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September 1, 2026 | 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.

Remedies

Thrivent Financial, et al. v. SEC, No. 25-1047 (D.C. Cir., July 21, 2026) – In a litigated matter, the D.C. Circuit ordered the SEC to reconsider a FINRA member firm’s petition to amend FINRA’s arbitration code to permit customer arbitration in a non-FINRA forum. The firm sought to change its customer agreements so that all customer arbitration claims would proceed in a non-FINRA forum. It petitioned the SEC to change the FINRA rules arguing that they conflict with the Federal Arbitration Act, but the SEC denied that request in a three-paragraph letter. Noting that review of agency denials is “quite deferential,” the D.C. Circuit nonetheless found that the SEC’s denial letter failed to “provide analysis that follows a discernable path to which the court may defer.” The court also denied the firm’s further request for an order requiring the SEC to grant its petition, noting that the SEC may still be able to provide a reasoned explanation for denying the petition, including one based on resource constraints.

History Associates Incorporated v. SEC, No. 1:24-cv-1858 (D.D.C, July 22, 2026) – In a joint status report regarding settlement of a litigated FOIA matter, the SEC agreed to produce certain additional documents, to conduct further text message searches, to report on the SEC’s text message preservation policy, and to pay $150,000 in plaintiff’s attorneys’ fees. A historical archive and records management firm submitted a FOIA request seeking records related to the SEC’s crypto investigations, and the agency largely denied those requests under FOIA’s Section 7(A) exemption for materials that could interfere with enforcement proceedings. The SEC later dropped its objection, but litigation continued over the scope of production, including text messages, after a report that the SEC had failed to preserve all of former Chair Gensler’s text messages. While the SEC does not agree that the plaintiff “substantially prevailed” as required for an attorney fee award under FOIA, it nonetheless agreed to pay $150,000 in plaintiff’s attorneys’ fees.

SEC v. Rogas, et al., Nos. 25-35, 25-36 (2d Cir., August 6, 2026) ­– In a litigated matter, the Second Circuit found that defense counsel’s retainer was subject to an SEC asset freeze order as of the date the order was served on the firm near the outset of the litigation. The litigation resulted in a consent judgment for over $17 million in net profits gained through Securities Act and Exchange Act violations. The district court ordered defense counsel to turn over approximately $3.6 million, the amount remaining from the retainer as of the date the SEC notified the firm of the freeze order. The Second Circuit affirmed, quoting with approval the statement that “[i]t is well-settled that a defendant has no right to use tainted assets for his legal defense,” and finding that the firm violated the freeze order by using the profits from the defendant’s fraud to defend him.

SEC v. Gastauer, et al., No. 25-1194 (1st Cir., August 19, 2026) – In a litigated matter, the First Circuit affirmed summary judgment against a “relief defendant,” a German citizen who had allegedly received profits from his son’s securities law violations, over the relief defendant’s objections that U.S. courts lacked personal jurisdiction. In a prior appeal, the First Circuit reversed and remanded summary judgment against the relief defendant, finding that the SEC may not establish personal jurisdiction simply on the basis that a foreign resident received tainted funds from a primary defendant residing in the U.S. On remand, the district court allowed jurisdictional discovery, to which the relief defendant did not respond or properly object, and then granted the SEC’s summary judgment motion, to which the relief defendant had not responded. On appeal, the First Circuit held that the relief defendant forfeited his objections to personal jurisdiction, holding among other things that he “did not have the option of both contesting personal jurisdiction and blocking reasonable jurisdictional discovery.”

Apex Clearing Corp. v. SEC, No. 25-60330 (5th Cir., August 25, 2026) – In a litigated matter, the Fifth Circuit denied a broker-dealer’s petition for review of the SEC’s denial of a motion to modify a settlement. The broker-dealer previously settled the SEC’s claims for failure to preserve off-channel communications on terms that were more severe than later settlements on similar charges. The SEC denied the broker-dealer’s motion to modify the settlement order because the broker-dealer had not presented any of the types of changed circumstances that would justify modification of a final settlement order. The Fifth Circuit affirmed, holding that the SEC’s decision was not arbitrary or capricious.

Investment Advisers/Investment Companies

SEC v. SBB Research Group, LLC, et al., No. 19-cv-6473 (N.D. Ill., July 13, 2026) – In ongoing litigation on SEC charges that an investment adviser overvalued certain illiquid securities held in a private fund, the district court granted partial summary judgment to the adviser. After excluding the SEC’s proposed expert testimony on GAAP accounting, the court granted summary judgment for the adviser based on alleged misrepresentations of GAAP compliance. However, the court found genuine issues of fact that precluded summary judgment on charges based on representations regarding the firm’s fair valuation process.

