CLIENT ALERT: 2026 Mid-Year Update on SEC and CFTC Enforcement

KEY TAKEAWAYS 

• The SEC and CFTC released reports on enforcement actions during the 2025 fiscal year, emphasizing their shift from a “regulation by volume” approach to more targeted enforcement agendas.
• The SEC and CFTC signed a Memorandum of Understanding to strengthen inter-agency coordination.  Dually registered firms, including broker-dealers, investment advisers, futures commission merchants, and swap dealers, should anticipate more coordinated oversight from the SEC and CFTC.
• The SEC and CFTC appointed new directors of enforcement, each of whom laid out a “back to basics” agenda focused on policing conduct that causes “real” harm to investors.
• The SEC and CFTC modified their cooperation policies to offer guidance on avoiding enforcement actions for parties that voluntarily self-report, cooperate, remediate, and provide restitution and/or disgorgement.
• The SEC and CFTC rescinded their decades-old “no-deny” settlement rules and announced they will not enforce existing “no-deny” provisions.
• The Supreme Court unanimously confirmed that the SEC may obtain disgorgement without proving that investors suffered pecuniary loss.

 

INTRODUCTION

The first half of 2026 brought significant changes to the U.S. Securities and Exchange Commission (“SEC”) and U.S. Commodity Futures Trading Commission (“CFTC”) enforcement landscape.  This alert summarizes key developments.

I.   SEC & CFTC Report Recalibration of Enforcement Priorities During FY 2025

The SEC and CFTC released enforcement data from fiscal year 2025 (“FY 2025”) showing a steep decline in SEC enforcement activity and a recalibration of enforcement priorities. In an April 7, 2026, press release, the SEC reported that it had filed 456 enforcement actions, including 303 standalone actions and 69 follow-on administrative proceedings, and obtained orders for monetary relief totaling $17.9 billion.  This is in contrast to 431 standalone actions and 93 follow-on administrative proceedings, and orders for monetary relief totaling $8.2 billion in fiscal year 2024.

The press release called FY 2025 “a unique period of transition for the enforcement division never experienced before in modern SEC history” that was “characterized by an unprecedented rush to bring a significant number of cases.” SEC Chairman Paul S. Atkins explained that the Commission has recently “redirected resources toward the types of misconduct that inflict the greatest harm—particularly fraud, market manipulation, and abuses of trust—and away from approaches that prioritized volume and record-setting penalties over true investor protection.”

The Commission criticized prior enforcement targeting off-channel communications by market participants, crypto registration violations, and “definition of a dealer” cases, as identifying no direct investor harm. The Commission highlighted its priorities going forward, including protecting retail investors, combatting cross-border fraud, and a recalibrated approach to crypto assets.

In a similar vein, the CFTC Division of Enforcement report, released in May 2026, frames FY 2025 as the year the agency “took decisive steps to end the era of regulation by enforcement” and realigned its structure to focus on protecting the public and preserving market integrity, especially in matters involving customer harm or market impact.

Also of note, the CFTC’s report highlighted a change from a regional-reporting structure to two mission-driven task forces: a Complex Fraud Task Force (handling insider trading, manipulation, spoofing, and wash trading) and a Retail Fraud and General Enforcement Task Force (handling fraud affecting the public and compliance matters like registration and supervision).

Looking forward, the report identifies five enforcement priorities: (i) insider trading (including in prediction markets); (ii) market manipulation; (iii) market abuse/disruptive trading; (iv) retail fraud (including Ponzi schemes); and (v) willful violations of Anti-Money Laundering (AML) and Know-Your-Customer (KYC) laws.

II.   SEC & CFTC Announce Heightened Coordination

On March 11, 2026, SEC Chairman Paul S. Atkins and CFTC Chairman Michael S. Selig signed a Memorandum of Understanding on regulatory harmonization and created a Joint Harmonization Initiative.  While the MOU does not create binding obligations, it commits the agencies to coordinate examinations, surveillance, and enforcement, including conferring on potential charges before bringing parallel actions, and to reduce duplicative reporting and inconsistent standards for dually registered firms.

III.   New SEC & CFTC Enforcement Leadership Set A “Back-to-Basics” Agenda

On March 2, 2026, the CFTC appointed David I. Miller as Director of Enforcement. In his first public remarks as Director, Miller began by stating “as clear as can be” that the CFTC will return to its “core purpose of policing fraud, abuse, and manipulation rather than setting policy.” Miller also admonished those who think insider trading is acceptable in the “prediction markets ecosystem” and highlighted recent insider trading actions and prosecutions aimed at the prediction markets.

On May 4, 2026, the SEC appointed David Woodcock as Director of Enforcement. In his first public remarks as Director, Woodcock outlined his priorities and acknowledged the recent decline in case volume, emphasizing a focus on protecting investors and markets “from real harm.” Woodcock also signaled that the SEC would continue to scrutinize private funds, and the private credit market in particular, for potential violations of the securities laws.

