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October 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.

Subpoena Enforcement

SEC v. Institutional Shareholder Services, Inc., Lit. Rel. 26632 (Sept. 4, 2026) – In a litigated matter, the SEC filed a subpoena enforcement action against a leading proxy adviser alleging that it failed to produce information within its possession, custody, or control during an SEC examination or in response to an administrative subpoena. The SEC stated that, among other things, it cannot assess whether the firm is acting in its clients’ best interest because the firm refuses to identify how it voted for each client.

Investment Advisers/Investment Companies

SEC v. Austin, et al., Lit. Rel. 26631 (Sept. 10, 2026) – In a settlement of a litigated matter, the SEC charged an investment advisory firm and its founder with sending nonpublic personal information belonging to clients to his future business partner and placing the client in investments that were contrary to the client’s instructions. The SEC alleged that after being terminated by a prior firm for misconduct, the founder engaged in a scheme to induce clients to join his new firm by misrepresenting his disciplinary history and the circumstances of his termination from his prior firm. Charges under Advisers Act Sections 206(1), 206(2), and 207, and, with respect to the founder, Rule 10 of Regulation S-P. Remedies included permanent injunction against both parties; a three-year bar from the founder acting as or being associated with any broker, dealer, or investment adviser; disgorgement of $25k plus interest from the firm; and penalties of $118k (founder) and $120k (firm).

In the Matter of Hatteras Investment Partners, LP, et. al., Rel. 34-106418, IA-6997 (Sept. 18, 2026) – In a settled matter, a registered investment adviser and its CEO were charged with breach of fiduciary duty for exchanging their managed funds’ portfolios of illiquid, alternative assets for preferred shares in a private entity that purported to offer liquidity solutions to holders of alternative investments. The goal of the transaction was to provide the funds’ shareholders with liquidity. The SEC alleged that the adviser and its CEO ignored multiple red flags, including that nearly 90% of the entity’s assets were attributable to goodwill, and ignored the concerns of the adviser’s fractional CFO. When the private entity went public in a de-SPAC transaction, its shares plummeted, resulting in losses of approximately $300 million to the funds. Charges under Advisers Act Section 206(2). Remedies included censure, cease-and desist, and $250k penalty against the CEO.

In the Matter of Truist Advisory Services, Inc., Rel. IA-7016 (Sept. 22, 2026) – In a settled matter, the SEC charged an investment adviser with approving trade correction requests from an adviser representative, which the representative used to cancel ten losing trades from his brokerage account and rebill them to four of his clients, resulting in the adviser misappropriating more than $500,000 from his advisory clients. Charges under Advisers Act Sections 206(2) and 206(4) and Rule 206(4)-7. Remedies included censure and $200k civil penalty. In determining the penalties, the SEC considered the adviser’s remedial efforts, which included an internal investigation.

In the Matter of Zoe Financial, Inc., Rel. IA-7019 (Sept. 28, 2026) – In a settled matter, a registered investment adviser was charged with failing to adequately disclose conflicts of interest to clients and prospective clients. The firm operated both a referral service to match investment advisers with potential clients and a turnkey asset management platform providing investment advisers with subadvisory services and other administrative support. The firm allegedly failed to adequately disclose that it had financial incentives to refer potential clients to advisers that used the asset management platform. Charges under Advisers Act Section 206(2). Remedies included censure, cease-and-desist, and a $450k penalty.

Broker-Dealers

In the Matter of Haywood Securities (USA) Inc., Rel. 34-106333 (Sept. 11, 2026) – In a settled matter, the SEC charged a Canada-based broker-dealer with failing to comply with its own written anti-money laundering policies and procedures and, as a result, failing to file Suspicious Activity Reports. The SEC alleged that, over a nearly five-year period, the broker-dealer identified information during account opening, customer due diligence, and subsequent trading activity that presented red flags for potentially suspicious activity, including indicia of potential criminal activity, accounts associated with persons with a criminal history, and suspicious trading. Charges under Exchange Act Section 17(a) and Rule 17a-8. Penalties included censure and a $750k civil penalty.

In the Matter of TradeZero America, Inc., Mass. Sec. Div. Dkt. E-2024-0374 (Sept. 14, 2026) – In a settled matter, the Massachusetts Securities Division charged a broker-dealer with failing to establish, implement, and maintain reasonable cybersecurity controls necessary to assess the risk of the firm’s third-party providers, resulting in a data breach affecting several thousand customers. In addition, the Division alleged that the firm failed to supervise its representatives in the use of an automated margin account approval program, resulting in improper approval of certain customers. Charges under the Massachusetts Uniform Securities Act, Section 204(a)(2)(J) (failure to supervise). Remedies included cease-and-desist, censure, restitution of customer trading losses to be determined, and a $750k fine.

