Securities Enforcement Roundup – June 2026

In this issue of our monthly Securities Enforcement Roundup, we highlight top securities enforcement developments from June 2026.

In June 2026:

• The US Securities and Exchange Commission (SEC or the Commission) continued to require factual admissions when finding that broker-dealers have submitted deficient trade data to the Commission.
• The US Supreme Court decided in a major ruling that the Commission can seek disgorgement without proving pecuniary loss.
• The SEC published a Draft Strategic Plan to guide the agency’s next four years.
• SEC Commissioner Hester Peirce emphasized regulatory restraint during her remarks at the US Chamber of Commerce Capital Markets Summit.
• An external review of the Financial Industry Regulatory Authority’s (FINRA’s) enforcement program recommended process-focused reforms to strengthen governance, transparency, consistency, and efficiency.
• FINRA enforcement continued to focus its efforts on Regulation Best Interest (Reg BI) failures, trade-reporting breakdowns, and anti-money laundering deficiencies.
• FINRA’s June 2026 Board actions under the FINRA Forward initiative point to continued rule modernization.

SEC FINES LARGE FINANCIAL SERVICES FIRM $1.9 MILLION FOR MISREPORTING TRADING DATA

On June 29, the SEC settled charges against a broker-dealer for failing to provide complete and accurate electronic blue sheet data to the Commission.[1]

According to the SEC, from at least March 2018 to December 2023 the firm had submitted at least 19,000 electronic blue sheets to the Commission with inaccurate or missing information; those deficiencies resulted in the misreporting of data relating to at least 51 million transactions. The SEC found that the broker-dealer’s reporting issues stemmed from seven types of errors, three of which were self-reported by the firm.

In its order, the Commission noted that the broker-dealer took certain remedial measures to enhance its electronic blue sheet reporting system. As with a long line of cases in the electronic blue sheet space, in this matter the firm admitted the facts set out in the SEC’s order. The broker-dealer further agreed to a censure, cease-and-desist order and to pay a $1.9 million civil penalty.

As noted, this case follows a number of electronic blue sheet actions instituted by the SEC over the last decade and highlights that the Commission will likely continue to be active in this area, which it considers “critical” to its “ability to discharge its enforcement and regulatory mandates.”[2] 

SEC’S SUPREME COURT WIN PRESERVES ITS DISGORGEMENT AUTHORITY

In Sripetch v. SEC (covered in more detail in a recent LawFlash), the US Supreme Court unanimously held that the Commission may continue collecting the ill-gotten gains of alleged violators of the securities laws without first having to identify victims who suffered a pecuniary harm.

According to the Court, the point of disgorgement is not to compensate a victim for a financial loss but rather for the defendant “to give to the plaintiff the amount which he has been enriched from the wrongful invasion of the plaintiff’s legally protected interests”: “[w]hatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.”[3]

Despite the unanimous victory, the SEC continues to face significant limits to its disgorgement powers. Disgorgement may not be used as a penalty.[4] Justice Gorsuch wrote that “[s]hould the government seek to depart from traditional equitable principles and attempt to use §78u(d)(7) to secure penalties, it would of course proceed beyond what Liu held §78u(d)(5) tolerates.”[5] 

Indeed, the Court’s decision left several key questions unresolved. First, it remains unclear whether the SEC can still seek disgorgement when it is infeasible to distribute the collected funds to investors. Second, it is still unclear how the SEC can meet its burden of showing infeasibility of returning funds to investors. Finally, the Court declined to decide whether the SEC is correct in its position that under Section 78u(d)(7) it does not have to connect the unlawful profits it seeks to any specific victims.

In light of this ruling, disgorgement will remain one of the SEC’s most powerful tools for recovering funds from “wrongdoers” even before it has identified impacted investors. Numerous questions remain unanswered, but for now the SEC can count this case among its rare recent wins before the Court.

SEC’S DRAFT STRATEGIC PLAN AND ATKINS’ COMMENTS SIGNAL REGULATORY RESET

On June 2, the SEC published a tone-setting Draft Strategic Plan[6] centered on “returning the agency to the core mission set by Congress more than 90 years ago” consisting of “protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation.”[7]

The plan, which “sets forth the Chairman’s vision for the next four years,” was “developed in consultation with, and input from, all Commissioners” and highlighted three central goals:

• Goal 1. Renew our regulatory policy focus to support innovation, capital formation, market efficiency, and investor protection;
• Goal 2. Shift our regulatory practices to increase stakeholder engagement, facilitate compliance efforts of market participants, and effectively return our enforcement approach to Congress’ original intent;
• Goal 3. Optimize our operational efficiency by enhancing our organizational structure, modernizing our technology, and fostering employee performance and accountability.[8]

Comments on the plan were due by July 2.[9]

