On the eve of an expected shift in regulatory direction under the new U.S. administration, the U.S. Securities and Exchange Commission (SEC) brought record enforcement activity in its latest quarter.
The SEC reported that it filed 200 enforcement actions in its fiscal first quarter (ended Dec. 31), which represented a record high level for the agency’s first quarter.
The record filing activity aimed to tackle a range of violations, including allegations of advisory firms failing to disclose conflicts interest, misleading disclosure to brokerage clients, frauds targeting retail investors and claims of “AI-washing,” or firms misleading investors about their use of artificial intelligence tools.
The SEC also reported that it filed another 40 enforcement actions through the first two weeks of January.
Alongside the record levels of enforcement, on the policy front, late on Jan. 17 the agency filed an appeal of a district court decision from last November that vacated a proposed rule aiming to bring more oversight to private-fund managers.
Commenting on the SEC’s decision, Jack Inglis, CEO of the Alternative Investment Management Association (AIMA), said in a statement, “We are disappointed in the SEC’s eleventh-hour decision to appeal; however, we are confident in our arguments and look forward to working with the new SEC leadership to reconsider this decision.”
As previously announced, the chair of SEC, Gary Gensler, formally stepped down Monday. Former SEC commissioner, Paul Atkins, has been nominated as his replacement.
In a joint statement Monday, current commissioners, Hester Peirce, Caroline Crenshaw and Mark Uyeda, lauded Gensler’s work at the polarized agency, saying he was “committed to bipartisan engagement and a respectful exchange of ideas.”
“We have finalized rules that have promoted market integrity and corporate governance, streamlined open-end fund disclosures, reduced settlement times, and passed needed reforms to the plans corporate insiders use to buy and sell company stock, among many other policy changes,” they said.
“Together we have returned billions of dollars to investors harmed by violations of the securities laws and helped educate the public on the risks and rewards of investing their savings. This record helps cement Chair Gensler’s legacy of unwavering commitment, not only to public service, but to the American investor.”
Additionally, the agency announced that its acting director of enforcement, Sanjay Wadhwa, will be leaving on Jan. 31, after more than 20 years at the SEC.
Wadhwa took over as acting director of enforcement in October 2024, in the wake of the departure of Gurbir Grewal. Prior to that, since 2021, he was deputy director of the enforcement division.
In his time as acting director and deputy director of the division, Wadhwa sought to enhance industry compliance through a combination of enforcement and rewarding cooperation.
“I have been gratified to see market participants stepping up their compliance efforts to embrace our shared goal of protecting investors. While the capital markets will always benefit from robust enforcement, the agency’s effectiveness at combatting securities law violations is enhanced with buy-in from market participants,” Wadhwa said in a statement.
The SEC said that under Wadhwa’s leadership, the agency “obtained orders for record amounts of financial remedies while at the same time an increasing number of market participants self-reported, remediated, and took other proactive steps to cooperate with the division’s investigations.”