Securities Enforcement Roundup – February 2026

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

• The US Securities and Exchange Commission (SEC or the Commission) revised its Enforcement Manual for the first time since 2017. The changes standardize and enhance the transparency of the Division of Enforcement’s (the Division’s) procedures, particularly those impacting the Wells process, cooperation credit, and settlement.
• In Amah, the US Court of Appeals for the Second Circuit applied Loper Bright in the context of an SEC enforcement action and vacated the district court’s finding of liability under the Investment Advisers Act of 1940 (Advisers Act). The Second Circuit required the district court to conduct its own independent judicial analysis of ambiguous statutory language, rather than deferring to the SEC’s interpretation.
• Thirteen states announced a settlement with a large asset manager in connection with a lawsuit alleging collusion between asset managers to drive up coal prices, representing a victory for states opposed to the incorporation of environmental, social, and governance (ESG) factors into investment decisions.
• Speaking at the Texas A&M School of Law Corporate Law Symposium, SEC Chair Paul Atkins advocated for alternative corporate domiciles to Delaware (like Texas) and reformed disclosure requirements that would streamline disclosures regarding executive compensation and company risk factors.
• The Commodity Futures Trading Commission (CFTC) withdrew a proposed rule banning event contracts based on elections and sporting events. Meanwhile, the exploding popularity of prediction markets has raised regulatory questions around complex insider trading issues.
• The Financial Industry Regulatory Authority (FINRA) filed a proposed rule with the SEC that would allow member firms to share performance projections with customers. FINRA proposed a similar rule in 2023, which was stayed in July 2024, but the SEC may approve the new proposal considering the agency’s priorities under the current US administration.

CHANGES TO THE SEC ENFORCEMENT MANUAL

As covered in our recent LawFlash, on February 24, 2026, the SEC announced that it had revised its Enforcement Manual (the Manual) for the first time since 2017. [1] Key updates in the manual include changes to the Wells process, the coordination of settlement offers with waiver requests, and the assessment of an issuer’s cooperation and remediation efforts in determining the appropriateness of an enforcement action or remedies to be imposed. In announcing these changes, Director of the Division of Enforcement Margaret Ryan explained, “Our updates to the Enforcement Manual ensure greater uniformity, reflect the Division’s best practices, and improve our staff’s ability to carry out the mission-critical work they do on behalf of investors.” [2]

Notable changes to the Manual focus on the fairness and transparency of the Wells process. These updates are consistent with Director Ryan’s first public remarks as director, which emphasized the importance of giving Wells Notice recipients a “meaningful opportunity to respond” to the Enforcement Staff’s proposed recommendations for an enforcement action. [3]

The Manual provides that (1) Wells Notice recipients now have four weeks to provide a responsive Wells submission, rather than the standard two-week deadline; (2) SEC Enforcement Staff should “be forthcoming about the content of the investigative file” in connection with providing recipients an opportunity to make a Wells submission, with the caveat that such disclosure is neither guaranteed nor unlimited in that parties may only receive “relevant portions” of the file; (3) Wells submissions should focus on disputed factual or legal issues and any legal risks or policy concerns raised by the Wells Notice; and (4) meetings with senior Enforcement Staff leadership should be scheduled within four weeks of the Staff’s receipt of a Wells submission. [4]

Significantly, the instruction regarding the contents of the investigative file now gives Wells recipients an opportunity to assess the strengths and weaknesses of the Staff’s potential action against them, which may, in some cases, encourage fruitful discussions with the Staff that could potentially lead to earlier resolutions. Moreover, this revision provides a consistent and uniform policy because, prior to the Manual’s revisions, the practices of various SEC offices differed with respect to sharing investigative file content with Wells recipients.

In addition to providing a uniform Wells process, the revised Manual permits the Commission to simultaneously consider settlement offers and requests to waive associated collateral consequences, including statutory disqualifications that could adversely impact a company’s ability to raise capital or take advantage of certain safe harbors. [5] By permitting simultaneous consideration of requests to waive such collateral consequences, the revised Manual offers more visibility into the potential effect of certain sanctions at the time of settlement.

The Manual also offers clearer guidance regarding the effect of cooperation and remediation efforts on the penalties the SEC imposes. [6] These updates should support efforts by companies to argue for a penalty reduction (or no penalty at all) in instances of extraordinary cooperation.