Further signaling the Commission’s enforcement objectives, Chairman Paul Atkins stated in a June 30 speech at the Economic Club of New York that the SEC has ended a “regulation by enforcement” approach and is refocusing enforcement on the agency’s core mission.[10] He emphasized that under his leadership the Division of Enforcement will prioritize matters that advance meaningful investor protection and market integrity, rather than measuring success by the number of enforcement actions filed or the size of penalties obtained.[11]

Chairman Atkins identified fraud, market manipulation, and abuses of trust as areas involving the most significant investor harm and therefore warranting focused enforcement attention.[12] Of particular note, the chairman stated that the Commission intends to undertake a broader review of its enforcement processes, describing the initiative as only the second such comprehensive review in the agency’s history.[13]

COMMISSIONER PEIRCE EMPHASIZES REGULATORY RESTRAINT DURING SUMMIT REMARKS

On June 9, soon-to-be-outgoing SEC Commissioner Hester Peirce addressed those gathered at the US Chamber of Commerce Capital Markets Summit.[14] In her remarks, Commissioner Peirce advocated for “sensible rules” and judicious enforcement, with the SEC “limit[ing] itself to the exercise of powers given to it by the people,” offering a vision of the agency guided by adherence to careful, narrow enforcement constrained by the legal authority of the SEC’s enabling statutes and, where necessary, the US Constitution.[15]

To that end, Commissioner Peirce spoke favorably of “recent actions reflect[ing] the Commission’s efforts to regulate the capital markets within the boundaries that the Constitution and Congress drew for it,” including the agency’s rescission of its “gag rule” prohibiting settling parties from publicly denying the allegations against them (covered in our May 2026 Securities Enforcement Roundup), its proposal to rescind its climate disclosure rules, and its joint proposal with the Commodity Futures Trading Commission to revise the “much lengthier, more burdensome, and more wide-ranging reporting requirement for private funds than envisioned by the underlying Dodd-Frank mandate” contained in Form PF.[16]

Commissioner Peirce likewise cautioned against “aggressive statutory interpretations,” noting that the SEC “should bridle its overly expansive reading of the Foreign Corrupt Practices Act’s requirements that companies devise and maintain a system of ‘internal accounting controls,’” given that, in her view, the SEC had “misapplied this provision in its enforcement program by failing to limit it to the accounting context and instead using it as a lever to discipline companies,” ultimately earning the agency “judicial criticism.”[17]

Finally, Commissioner Peirce addressed the SEC’s historical use of disgorgement, stressing that, particularly in the wake of the Supreme Court ruling in Sripetch, “the Commission must accept that equitable disgorgement is a remedy circumscribed by a long history of limiting principles.”[18]

While Commissioner Peirce’s tenure soon comes to an end, her counseling of regulatory restraint echoes recent agency initiatives as outlined above and may well prove to be a key enforcement theme going forward.

EXTERNAL REVIEW SUGGESTS ENHANCEMENTS TO FINRA ENFORCEMENT GOVERNANCE, TRANSPARENCY, EFFICIENCY

On June 30, FINRA published its long-awaited outside expert report titled “Recommendations Based on a Review of the Policies, Procedures, Processes, and Practices of FINRA’s Enforcement Program” (Report), setting forth 24 significant and wide-ranging recommendations designed to improve FINRA’s Enforcement program.[19] Drafted by Professor Paul Eckert of William and Mary Law School and former SEC Commissioner Troy Paredes, the Report is part of the broader FINRA Forward initiative. 

Several of the Report’s recommendations tie directly to enhancements to the Enforcement program already made by FINRA. Nevertheless, as FINRA’s CEO Robert Cook stated in a message accompanying the Report, “FINRA is committed to drawing on these recommendations to strengthen our enforcement program, make necessary changes, and ensure it is operating in a fair, transparent, and effective manner.”[20]

In doing so, Cook noted that FINRA will consider the recommendations “both individually and holistically” and be guided by certain overarching themes, including FINRA’s broader role and responsibilities as a self-regulatory organization, and that the principles which shape enforcement should be articulated clearly to the industry.[21]

The Report’s key recommendations include:

• Enhanced CEO involvement in enforcement matters
• Adoption of limitations periods for enforcement cases
• Challenges and changes to the Rule 8210 process
• Limiting enforcement staff involvement to investigations
• Revised standard for credit for meaningful cooperation
• Limitations on the use of “tag along” Rule 8210 charges
• Increased member firm engagement at the time of an enforcement referral
• Earlier opportunities for resolution and remediation
• Publication of an Enforcement Manual and greater access to disciplinary materials

Many of the Report’s recommendations would, if implemented, fundamentally change Enforcement’s governance, procedures, and practices.

