA). The proposed amendments would increase the asset-based thresholds used to determine small entity status, update the method for aggregating assets of related funds, and provide for inflation-based adjustments to the thresholds every ten years. The SEC stated that these changes are intended to improve how the agency evaluates the economic impact of its rulemaking on smaller market participants and to better align its regulatory analyses with current market conditions. According to Paul Atkins, the proposal reflects the SEC’s ongoing effort to modernize regulatory requirements and more accurately capture the types and number of investment advisers and investment companies that qualify as small entities. The stated goal is to promote regulatory effectiveness and efficiency while minimizing the significant economic impact of rulemaking on smaller firms. The proposing release will be published in the Federal Register. Public comments will be accepted for 60 days following publication of the proposing release. https://www.sec.gov/newsroom/press-releases/2026-1-sec-proposes-amendments-small-entity-definitions-investment-companies-investment-advisers-purposes
15. On January 7, 2026, the SEC Division of Trading and Markets issued guidance clarifying how broker-dealers may custody and trade crypto assets, marking a significant shift in the SEC’s regulatory posture. The SEC Staff explained that carrying broker-dealers may take physical possession of crypto asset securities by holding the associated private keys and implementing robust policies addressing cybersecurity, blockchain risks, forks, and contingency events, consistent with Exchange Act Rule 15c3-3. The guidance also confirmed that alternative trading systems (ATSs) may facilitate trading of crypto asset security and non-security pairs, subject to existing securities law requirements and enhanced disclosures, while acknowledging that national securities exchanges would require further rule changes to trade non-securities. In parallel, Commissioner Hester Peirce issued a Request for Information seeking public input on modernizing the regulatory framework for ATSs, national securities exchanges, and crypto trading infrastructure. Taken together, these developments signal the SEC Staff’s effort to create a clearer, more workable pathway for custody and trading of crypto assets—both securities and non-securities—on SEC-regulated platforms, while leaving open key questions around implementation and jurisdiction. https://www.dechert.com/knowledge/onpoint/2026/1/sec-staff-clarifies-broker-dealer-custody-and-trading-of-crypto-.html?utm_source=vuture&utm_medium=email&utm_campaign=2026%2f01%2f07%20sec%20staff%20clarifies%20broker-dealer%20custody%20and%20trading%20of%20crypto%20assets
16. On January 6, 2026, the U.S. District Court for the Northern District of California entered a final judgment in the SEC’s civil enforcement action against Bernardo Mendia-Alcaraz, his private equity firm Toltec Capital LLC, and two relief defendants, Edith Ramirez Cano and Fondo Toltec S de RL de CV. The SEC alleged that the defendants raised $3.3 million from investors through false and misleading statements. The funds were misused for Ponzi-like payments to other investors and for personal expenses. The final judgment permanently enjoins Mendia-Alcaraz and Toltec Capital from violating various provisions of the federal securities laws. Additionally, Mendia-Alcaraz is permanently prohibited from participating in the issuance, purchase, offer, or sale of securities, except for his personal accounts, and from serving as an officer or director of any publicly traded company. The disgorgement amount was set at $2,207,524, with $150,866 in prejudgment interest. Relief defendants Fondo Toltec and Ramirez Cano were jointly liable for $554,563 and $3,654 in disgorgement, with additional prejudgment interest. Mendia-Alcaraz was also required to pay a civil penalty of $2,207,524. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26457
17. On January 2, 2025, the Financial Crimes Enforcement Network (FinCEN) published a final rule postponing the compliance deadline for its anti-money-laundering and counter-terrorist financing requirements applicable to registered investment advisers and exempt reporting advisers. The amendment delays the effective date of the Investment Adviser AML Rule, which requires covered advisers to develop and implement an AML/CFT compliance program and comply with suspicious activity reporting obligations, moving the deadline to January 1, 2028—two years later than originally scheduled. FinCEN stated that the delay is intended to provide additional time to review and refine the rule so it is appropriately tailored to the diverse business models and risk profiles of investment advisers, and to better coordinate with related regulatory efforts, including potential updates to customer identification program requirements and joint initiatives with the SEC. While the postponement is expected to ease near-term compliance costs and address industry concerns about the significant planning and operational demands of building AML programs, some critics cautioned that the delay could prolong gaps in U.S. AML coverage. https://www.federalregister.gov/documents/2025/01/02/2025-24184/anti-money-launderingcountering-the-financing-of-terrorism-program-and-suspicious-activity-report-filing-requirements-for-registered-investment-advisers-and-exempt-reporting-advisers