American Portfolios Financial Services, Inc., FINRA No. 2023078794701 (Sept. 21, 2026) – In a settled matter, a broker-dealer was charged with failing to adopt and implement reasonable policies and procedures regarding recommendations regarding commissionable unit investment trust (UIT) shares, and with failing to supervise three representatives who had a pattern of recommending pre-maturity UIT sales and the purchase of new UITs, causing customers to forgo certain benefits and incur additional costs. Charges under SEC Reg BI (Exchange Act Rule 15l) and FINRA Rules 2010, 2111, and 3110. Remedies included censure, restitution of approximately $1.2m plus interest, and a $400k fine.

In the Matter of OTC Link LLC, Rel. 34-106458 (Sept. 22, 2026) – In a settled matter, a broker-dealer that operates an alternative trading system and that has been designated an “SCI Entity” was charged with failing to adopt and implement policies and procedures required by Reg SCI and with failing to remediate deficiencies cited in previous examinations. Reg SCI (“Systems Compliance and Integrity”) defines SCI Entities as market participants that play a significant role in U.S. securities markets and/or have the potential to impact the market in the event of systems problems. The SEC alleged that the broker-dealer failed to establish, maintain, and enforce required policies and procedures concerning system security, vulnerability review, and testing. Charges under Exchange Act Reg SCI Rules 1001(a)(1), (a)(2) and (a)(3). Remedies included cease-and-desist, censure, and a $575k penalty.

Vanguard Marketing Corporation, FINRA No. 2024081522901 (Sept. 23, 2026) – In a settled matter, a broker-dealer was charged with misreporting the cost basis of customers’ investments in account statements, trade confirmations, and Forms 1099 due to a series of technical issues, and with failure to supervise, by failing to reasonably investigate red flags regarding these inaccuracies. Charges under FINRA Rules 2201, 4511, and 2010. FINRA took into consideration the firm’s remedial steps, including payment of approximately $1.9 million to customers who may have overpaid taxes, or who needed to refile past returns or seek tax advice. Remedies included censure and a $950k fine.

Unregistered Securities-Based Swaps Brokers, Rel. 34-106538 through 34-106544 (Sept. 30, 2026)[1] – In separate settled matters, the SEC charged seven individuals with holding themselves out as brokers and offering customer the ability to trade “contracts for differences,” or CFDs, based on stocks, commodities, and other assets, without being registered as broker-dealers. Because the values of stock-based CFDs were based on a single security, including the value thereof, the SEC stated that they qualified as security-based swaps under the federal securities laws. Charges under Exchange Act Section 15(a)(1). Remedies included cease-and-desist, securities industry bars, and penalties ranging from $60k to $125k.

Securities Offerings

SEC v. Lachwani, Lit. Rel. 26647 (Sept. 24, 2026) – In a settlement of a litigated matter, the SEC charged the former CEO of a private technology company with fraudulently inflating the company’s financial metrics and internal sales records related to a securities offering. The SEC alleged that the former CEO overstated the value of customer contracts, treated potential future business as guaranteed revenue, and created or altered invoices to conceal the inflation, causing the technology company’s reported valuation to rise above $1 billion. Following an internal investigation, the technology company reduced its valuation from $1.1 billion to $300 million. Charges under Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. Subject to court approval, remedies include permanent injunctions, an officer-and-director bar, and a conduct-based injunction restricting the former CEO’s participation in securities offerings and transactions other than for his own personal accounts.

In the Matter of CBIZ, Inc., Rel. 33-11441 (Sept. 28, 2026) – In a settled matter, a public company was charged with offering and selling 481,049 shares of common stock to employees through its employee stock purchase plan in excess of the number registered on Form S-8. The SEC found that the violations resulted from inadequate procedures for tracking the aggregate number of shares sold under the plan, which caused the company to continue sales after exhausting the registered shares. After discovering the issue, the company suspended the plan, conducted an internal investigation, self-reported to the SEC, and voluntarily commenced a rescission offer covering all affected current and former employees. Charges under Securities Act Sections 5(a) and 5(c). Remedies included cease-and-desist. The SEC imposed no civil penalty considering the company’s cooperation and remedial efforts.

Issuer Reporting/Accounting

SEC v. Hutchison, No. 22-2296 (D.D.C., August 5, 2026) – In ongoing litigation, the district court granted partial summary judgment to the SEC on scienter-based charges that the former CEO of a publicly-traded dental products company failed to disclose that the company regularly pulled forward sales in order to meet quarterly revenue goals. Charges under Securities Act Section 17(a), Exchange Act Sections 10(b) and 13 and Sarbanes-Oxley Act Section 304 (compensation reimbursement). The court denied summary judgment on one factual charge and did not reach the issue of remedies in this order.