In the Matter of Derek L. Copeland, Rel. 34-105889, IA-6978 (July 13, 2026) – In a settled matter, an investment adviser representative associated with an SEC-registered investment adviser was charged with failing to adequately disclose conflicts of interest in advising clients regarding over $50 million in private real estate securities investments, where he also received direct and indirect compensation from the investment sponsors. Charges under Advisers Act 206(2). Remedies included cease-and-desist, censure, and a $125k penalty.

In the Matter of Simplify Asset Management, Inc., Rel. IC-36269 (July 27, 2026) – In a settled matter, a registered investment adviser was charged with causing violations of conflict of interest and disclosure provisions of the Investment Company Act with respect to ETFs it managed. The SEC alleged that the RIA caused one ETF client to engage in principal trades with an investment trust that was a corporate affiliate of the RIA. The SEC further charged that the RIA caused a second ETF client to exceed the ICA’s leverage limits without providing required notices to the ETF board or to the SEC. Finally, the RIA allegedly caused seven ETF clients to fail to provide notices to fund investors that some dividends constituted a return of capital, which is treated differently for tax purposes. Charges under Investment Company Act Sections 17(a)(1), 18(f)(1) and 19(a), and Rules 19a-1, 30b1-10 and 38a-1. Remedies included cease-and-desist and a $400k penalty.

In the Matter of Papamarkou Wellner Asset Management, Inc., Rel IA-6984 (July 31, 2026) – In a settled matter, a registered investment adviser was charged with assessing client fees in a manner inconsistent with its client agreements and ADV disclosures. The firm allegedly failed to deduct a portion of the compensation received by its affiliated broker-dealer from six third-party private fund managers. Charges under Advisers Act Sections 206(2) and 206(4) and Rule 206(4)-7. Remedies included censure, cease-and-desist, disgorgement of approximately $300k plus prejudgment interest, and a $125k penalty.

SEC v. Munson, et al., Lit. Rel. 26605 (August 10, 2026) – In a bifurcated settlement, the SEC charged a private fund adviser, its CEO, and three affiliated general partners with defrauding investors in funds investing in pre-IPO companies, including SpaceX and Klarna. The SEC alleged that the adviser made false statements to solicit investments, misappropriated client assets through unauthorized loans, caused funds to purchase pre-IPO shares from the defendants at higher prices without required consent, and charged millions of dollars in undisclosed acquisition fees. The SEC also alleged that the adviser improperly pledged client assets as collateral for a $10 million line of credit used in part to satisfy the defendants’ own obligations and failed to register as an investment adviser. Charges under Securities Act Section 17(a), Exchange Act Section 10(b) and Rule 10b-5, Advisers Act Sections 203(a), 206(1), (2), (3), and (4) and Rule 206(4)-8. Remedies include permanent injunctions and a three-year associational bar for the CEO. The parties agreed that the court will determine the amount of disgorgement, prejudgment interest, and civil penalties.

False Forms ADV Filings, Lit. Rel. 26622 (August 27, 2026) – In litigated matters, the SEC charged 38 entities with making false and unsubstantiated statements in Forms ADV to portray themselves as legitimate U.S. investment advisers. The SEC alleged that the entities listed nonexistent U.S. business locations, provided disconnected or unrelated telephone numbers, reported nearly identical ownership and financial information, and falsely claimed that private fund financial statements had been audited by accounting firms that could not be found in public registries. Certain entities were also allegedly promoted through websites displaying fake certificates suggesting SEC registration. Charges under Advisers Act Sections 204(a) and 207. The SEC seeks permanent and conduct-based injunctions prohibiting further false filings, as well as civil penalties. The SEC also removed the entities’ ERA filings from its website.

Broker-Dealers

tastytrade, Inc., FINRA AWC No. 2017056224801 (July 21, 2026) – In a settled matter, a FINRA member firm was charged with failing to conduct rigorous reviews to ensure that customer orders received best execution. The firm allegedly routed all customer equity orders to five market makers that paid for order flow without comparing the execution quality with that available from competing markets, failed to review all relevant execution quality factors, including price disimprovement, and failed to review orders on a type-of-order basis. Charges under FINRA Rules 5310 (order review), 3110 and 2010. Remedies included censure and an $850k fine.