SECOND CIRCUIT APPLIES LOPER BRIGHT, LIMITING DEFERENCE TO SEC INTERPRETATIONS OF AMBIGUOUS STATUTES

On February 24, the Second Circuit in US Securities and Exchange Commission v. Amah vacated a district court order imposing liability against a defendant under the Advisers Act and remanded the case to the district court with instructions to exercise its independent judgment in interpreting the relevant statutory provisions. [7] The decision shows that the US Supreme Court’s decision in Loper Bright Enterprises v. Raimondo [8] has “teeth” in the securities context and that district courts cannot simply defer to the SEC when interpreting ambiguous statutory language. Instead, the district courts must independently assess the statutory language.

In Amah, the SEC secured summary judgment based on the defendant’s solicitation of investments from members of his religious community through materially false and misleading statements—conduct found to violate the Securities Exchange Act of 1934 (Exchange Act), the Securities Act of 1933 (Securities Act), and the Advisers Act. On appeal, the Second Circuit affirmed the Exchange Act and Securities Act liability. However, it vacated and remanded the ruling on Advisers Act liability, explaining that the district court had improperly relied on the SEC’s own interpretive position without conducting the independent judicial review now required by Loper Bright. [9]

Under the Advisers Act, an “investment adviser” must advise others “for compensation.” [10] In this case, the central issue was how to interpret “for compensation” where the defendant had not received compensation directly but could reasonably expect to do so in the future. The district court deferred to the SEC’s interpretation that advice is given “for compensation” where the adviser has a mere expectation of receiving compensation, thereby bringing the adviser within the ambit of the Advisers Act even if the adviser has not yet received compensation. The Second Circuit determined that the interpretation of “for compensation” was an important and novel issue of statutory construction and that the district court improperly deferred to the SEC’s interpretation in contradiction to Loper Bright. Thus, it remanded the matter back to the district court to assess that definition using its independent judgment, rather than simply deferring to the SEC’s interpretation. [11]

The Second Circuit emphasized that, while the district court may ultimately reach the same statutory interpretation as the SEC, the decision must reflect the court’s independent analysis under the new Loper Bright precedent. In short, Amah signals that the SEC must now defend its statutory interpretations in court, creating new opportunities for defendants to challenge agency positions.

ASSET MANAGER SETTLES CLAIMS BY TEXAS AND OTHER STATES ALLEGING COLLUSION BETWEEN ASSET MANAGERS TO DRIVE UP COAL PRICES

On February 26, 2026, several states announced that they reached a $29.5 million settlement with a large asset manager, alleging that the firm and other asset managers pressured publicly traded energy companies to lower their energy output to meet certain carbon-reduction goals. [12] The states alleged that the asset managers’ conduct contributed to coal price increases via “ESG-driven market manipulation.” Notably, the Federal Trade Commission and Antitrust Division of the US Department of Justice filed a joint statement of interest supporting the states’ position in May 2025. [13]

Under the terms of the settlement, the asset manager will, for the first time, offer proxy voting to investors in the asset manager’s funds that hold 50% or more of their total stock in US public companies. This proxy voting measure will allow individual shareholders to direct how their shares are voted, preventing the manager from voting the investors’ shares based on ESG considerations or otherwise.

Additionally, the terms of the settlement require the asset manager to refrain from threatening to withdraw its holdings in portfolio companies unless they agree to act in a certain way, such as prioritizing ESG goals. [14] Further, the manager agreed not to participate in soliciting proxies for any matter presented to portfolio company shareholders. [15]

Two other asset manager defendants will continue fighting the lawsuit. [16] Still, we expect the settlement to embolden some states to consider litigation when they believe an asset manager is improperly prioritizing ESG over investment returns.

CHAIR ATKINS’S REMARKS AT THE TEXAS A&M SCHOOL OF LAW CORPORATE LAW SYMPOSIUM

In a February 17, 2026 speech at the Texas A&M School of Law Corporate Law Symposium, Chair Atkins reiterated his commitment to reforming capital markets regulation and policy. [17] In so doing, he focused on two topics: (1) the benefits of offering alternative corporate domiciles to Delaware (in this case, Texas); and (2) “rationalizing,” “simplifying,” and “modernizing” public company disclosures. [18]

Chair Atkins made clear that he views competition among states for corporate domiciles as a healthy feature of US capital markets, encouraging intentionality and choice for companies evaluating where to incorporate. [19] As an example, he pointed to what he perceived as increased abusive shareholder litigation brought in Delaware against companies incorporated in Delaware. Chair Atkins then noted the recent Texas SB 29 bill as an alternative domicile and one of “several significant steps to further [Texas’s] appeal as a destination for corporate domestication.” For example, under SB 29, shareholders may not recover attorneys’ fees for actions where the resolution involves mere amended disclosures, even if material. [20]