SEC v. Travel + Leisure Co., Lit. Rel. 26657 (Sept. 30, 2026) – In a settled matter, the SEC charged a publicly-traded timeshare company with making misleading statements about its removal of thousands of defaulted or past due customer loans from its balance sheet. The SEC alleges that when the company granted rescission of the loans, it reversed them in its accounting system as if they had never been made, resulting in a misleading presentation of its loan loss experience. Charges under Securities Act Sections 17(a)(2) and (a)(3) and Exchange Act Section 13(a) and Rules 12b-20, 13a-1, 13a-11 and 13a-13. The company consented to entry of judgment with remedies, including a permanent injunction and a $975k penalty.

Insider Trading

SEC v. Chen, Lit Rel. 26634 (Sept. 9, 2026) – In a settled matter, the SEC charged a former employee of a company that assisted public companies with making EDGAR filings with using material nonpublic information obtained through his work to make trades that generated more than $2.2 million in profits. Charges under Exchange Act Sections 10(b) and 14(e) and Rules 10b-5 and 14e-3. Remedies included permanent injunctive relief and disgorgement of over $1.8m, payment of which was deemed satisfied by orders of restitution and forfeiture entered against the individual in parallel criminal proceedings in the Eastern District of New York.

SEC v. Jorgensen, Lit Rel. 26635 (Sept. 10, 2026) – In a settlement of a litigated matter, the SEC charged a former chief revenue officer of a digital platform provider for medical professionals with illegally trading in the digital platform’s stock in advance of two negative earnings announcements based on information learned from his work, avoiding losses and realizing over $2.5 million in profits. Charges under Exchange Act Sections 10(b) and 16(a) and Rules 10b-5 and 16a-3. Remedies included permanent injunctive relief, a lifetime officer-and-director bar, and disgorgement with prejudgment interest of over $3m. In a parallel criminal action, the former CRO pled guilty to insider trading and was sentenced to 26 months in prison.

SEC v. Kipp, Lit. Rel. 26640 (Sept. 15, 2026) – In a settled matter, a retired employee of Funko, Inc. was charged with trading on material nonpublic information related to the imminent departure of Funko’s CEO. The retiree allegedly sold all of his Funko shares after the CEO texted the retiree that the board was placing the CEO on a sabbatical and that the CEO had decided he would leave Funko permanently. Charges under Exchange Act Section 10(b) and Rule 10b-5. Remedies included permanent injunctive relief, disgorgement totaling approximately $483k plus prejudgment interest, and a $483k civil penalty.

SEC v. Fan Yang, et al., Lit. Rel. 26650 (Sept. 28, 2026) – In a settled matter, the SEC charged a former accountant in the corporate development department of Cummins, Inc., her husband, a former engineer at Cummins, and four others for illegal tipping and trading ahead of the February 22, 2022 announcement that Cummins had agreed to acquire Meritor, Inc. Charges under Exchange Act Section 10(b) and Rule 10b-5. Remedies included injunctive relief against all individuals, disgorgement totaling approximately $500k plus interest, penalties totaling approximately $350k from the four tippees, and civil penalties against the former accountant and her husband to be determined by the court.

SEC v. Asudani, Lit. Rel. 26662 (Sept. 30, 2026) – In a litigated matter, the SEC charged a former vice president of a publicly-traded pharmaceutical company (identified as “Company A”) with trading ahead of the announcement of the acquisition of Adamas Pharmaceuticals by Supernus Pharmaceuticals. The SEC alleged that the former vice president bought Adamas stock after learning in an internal Company A meeting that Company A was bidding to acquire Adamas. Charges under Exchange Act Section 10(b) and Rule 10b-5. The SEC seeks remedies including injunctive relief, an officer-and-director bar, disgorgement, and a civil penalty.

Market Manipulation/ Investor Trading

SEC v. Hernandez, et al., Lit. Rel. 26626 (Sept. 3, 2026) – In a partial settlement of a litigated matter, the SEC charged an individual and three others with participating in an alleged $2 million “free-riding” scheme. The SEC alleged that all four individuals opened and used unfunded brokerage accounts (the loser accounts) to generate trading profits in other brokerage accounts that they also controlled (the winner accounts). The defendants allegedly maintained the loser accounts at a broker that provided an instant deposit credit, which they used to fund trades at artificial prices and repeatedly generate trading profits. In doing so, the group allegedly transferred the credit provided by the broker from the loser accounts to the winner accounts, accumulating guaranteed profits at the broker’s expense. Over a four-year period, the scheme involved over 600 brokerage accounts. Charges under Exchange Act Sections 10(b) and 20(b) and Rule 10b-5(a) and (c). One individual consented to the entry of judgment, with remedies including permanent injunctive relief, a five-year ban from opening a brokerage account without first providing a copy of the SEC’s complaint and the final judgment to the brokerage, and disgorgement of approximately $200k plus interest, which was deemed satisfied by orders of restitution and forfeiture entered against the individual in parallel criminal proceedings in the Eastern District of New York.

(NSEU 26-04)

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

[1] The matters are Quillan Black, Tyler MacKechnie, Jordan Morgan, Lewis Neal, Michael Levi Peters, Michael Talento, and Anthony Tyler Williams.