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December 1, 2025 | Legal Update

The Nutter Securities Enforcement Update is a periodic update of noteworthy recent securities enforcement activity, settlements, decisions, and charges. We provide brief summaries that highlight recent enforcement action filings and developments to help identify enforcement trends, changes in the law, new theories, and new areas of enforcement focus. For more information on these cases or about how they may impact you, contact your Nutter attorney.

SEC Enforcement Procedures

Atkins Statement on Wells Process (Oct. 7, 2025) – In a policy address, SEC Chairman Paul Atkins signaled a re-invigoration of the Wells process in SEC investigations. The Wells process is the longstanding SEC policy of providing confidential notice ahead of potential charges and giving potential respondents an opportunity to present their positions to the SEC staff before a complaint is filed. In recent years, parties have complained that notice comes too late and without sufficient time or information to have meaningful discussions with the staff. Chairman Atkins said his expectation going forward is that enforcement staff will provide sufficient information and access to documents for potential respondents to understand the evidentiary basis for potential charges, and at least four weeks notice, unless doing so would be inappropriate, such as situations involving ongoing fraud.

Administrative Law

CBOE Global Markets, Inc. v. SEC, No. 24-1350 (DC Cir. Oct. 14, 2025) – On a post-Loper Bright review of an SEC rule amendment imposing a price cap on national securities exchange investor access charges, the D.C. Circuit Court held that the amended rule was within the SEC’s statutory authority and not arbitrary and capricious. In 2024, the SEC unanimously adopted amendments to Reg NMS to reduce minimum tick size in order to improve price competition and to lower the cap on access fees paid by investors from 30 mils to 10 mils for stocks priced over $1 and from 0.3% to 0.1% for stocks priced below $1. The court found that under Exchange Act Sections 11A and 23, the SEC has broad, discretionary authority to regulate the national market system that includes the power to set a universal access-fee cap, and that the SEC had reasonably considered the relevant issues and reasonably explained its decision. The court noted that in Loper Bright, the Supreme Court stated that “When the best reading of a statute is that it delegates discretionary authority to an agency,” the court’s role is to ensure that the agency acted within “the boundaries of its delegated authority.” (In an October 31 release, the SEC extended the rule’s compliance dates, which had been stayed during the litigation.)

Remedies

SEC v. Darrah, No. 2:23-cv-8843-DSF-ASG (C.D. Cal. Oct. 2, 2025) – In a litigated matter, the court largely granted the SEC’s motion for entry of a default judgment assessing remedies against a registered investment advisory firm. The SEC had charged the firm and one of the firm’s principals with misappropriating client funds, in violation of Securities Act Section 17(a)(1), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and 206(2), as well as related violations of Advisers Act Sections 206(4), 207 and Rule 206(4)-7. On the SEC’s motion for judgment, the firm opposed the scope of relief, primarily because it claimed to be “a passive, non-beneficiary” of the principal’s conduct. The court disagreed, finding that joint and several liability was consistent with equitable principles; however, the court reduced the SEC’s demand by amounts that were misappropriated after the firm sold its investment advisory business to a third party. Remedies included disgorgement of approximately $2m plus prejudgment interest, penalties of approximately $2m, and permanent injunctive relief.

Investment Advisers/Investment Companies

SEC v. Bluesky Eagle Capital Mgmt. Ltd., et al., Lit. Rel. No. 26416 (Nov. 17, 2025) – In a litigated action, the SEC charged six investment advisers with making misrepresentations in their Forms ADV regarding their assets under management, clients, and office locations. The SEC also alleged that two of the investment advisers claimed to be public companies, but a search of the SEC’s public company database showed no information about those two companies. Additionally, the SEC alleged that all six investment advisers failed to respond to SEC requests to provide records to substantiate the information in their Forms ADV. Charges under Advisors Act Sections 204(a) and 207. 

SEC v. Bluepoint Investment Counsel, LLC, et al., Lit. Rel. No. 26422 (Nov. 19, 2025) – In ongoing federal court litigation, the SEC charged seven investment managers (including two individuals and five entities) with securities fraud, alleging that they fraudulently operated and promoted a private investment fund that claimed fraudulently inflated returns on its investments in an illiquid portfolio of gems, minerals, and private equity. Charges under Securities Act Sections 17(a) (1), (a)(2) and (a)(3), Exchange Act Section 10(b) and Rule 10b-5, and Advisers Act Sections 206(1), 206(2), 206(4) and Rule 206(4)-8. After a jury verdict in August 2022, the court entered final judgment, ordering that (i) five of the defendants were jointly and severally liable for disgorgement of more than $12.5 million and prejudgment interest of more than $3.5 million; (ii) the two individuals pay $5 million each in civil penalties; and (ii) three of the entities pay $500,000 each in civil penalties, for total monetary relief exceeding $27.5 million. 

