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Kudos to the Commissioners and enforcement leadership of the Securities and Exchange Commission for introducing much-needed flexibility into the enforcement process. On February 10, 2026, the SEC announced an unconventional settlement of a fraud action against an asset manager and its chief compliance officer that had been pending in district court for more than four years.
The SEC dismissed, with prejudice, the district court action and simultaneously instituted a settled administrative cease-and-desist proceeding significantly milder than the allegations of the complaint that dropped one corporate respondent from the case, and downgraded the charges against others from a panoply of scienter-based claims (including Exchange Act Rule 10b-5, Securities Act Section 17(a)(1), and Investment Advisers Act Section 206(1)) to a single negligence-based claim (under Advisers Act Section 206(2)).
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