Chair Atkins next observed that certain disclosures in SEC filings had become so lengthy that the focus had turned to litigation risk rather than informing investors. For example, he noted that Regulation S-K Item 402 (disclosure of Executive Compensation) has “morphed into a Frankenstein monster beyond recognition.” [21] Chair Atkins advocated for narrowing the scope of required disclosures, making them clearer and more accessible to the reasonable investor. In addressing Regulation S-K Item 105 (Risk Factors), he pointed out that risk factor disclosures have expanded from brief summaries to more than 15 pages in many cases, largely to limit litigation exposure. As a solution, Chair Atkins proposed a safe harbor for companies that do not disclose the effects of widely publicized events reasonably likely to affect most companies. He suggested that this approach would encourage targeted and meaningful disclosures. [22]

PREDICTION MARKETS CONTINUE TO GAIN REGULATORY INTEREST

Regulatory agencies and the states continue grappling with the growing prediction market industry. On February 4, 2026, the CFTC (1) withdrew a proposed rule from 2024 that sought to prohibit trades on elections, sports, and award contests; and (2) rescinded its September 2025 guidance that advised registrants to refrain from offering sports-related event contracts. [23] Notwithstanding the CFTC’s actions, many states have alleged that prediction market platforms offer unsanctioned bets. In response, several prediction market platforms have argued that the states are preempted from regulating in this area. [24]

The application of insider trading laws to the prediction market industry has also gained recent attention. For example, on the day after the CFTC withdrew the proposed 2024 rule, the US Attorney for the Southern District of New York, Jay Clayton, announced that his office anticipated prosecuting cases in the prediction market space. [25] Clayton stated his belief that fraud conducted through a prediction market is “a crime” and explained that his office is assessing how to apply existing laws (such as insider trading laws) to this developing area. [26] Democratic senators also recently asked CFTC Chair Michael Selig how he plans to combat insider trading on these platforms. [27] On March 2, 2026, Chair Selig appointed David Miller—a veteran attorney with extensive experience prosecuting and defending high-profile insider trading cases—as the CFTC’s Director of Enforcement. [28] This suggests that the CFTC may be considering pursuing insider trading cases in this space.

While the regulators ascertain how to detect and enforce fraud in the prediction market space, Kalshi recently announced that it opened 200 investigations into insider trading in the past year alone, resulting in accounts being frozen and traders being banned from the platform and fined. [29] We anticipate that this area of the law will continue to develop throughout 2026 and beyond.

FINRA FILES PROPOSED RULE CHANGE THAT WOULD ALLOW BROKER-DEALERS TO SHARE PORTFOLIO PERFORMANCE PROJECTIONS

As covered in our recent LawFlash, FINRA recently filed a proposed rule change with the SEC that would allow broker-dealers to disseminate information to investors regarding the projected financial performance of a security or portfolio of securities, expanding on its recent efforts to loosen restrictions on broker-dealers’ ability to share performance projections with investors. [30] Currently, FINRA Rule 2210 prohibits member firms from providing portfolio performance projections to clients under most circumstances.

FINRA’s stated rationale for this proposal is that while “institutional and sophisticated investors” are able to access performance projections from issuers and investment advisers, the current rules prevent these investors from obtaining a “member’s potentially different and valuable perspective.” [31]

The newly proposed rule is intended to “better align with the IA Marketing Rule” adopted by the SEC in December 2020, which permits investment advisers to include performance projections in advertisements as long as they are appropriately tailored to the intended audience. [32] Similarly, under FINRA’s newly proposed rule, rather than limiting the customers who may receive the performance metrics, all investors would be eligible to receive the information, provided that it is appropriate for its “intended audience.” [33]

However, despite efforts by FINRA to better align the newly proposed rule with the IA Marketing Rule, key differences remain. [34] In particular, the IA Marketing Rule permits investment advisers to include additional types of hypothetical performance in their advertisements, such as back-tested performance and model portfolio performance, which broker-dealers could not include in advertisements under the proposed rule.

FINRA’s proposed rule also requires broker-dealers to have a reasonable basis for their performance projections and to retain records supporting their analysis, whereas the IA Marketing Rule does not impose similar requirements on investment advisers. Similarly, the proposed FINRA rule goes beyond the IA Marketing Rule by requiring broker-dealers to explain that projections may differ from actual performance. Lastly, FINRA’s proposal would obligate broker-dealers to disclose whether performance projections are net of fees and expenses, while the IA Marketing Rule only requires investment advisers to accompany any presentation of gross performance with a presentation of net performance.

For now, it is unclear how the SEC will rule on FINRA’s latest proposal. The Commission stayed a similar proposal in July 2024. Given the new proposal’s attempt to better align with the IA Marketing Rule, the SEC may be more likely to approve the current measure.