In the Matter of Hext Capital Partners, LLC, et al., Rel. 34-105993 (July 27, 2026) – In a settled matter, a broker-dealer and its principal owner were charged with violations of Exchange Act net capital requirements. The SEC charged that the owner signed an agreement making the firm a co-obligor on a line of credit that exceeded the value of its assets, and did not send the agreement to the firm’s CCO to be included in net capital calculations. Charges under Exchange Act Section 15(c)(3) and Rule 15c3-1. Remedies included cease-and-desist and penalties of $50k for the firm and $10k for the owner.

In the Matter of UBS Financial Services Inc., Rel. 34-106026, IA-6985 (August 3, 2026) – In a settled matter, a dually registered broker-dealer and investment adviser was charged with failing to timely file suspicious activity reports (SARs) due to deficiencies in its anti-money laundering monitoring and customer due diligence processes. From 2019 through 2023, the firm allegedly failed to adequately monitor certain foreign currency wire transactions because of flaws in both its legacy and replacement transaction-monitoring systems, resulting in thousands of suspicious transactions totaling approximately $250 million being reported late. The SEC also found that the firm failed to appropriately maintain customer risk profiles, including by failing to identify or update information concerning ties to high-risk jurisdictions, which led to additional late SAR filings. The firm had previously settled similar anti-money laundering related charges with the SEC in 2018. Charges under Exchange Act Section 17(a) and Rule 17a-8. Remedies included censure, cease-and-desist, remedial undertakings, and a $20m civil penalty.

In the Matter of R4 Capital Funding LLC, Rel. 34-106171 (August 21, 2026) – In a settled matter, a financing company was charged with providing unregistered broker services to certain of its clients. The SEC charged that the financing company provided broker services while not registered as a broker in connection with 31 municipal bond offerings, which raised a total of over $1.16 billion to finance 27 multifamily housing developments. These broker services included negotiating the structure and pricing of the municipal bonds with the developers of the multifamily housing developments, soliciting investors to purchase the bonds, and providing advice to investors as to the merits of the bonds. Charges under Section 15(a)(1) of the Exchange Act. Remedies included cease-and-desist and a civil penalty of $100k.

Securities Offerings 

SEC v. Patterson, et al., Lit. Rel. 26585 (July 13, 2026) – In a settled matter, the SEC charged the Chairman and CEO of Battle Motors, Inc., and the company itself, with making misleading statements about the company’s success in connection with a $112.5 million convertible debt offering. The complaint charged that the company and CEO claimed that the company had $30 million in vehicle purchase orders when they had only $2 million in sales, by including expressions of customer interest as orders, and that they significantly overstated the number of dealers and locations in their dealer network. Charges under Securities Act Sections 17(a)(2) and 17(a)(3). Subject to court approval, the final judgments would include a two-year officer-and-director bar for the CEO and penalties of about $600k for the company and over $100k for the CEO.

SEC v. Chu, et al., Lit. Rel. 26612 (August 18, 2026) – In a litigated matter, the SEC charged the former CEO, CFO, and Senior Director of Finance of Tricolor Holdings LLC for their roles in an alleged multi-year scheme to defraud investors by double pledging hundreds of millions of dollars of subprime auto loans to multiple asset-backed securities (ABS) offerings and lenders. The complaint alleges that, over a five year period prior to Tricolor’s bankruptcy, Tricolor raised more than $1.9 billion through ABS offerings while the charged executives made numerous false and misleading representations to investors that the company was financially sound, that the loans included in the ABS collateral pools were free and clear of any other liens, and that non-paying or defaulted loans were current and therefore eligible for inclusion in the securitization pools. In a parallel action, the three executives were criminally charged by the U.S. Attorney’s Office for the Southern District of New York in December 2025. Charges under Securities Act Sections 17(a), 17(a)(1), and 17(a)(3), Exchange Act Section 10(b) and Rule 10b-5, and Exchange Act Section 20(a). Relief sought includes injunctive relief, disgorgement with prejudgment interest, and civil penalties against all three executives, as well as officer-and-director bars against the CEO and CFO.