In the Matter of Rudney Associates, Inc. et al., Rel. IA-6927 (Nov. 24, 2025) – In a settled matter, a registered investment adviser and its principal were charged with failing to annually review the adequacy of its compliance policies and procedures, failing to implement policies and procedures requiring that its Form ADV Part 2A accurately reflected its method for determining advisory fees and obtaining written advisory agreements from all clients, and failing to maintain records of delivery of ADV Part 2A brochure to its clients. The order noted that the respondents had previously been sanctioned for similar violations. Charges under Advisers Act Sections 204 and 206(4) and Rules 204-2(a)(14) and 206(4)-7. Remedies included cease-and-desist, censure, compliance undertakings, and a $150k civil penalty.

Broker-Dealers

SEC v. Alpine Securities Corp., No. 2:22-cv-01279-RFB-MDC (D. Nev. Sept. 30, 2025) – In a litigated matter, the court granted the SEC’s motion for summary judgment against a broker-dealer firm and its CEO and COO. The SEC charged that the firm, in an effort to close its unprofitable retail business, sold small positions in illiquid securities from customer accounts to itself for $0.01 without notice to customers, and transferred customer accounts to state unclaimed property accounts without attempting to determine if the position had truly been abandoned by customers. Charges under Securities Act Section 17(a)(1) and Exchange Act Sections 10(b) and 15(c)(1) and Rule 10b-5. Remedies will be determined later by the court.

Deutsche Bank Securities Inc., FINRA AWC No. 2022073416601 (Nov. 18, 2025) – In a settled matter, a broker-dealer firm was charged with issuing securities research reports on foreign issuers that were not listed on the NYSE or NASDAQ without disclosing pertinent investment banking client relationships and fees connected with those issuers. It was also charged with lacking a reasonably designed supervisory system to monitor trading activities of securities analysis who noted subject securities through third party managed accounts, and with failing to include hyperlinks to required disclosures on compendium debt research reports. Charges under FINRA Rules 2010, 2241(c), 2242(c) and 3110, and corresponding NASD Rules for earlier periods. Remedies included censure and a $2.5m fine.

Cybersecurity

SEC v. SolarWinds Corp., et al., Lit. Rel. No. 26423 (Nov. 20, 2025) – The SEC filed a joint stipulation with SolarWinds and its Chief Information Security Officer (a co-defendant) to dismiss, with prejudice, the remaining claims in this action. The dismissed claims were that the defendants had violated Exchange Act Section 10(b) and Rule 10b-5 by making misleading statements about its cybersecurity practices before a major cyber attack. In 2024, the court dismissed the SEC’s claims based on post-attack statements and claims that SolarWinds violated Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) requiring internal accounting controls, holding that those rules applied only to controls over financial systems and did not extend to controls over cybersecurity systems. The stipulation states that the SEC’s decision to seek dismissal was “in the exercise of its discretion” and “does not necessarily reflect the Commission’s position on any other case.”

In the Matter of M Holdings Securities, Inc., Rel. 34-104255 (Nov. 25, 2025) – In a settled matter, the SEC charged a broker-dealer and investment adviser with failing to maintain reasonably designed cybersecurity and customer information protection policies over a multi-year period. The SEC alleges that, from 2019 to 2024, the firm lacked adequate written information security policies across its nationwide network of branch offices, even after adopting its first information security policy in 2020. According to the SEC’s order, multiple branch offices continued to operate without required controls, including multi-factor authentication, annual security-awareness training, and written incident-response procedures, despite repeated email-account takeovers that exposed the personal information of approximately 8,500 individuals. The SEC further alleges that the firm failed to implement a reasonably designed Identity Theft Prevention Program because it did not update the program to reflect evolving risks or periodically assess whether it maintained covered accounts. Violations of Regulation S-P Rule 30(a) and Regulation S-ID Rule 201. Remedies included a cease-and-desist order, censure, and a $325k civil penalty.