IV.   SEC & CFTC Clarify When They Will Reward Cooperation

On May 19, 2026, the CFTC’s Division of Enforcement (the “Division”) issued a new Policy on Cooperation (the “Policy”). The Policy establishes a tiered framework, with varied levels of reward depending on the nature of the party’s cooperation and assistance:

1. Full Declination.  Notably, the Division will decline enforcement only when all of the following conditions are met: (1) a voluntary self-report; (2) full cooperation; (3) remediation; (4) full restitution and/or disgorgement where applicable; and (5) no “aggravating circumstances.”  A self-report generally must be made before any reasonably anticipated imminent threat of disclosure or investigation, but can still qualify even if the CFTC already has independent knowledge of the misconduct.
2. Reduced Penalties. Where a party cooperated, remediated, and paid restitution and disgorgement but is ineligible for declination, the Division will recommend a penalty reduction of at least 50% (where a good-faith self-report did not qualify as a voluntary self-report) or at least 25% (in matters involving aggravating factors), with a maximum reduction of 75%.
3. Discretionary Credit. Where a party does not meet the above requirements, the Division retains discretion to award up to a 25% reduction “for any self-reporting and/or cooperation,” but only if “the party has engaged in Timely and Appropriate Remediation and has provided Full Restitution and/or Disgorgement.”

The first half of 2026 also brought notable changes to the sections of the SEC’s Enforcement Manual (the “Manual”) that relate to cooperation. The Manual warns that to receive leniency self-reporting generally must come before the conduct at issue is public or is the subject of investigation by another regulator. The Manual also affirms that civil penalties may be reduced with sufficient cooperation. Finally, the Manual notes that self-reporting and cooperation can help both entities and individuals.

V.   SEC & CFTC Rescind “No-Deny” Settlement Rules

On May 18, 2026, the SEC rescinded Rule 202.5(e) of its informal rules of procedure, the policy in place since 1972 under which the Commission would not settle an enforcement action imposing a sanction unless the defendant agreed not to publicly deny the allegations.

In its press release, the Commission explained that the recission “aligns the Commission with the overwhelming majority of federal agencies that do not have a similar rule and gives the Commission more flexibility in settling enforcement actions.” SEC Chairman Atkins also noted that the “no-deny” rule risked inhibiting free speech rights and said he was “pleased” with the recission.

Critically, the SEC stated that it will not enforce no-deny provisions in existing agreements and will take no action to vacate a settlement based on a breach of such provision. The SEC cautioned, however, that the rescission “does not affect the Commission’s discretion to settle with defendants who decline to admit facts or liability or its discretion to negotiate for admissions as part of a settlement.”

On June 3, 2026, the CFTC similarly rescinded its no deny rule. The CFTC press release announcing this decision mirrors the SEC’s May 18, 2026, announcement.

VI.   Supreme Court Holds the SEC May Obtain Disgorgement Without Proving Pecuniary Loss

On June 4, 2026, the Supreme Court unanimously held, in Sripetch v. SEC, No. 25-466, 608 U.S. ___ (2026), that the SEC may obtain disgorgement of a defendant’s ill-gotten gains without proving that investors suffered pecuniary loss.  With its decision, the Supreme Court expressly resolved a circuit split, siding with the First and Ninth Circuits and against the Second Circuit which had held in a 2023 decision that a “defrauded investor is not a ‘victim’ for equitable purposes if he suffers no pecuniary harm.”

Writing for the Court, Justice Gorsuch explained that under “traditional equitable principles” disgorgement requires “the defendant . . . to give to the plaintiff the amount by which he has been enriched [] from the wrongful invasion of the plaintiff’s legally protected interests, not to compensate the plaintiff for a financial loss” (internal quotation omitted).

CONCLUSION

Market participants should expect fewer enforcement actions based on technical infractions or novel theories, and instead a more vigorous pursuit of serious fraud, manipulation, and market abuse that cause actual investor harm. On the other hand, market participants should not assume that “victimless” conduct will avoid disgorgement exposure.

While settling parties have new latitude to publicly contest allegations, public denials carry risk: they may affect regulator relationships, invite press scrutiny, and be used against a party in related private litigation. Therefore, any post-settlement public statement should be carefully vetted, and its benefits should be weighed against possible costs.

Market participants should revisit their self-reporting and cooperation protocols and update compliance programs accordingly. Companies and individuals should not be lulled by the reduced case count; the enforcement actions that are brought will be carefully selected and well-coordinated. Sher Tremonte LLP will continue to monitor developments in the second half of the year. Written by Tami Stark and Raphael Friedman. For questions, please contact Cassie Dick, Brian Kidd, Alison Moe, Tami Stark or Michael Tremonte.