Publications

The CFTC and SEC Announce Historic Coordination Effort

Summary: The SEC and the CFTC jointly announced that they entered into a Memorandum of Understanding “to guide coordination and collaboration between the two agencies to support lawful innovation, uphold market integrity, and ensure investor and customer protection.” As managers well know, the two agencies’ overlapping jurisdiction has at times led to duplicative and often conflicting regulatory schemes, as well as enforcement investigations and resolutions covering essentially identical conduct. The MOU identifies core principles that will guide the agencies’ collaboration on a go-forward basis, including striving for regulatory clarity and consistency, maintaining the current statutory authority while rejecting a “turf war” mentality, and ensuring that matters involving joint overlapping jurisdiction are resolved in a timely and coordinated manner.

• Two aspects of the MOU bear specific mention: first, the MOU reflects the agencies’ commitment to a “minimum effective dose” regulatory approach, which would enable a path for firms to satisfy one agency’s regulatory requirements through substituted compliance with the other agency’s comparable regulations. Second, the MOU establishes procedures for coordinated enforcement; specifically, the two agencies agreed to consult each other at the outset of any investigation that could involve overlapping jurisdiction, and coordinate throughout the matter to the extent the matter presents areas of mutual programmatic interest.

Takeaway: Although the MOU is not legally binding, it does signal a meaningful step towards regulatory harmonization and was preceded by multiple public statements pledging enhanced coordination. If adhered to, the MOU may have a significant impact on dual registrants in the long-term; for example, by reducing the friction between conflicting regulatory schemes, dual registrants may see compliance costs go down.

Best Practice Tip: Firms should consider proactively identifying areas of overlapping SEC and CFTC rules and regulations, taking stock of any areas that are especially burdensome or duplicative, and engaging with one or both agencies to bring these items to their attention. In the event of overlapping investigative activity, firms should be proactive in urging the agencies to coordinate and, if appropriate, for one or the other to stand down in cases of marginal jurisdictional nexus.

Enforcement Activity Strong Despite Leadership Changes at the Top

Summary: On March 16, the SEC announced that Judge Margaret Ryan had resigned as Director of the Division of Enforcement after just over six months on the job. Less than a month later, on April 8, the SEC announced that David Woodcock would be taking over the job effective May 4. Woodcock is an SEC veteran who served as the Director of the Fort Worth Regional Office from 2011 to 2015 and had been a partner at a global law firm prior to his selection. Despite these leadership changes, Enforcement activity at the SEC continues to ramp up (as summarized in our final entry discussing the Enforcement Division’s 2025 enforcement recap).

• On March 6, the SEC announced a settlement with New York Stock Exchange LLC (“NYSE”) related to a January 2023 failure to conduct opening auctions for more than 2,800 securities due to a critical systems disruption. The SEC alleged that NYSE mistakenly ran its primary and backup trading systems at the same time, which caused the primary trading system to incorrectly treat the opening auctions as having already occurred. As a result, NYSE did not run opening auctions for the impacted securities causing “market-wide impacts” that included price-triggered restrictions on trading, market-wide trading pauses, and thousands of busted trades. The SEC’s order settled charges under Rule 1001(a)(2)(vii) of Regulation SCI and Exchange Act Section 19(g)(1). NYSE agreed to pay a $9 million penalty.

• Also on March 6, the SEC announced a settlement with a broker-dealer for failing to file Suspicious Activity Reports (“SARs”) in violation of Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. The SEC alleged that the broker-dealer failed to file approximately 150 SARs from February 2019 through March 2022 and alleged that “exception reports” used to identify potential suspicious activities “went unreviewed for months or years at a time.” In addition, the SEC alleged that certain employees had falsified documentation of their purported review of exception reports and some of those falsified documents were produced to FINRA in response to a FINRA inquiry. The broker-dealer was ordered to pay a $20 million penalty.

• On March 23, the SEC announced a settlement with registered investment adviser Ally Invest Advisors Inc. for alleged breaches of fiduciary duty and disclosure failures. The SEC alleged that Ally failed to disclose materials facts about its retail no advisory fee Cash-Enhanced “robo-advisor” accounts. Specifically, the SEC alleged that Ally had an undisclosed conflict of interest in allocating 30% of client assets in Cash-Enhanced accounts to cash as the allocation percentage was selected, in part, to generate revenue that Ally lost by not charging fees on the accounts. The SEC also alleged that Ally’s disclosures were inaccurate when it said its Cash-Enhanced accounts were based on Modern Portfolio Theory when in reality only the non-cash portions of the accounts were managed based on the theory. The SEC’s order settled a charge under Section 206(2) of the Advisers Act and assessed a $500,000 penalty. There was no Compliance Rule charge and no order of disgorgement.

• On March 27, the SEC announced that it had filed a federal district court motion seeking an order to compel an individual and six companies affiliated with him to comply with SEC-issued investigative subpoenas seeking the production of documents. The subpoenas were issued in October 2024, and only one entity made a partial production in April 2025. In July 2025, the respondents asserted constitutional objections and refused to produce any additional documents.

Takeaway: The steady march of enforcement cases last month added to our observations of an uptick in new investigations and renewed activity in existing investigations that appeared to have gone dormant. The wide-ranging subject matters of the recently announced enforcement actions—from a classic Market Abuse Unit case in the NYSE settlement to a rarely seen subpoena enforcement action—suggest that Enforcement is settling into a more regular cadence that we expect to continue.

Best Practice Tip: Prepare for an increasingly active Enforcement staff that is ready to open new investigations and push existing investigations forward, along with new Enforcement leadership that will be supportive of these trends.

SEC Releases Enforcement Results for FY 2025

Summary: The SEC announced its Enforcement Results for FY 2025 with the headline that it “resets the measure of enforcement effectiveness to investor protection and Congressional intent.” The release added that SEC resources had been “regrettably. . .misapplied in prior years to pursue media headlines and run up numbers, and in turn, led to misguided expectations on what constitutes effective enforcement.” Emphasizing this point, Chairman Atkins said: “We have 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.”

Takeaway: The announcement highlights the current SEC’s criticism of its predecessor as being improperly focused on the number of cases brought and the amount of penalties and disgorgement imposed. That said, the announcement and Chairman Atkins’s messaging provide insights into enforcement priorities going forward:

• Chairman Atkins’s specific reference to “abuses of trust” as a “type[] of misconduct that inflict[s] the greatest harm” gives the Staff wide latitude to pursue Advisers Act cases involving alleged breaches of fiduciary duty even in the absence of fraudulent conduct.

• References to the prior SEC’s cases that involved no investor harm suggest that a key part of advocacy with the current SEC should be demonstrating how alleged violations did not create any victims.

• References to the importance of remediation underscore that early identification of issues, including in exams, and prompt remediation, will be a compelling data point in discouraging enforcement interest.

Best Practice Tip: The current SEC continues to emphasize its focus on fraud, market manipulation, and “abuses of trust” that result in investor harm. Advisers should continue to maintain their compliance programs to protect against conduct that might pique enforcement interest and think about how the SEC’s priorities fit—or don’t fit—into existing investigations.