Issuer Reporting/Audit and Accounting

BDO USA, LLP v. New England Carpenters [etc.] (U.S. Supreme Court, Oct. 6, 2025) – In a private securities class action with enforcement implications, the Supreme Court declined to review a Second Circuit opinion regarding the materiality of auditor certifications of compliance with Public Company Accounting Oversight Board (PCAOB) standards. The plaintiffs were investors in AmTrust, a publicly traded insurance company which had restated five years of previous financial statements to correct significant errors. The plaintiffs sued, among others, AmTrust’s auditor, BDO, claiming that BDO’s certifications that the audits were done in accordance with PCAOB standards were material misstatements of opinion in violation of Exchange Act Section 10(b) and Rule 10b-5. The district court dismissed the complaint, finding among other things that BDO’s certification was too general to be material to a reasonable investor. The Second Circuit initially affirmed the dismissal, but reversed itself upon rehearing after requesting and receiving an amicus brief from the SEC. Although the certification used “standardized language,” it nevertheless “conveyed to investors that AmTrust’s audited financial statements were reliable” and therefore had independent significance even if the plaintiffs did not allege a link between the certification and the specific errors in the financial statements. 

U.S. v. Cole, No.23-7566-cr (2d Cir. Oct. 27, 2025) – In a criminal securities fraud matter, the Second Circuit reversed the conviction of the former CEO of Iconix Brand Group as precluded by the double jeopardy clause of the Fifth Amendment. The former CEO and others were accused of artificially inflating Iconix’s reported revenue by entering into sales agreements at inflated prices while agreeing to return the excess prices at a later date. The charges included conspiracy to commit three “substantive” violations (which were also charged separately): securities fraud, false filings to the SEC, and interference with company’s audits. In the first trial, the jury acquitted the CEO on conspiracy charges and hung on the three substantive violations. In the second trial on the substantive charges, the CEO was convicted. On appeal, the Second Circuit held that the first jury’s acquittal on conspiracy charges meant that the jury must have doubted that the CEO made the alleged secret deals necessary to the substantive charges, and that the substantive charges were therefore precluded by the double jeopardy clause.

In the Matter of John Michaels, CPA, Rel. 34-35809, IC-35809, AAER-4578 (Nov. 21, 2025) – In a settled matter, the SEC charged a certified public accountant with failure to comply with PCAOB standards in his audit of a registered investment company. Specifically, the SEC alleged that the CPA failed to comply with the PCAOB’s auditor independence rules, because his wife held investments in the investment company the CPA audited. The SEC also alleged that the CPA violated audit documentation rules, because the audit workpapers consisted only of handwritten notes and unidentified mathematic equations, without explanation of how the work was performed, its purpose, the source of information, or the conclusion the CPA reached. Charges under Investment Company Act Section 30(g), Rule 2-02(b)(1) of Regulation S-X, Exchange Act Section 4C(a)(2) and SEC Rule 102(e). Remedies included cease-and-desist and three-year suspension.

In the Matter of MH Investment Mgmt., Inc., Rel. 34-35810, AAER-4579 (Nov. 21, 2025) – In a settled matter related to In the Matter of John Michaels, CPA, the SEC charged an investment adviser with causing the fund advisors to hire an auditor, when the investment adviser was aware that the auditor’s wife held investments in the fund. Charges under Investment Company Act Section 30(g). Remedies included cease-and-desist and $10k civil monetary penalty.  

Securities Offerings

SEC v Wander, et al. Lit. Rel 26419 (Nov. 18, 2025) – In a litigated action, the SEC charged two limited liability companies, their founders, and their CEO with misleading investors about the companies’ financial condition and fraudulently inducing investments in a $237 million preferred equity offering. The SEC alleged that the defendants falsely represented that the companies were earning, and would continue to earn, substantial net positive income sufficient to pay investors a 10% annual dividend. The SEC alleged that in reality, the companies were in a severe and worsening liquidity crisis and had no realistic prospects of earning net income sufficient to pay the dividends. The companies’ liquidity crisis was caused, in part, by the companies’ misuse of a credit facility, resulting in a $300 million overdraw that damaged the companies’ financial prospects. The SEC alleges that the companies’ founders concealed the overdraw and its causes. The SEC also alleges that one of the founders misled investors when he represented that the proceeds of the offering would be used for general corporate purposes, when, in fact, $33 million of investor funds went to the founders personally. Charges under Exchange Act Section 10(b) and Rule 10b-5 thereunder and Securities Act Section 17(a). 

Insider Trading

SEC v. Viggiano, et al., Lit. Rel. No. 26417 (Nov. 18, 2025) – In a settlement of a previously-filed action, the SEC charged a former analyst at a major investment firm and later at an international investment bank with engaging in insider trading related to multiple acquisition transactions. The SEC alleged that the analyst, in his roles at these financial institutions, obtained confidential information about eight transactions and shared this information with two other individuals, who bought and sold securities based on that information and earned hundreds of thousands of dollars in profits. Charges under Exchange Act Section 10(b) and Rule 10b-5. The settlement included an industry bar and $35,000 in disgorgement, which was deemed satisfied by the order of forfeiture entered in the parallel criminal case.

(NSEU 25-07)

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