18. On December 19, 2025, the Commodity Futures Trading Commission’s Market Participants Division announced it has issued a no-action letter to the Managed Funds Association submitted on behalf of its members. The letter states MPD will not recommend the CFTC initiate an enforcement action against firms registered as investment advisers with the SEC who operate commodity pools privately offered solely to sophisticated investors known as qualified eligible persons, for failing to register with the SEC as a commodity pool operator, subject to certain conditions. The CFTC reasoned that these private fund advisers “did not require the same level of regulatory oversight” as others, in part, because they serve “institutional investors, family offices, and high-net-worth individuals” and “possess the resources and expertise to evaluate investment risks without the need for prescriptive regulatory protections,” according to the no-action letter. https://www.cftc.gov/PressRoom/PressReleases/9160-25
19. On December 4, 2025, the SEC’s Inspector General released a report regarding the SEC staffing levels. The Inspector General stated that the SEC experienced a sharp increase in staff attrition during fiscal year 2025 and that 17.8% of SEC staff left the agency in FY 2025, representing an attrition rate more than five times higher than the prior year. The report noted that approximately 13% of staff departed during a period of significant federal workforce disruption, with some smaller SEC offices losing as much as 26% of their personnel. The report further explains that the impact of these departures was compounded by a hiring freeze, changes to federal hiring processes, and an approximate 27% reduction in contract personnel, raising concerns about the SEC’s operational capacity across examination, enforcement, and oversight functions. https://www.oversight.gov/sites/default/files/documents/reports/2026-01/SEC-OIG-MPC-2025.pdf
20. On November 25, 2025, the SEC announced an important settlement that was not covered in our December 2025 latest regulatory developments. The settlement was with a dual-registered investment adviser and broker-dealer for violations of Regulation S-P and Regulation S-ID arising from repeated cybersecurity failures and inadequate identity theft controls. According to the SEC’s order, the firm failed to adopt and implement reasonably designed, enterprise-level information security policies to protect customer records and information and failed to maintain and periodically update a written identity theft prevention program tailored to its business. Between July 2019 and March 2024, multiple email account takeovers at affiliated member firms exposed customer information and led to credential-harvesting campaigns affecting thousands of individuals, including at least one unauthorized wire transfer, at firms that lacked basic safeguards such as multifactor authentication, incident response procedures, and security awareness training. The SEC also found that the firm’s identity theft program had not been meaningfully updated for years, did not address cybersecurity-related red flags despite ongoing incidents, lacked clear detection and response procedures, and failed to document periodic determinations of covered accounts as required by Regulation S-ID. Without admitting or denying the findings, the firm agreed to a cease-and-desist order, a censure, and a $325,000 civil penalty, and the SEC credited remedial actions including enhanced governance, updated policies, stronger oversight of branch firms, expanded training, and improved monitoring tools. The action underscores the SEC’s expectation that broker-dealers and registered investment advisers maintain effective, operational cybersecurity and identity theft programs—not merely written policies—particularly in advance of recent Regulation S-P amendments and in light of heightened examination focus on Regulation S-P and Regulation S-ID compliance. https://www.lowenstein.com/news-insights/publications/client-alerts/sec-brings-cybersecurity-and-identity-theft-controls-case-against-registered-investment-adviser-and-broker-dealer-im