FINRA ENFORCEMENT CONTINUES FOCUS ON REG BI, TRADE REPORTING AML DEFICIENCIES

FINRA’s most prominent June enforcement announcement was its expulsion of Reid & Rudiger LLC and the permanent bars of the firm’s two co-founders for churning and excessively trading customer accounts in violation of Reg BI, SEC, and FINRA rules.[22] According to FINRA, the co-founders recommended an investment strategy that made it virtually impossible for the affected customers to make a profit on their investments.

FINRA found that the misconduct impacted 20 accounts over nearly six years, generated about $2 million in commissions and trading costs, and caused approximately $2.7 million in customer losses.[23] FINRA also suspended and fined two firm supervisors for failing to identify and investigate red flags. As stated by Bill St. Louis, FINRA’s Head of Enforcement, “this action underscores FINRA’s unique role as a self-regulatory organization committed to protecting retail investors from misconduct.”[24]

FINRA’s June disciplinary matters also reflect continued scrutiny of trade reporting. FINRA found that a firm that provides brokerage services to correspondent broker-dealers failed to report more than 211 million fractional-share trades to a FINRA trade reporting facility (TRF) and approximately 169 million fractional share–related reportable events to the Consolidated Audit Trail (CAT) Central Repository, and also submitted approximately 127 million inaccurate or late TRF reports and approximately 2.1 billion inaccurate CAT reportable events.

The firm further effected more than 110,000 fractional-share trades during trading halts, pauses, and marketwide circuit breakers.[25] Lastly, FINRA found that the broker-dealer failed to establish, maintain, and enforce a supervisory system reasonably designed to comply with its TRF and CAT reporting obligations and to prevent trading during market halts. FINRA imposed a censure, a $1.1 million fine, and restitution of $55,122.15 related to the trades effected during market halts.

Anti-money laundering (AML) controls were another recurring theme for enforcement in June. In one case, FINRA found that a firm that provides online brokerage services for self-directed options trading failed to establish and implement an AML program reasonably designed to detect and cause the reporting of suspicious transactions and also failed to include appropriate risk-based procedures for carrying out ongoing customer due diligence and monitoring.[26]

FINRA found, among other things, that the firm did not tailor its manipulative trading surveillance program to its options business, failed to reasonably review and follow up on its trade surveillance alerts, did not reasonably review potential instances of wash trading, did not reasonably design a surveillance program for customer money movement, and did not include an appropriate risk-based process for ongoing customer due diligence in its AML program.[27] The firm consented to a censure, a $210,000 fine, and an undertaking to certify remediation of its AML policies and procedures.

In another matter, FINRA’s action against a small broker-dealer similarly emphasized the need to tailor AML controls to the firm’s business model.[28] FINRA found that an investment banking firm, which underwrote IPOs often involving foreign issuers, failed to establish and implement a reasonable AML program that could reasonably be expected to identify and report suspicious transactions in light of its offering activities and customer base, such as its participation in deals involving China-based issuers.

The firm also failed to conduct reasonable independent testing of its AML program. Separate and apart from those issues, the firm failed to preserve or supervise business-related off-channel electronic communications, and did not timely file required underwriting documentation in connection with approximately 25 public offerings.[29] FINRA imposed a censure, a $335,000 fine, and an undertaking to retain an independent consultant to conduct a comprehensive review of its compliance with FINRA’s AML and public offering filing rules.

Taken together, these matters demonstrate that FINRA continues to focus on not only customer-facing misconduct, such as Reg BI violations, but also the adequacy of firms’ AML programs, and that, where appropriate, FINRA will include violations related to the use of off-channel communications in its cases. 

FINRA BOARD MEETING HIGHLIGHTS FINRA FORWARD INITIATIVE

At its June 2026 meeting, FINRA’s Board of Governors approved four rule proposals that preview important areas of regulatory change.[30] The first would make permanent the Remote Inspections Pilot Program before its scheduled expiration, preserving the ability of member firms to conduct remote inspections of offices, informed by data collected during the pilot and feedback on Regulatory Notice 25-07.[31]

The second would modernize supervisory obligations by extending the presumptive inspection cycle for nonbranch locations, simplifying treatment of residences, and modifying supervisory ineligibility requirements for Residential Supervisory Locations.[32]

The Board also approved a continuing education (CE) proposal designed to address CE burdens for individuals with multiple registrations, help firms develop training programs more efficiently, provide timing flexibility for CE deadlines, and create a voluntary pilot for CE delivery to senior leaders.[33]

Finally, the Board approved a corporate financing modernization proposal that would amend FINRA’s corporate financing rules to modernize underwriting-compensation treatment, simplify compliance for members with conflicts of interest in public offerings, and expand the filing exemption for certain private placements.[34]

FINRA framed these rule proposals as reflecting its continued commitment to modernizing its regulatory framework while maintaining robust investor protections.[35] These rule proposals are part of the FINRA Forward rule modernization initiative to improve FINRA’s effectiveness and efficiency.