Issuer Reporting/Accounting

SEC v. Live Ventures Inc., et al., Lit. Rel. 26613 (August 21, 2026) – In a settlement of a litigated matter, the SEC charged the CEO and former CFO of Live Ventures in an alleged financial and disclosure fraud scheme. The complaint charged that the CEO engineered a transaction that created $915,500 of fraudulent “other income” and increased Live Ventures’ pre-tax income by 20% in one fiscal year. The complaint further alleged that the CEO used Live Ventures’ inflated earnings and a fraudulently reduced share count to calculate an earnings per share that was 40% higher than the earnings per share in Live Ventures’ audited financial statements. The CEO allegedly put the inflated earnings per share in a press release that Live Ventures issued. As to the former CFO, the complaint alleged that he made false statements to Live Ventures’ outside accountants in connection with a later management representation letter. Charges under Securities Act Sections 17(a)(2) and (3). Subject to court approval, the final judgments would include permanent injunctive relief, a $175k civil penalty for the CEO, and a $118k civil penalty for the former CFO.

Insider Trading

SEC v. Chammout, et al., Lit. Rel. 26589 (July 17, 2026) – In a settled matter, the SEC charged a former executive and director of Desktop Metal, Inc. and three friends with trading on the basis of material nonpublic information in advance of the announcement that Desktop Metal would acquire The ExOne Company. Charges under Exchange Act Section 10(b) and Rule 10b-5. Three of the defendants consented to the entry of judgments that included injunctive relief, an officer-and-director bar for the executive, disgorgement totaling approximately $500k plus prejudgment interest, and penalties in the same amounts as the disgorgement.

SEC v. Peizer, et al., Lit. Rel. 26603 (August 7, 2026) – In a litigated matter, the parties filed a joint stipulation to dismiss an unusual insider trading case. The SEC had originally alleged that the Executive Chairman of Ontrak established two Rule 10b5-1 trading plans to sell Ontrak securities at a time when he was in possession of material nonpublic information –- that Ontrak’s largest customer was likely to terminate its contract – and that he was thus ineligible for the Rule 10b5-1 safe harbor. The Executive Chairman’s 10b5-1 plan trades allegedly avoided over $12 million in losses. The joint stipulation noted 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.”

SEC v. Wolfe, et al., Lit. Rel. 26617 (August 21, 2026) – In a litigated matter, the SEC charged two former Wall Street investment bankers with trading on material non-public information before the announcement that one of the banks’ clients had agreed to be acquired by a private investment fund. The SEC alleged that one banker tipped his longtime business colleague, who then purchased over 2.2. million shares of stock on the basis of this information, profiting $18.5 million when the stock price rose by 40%. Charges under Exchange Act Section 10(b) and Rule 10b-5. Relief sought includes permanent injunctions, civil monetary penalties, disgorgement, and an officer-and-director bar.

Market Manipulation

SEC v. Bajic, et al., Lit. Rel. 26583 (July 10, 2026) – In a settlement of a litigated matter, an individual investor consented to judgment on charges that he assisted undisclosed public company insiders or control persons secretly sell large quantities of microcap stock. The complaint alleged that the individual and others used a network of foreign companies they controlled to buy and sell that stock in order to conceal the ownership interest of numerous companies’ control persons. Charges under Securities Act Sections 5(a), 5(c), 17(a)(1) and 17(a)(3), and Exchange Act Sections 10(b), 13(d) and 15(a) and Rules 10b-5(a) and (c). Remedies included a penny stock bar and disgorgement of over $800k, deemed satisfied by a forfeiture judgment in a parallel criminal action.

SEC v. Cerisano, Lit. Rel. 26606 (August 10, 2026) – In a settled matter, the SEC alleged that an individual rapidly placed a series of “spoof” orders, which he did not intend to execute, to artificially move the stock price in a direction of his choosing. The SEC alleged that the individual would then place and execute orders on the opposite side of the market in a separate broker-dealer account to take advantage of the artificial price movements he created. The SEC further alleged that one broker-dealer warned the individual and ultimately closed his account, but the individual used multiple accounts at other broker-dealers to continue the scheme. Charges under Securities Act Section 17(a) and Exchange Act Sections 9(a)(2) and 10(b), and Rule 10b-5 thereunder. The individual consented to judgment with remedies that included injunctive relief, disgorgement of over $1.1m plus interest, and a civil penalty of approximately $335k.

SEC v. Gotbit Consulting LLC, et al., Lit. Rel 26598 (August 3, 2026) – In a settlement of a litigated matter, the SEC charged a hedge fund with engaging in a scheme to manipulate the market for a crypto asset by “wash trading” and generating artificial trading volume for the asset. Charges under Securities Act Section 17(a) and Exchange Act Sections 9(a)(2) and 10(b), and Rule 10b-5 thereunder. Subject to court approval, the final judgment would include a permanent injunction and permanent bar from participating in any issuance, purchase, offer, or sale of securities.

(NSEU 26-03)

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising