https://www.cfobrew.com/stories/2026/02/05/amid-the-sec-s-slowdown-in-enforcement-actions-cfos-need-to-play-the-long-game-experts-caution

By Natasha Piñon

Amid the SEC’s slowdown in enforcement actions, CFOs need to tread carefully.
There’s a new sheriff at the securities regulator—but that doesn’t mean it’s the Wild West for CFOs.

“Tread carefully,” Lisa Bragança told us, addressing CFOs. “Don’t jump to conclude that just because something has changed at the SEC level, that it means you should move to that disclosure regime. You may still have obligations under state [rules] and other organizations.”

“This is a time that CFOs definitely need to be careful…to make sure that they don’t just go ‘Whee!’” she added. “It’s a more complicated time, because we will have these different views of what needs to be done, disclosed, and what a fiduciary is required to do.”

State of mind. In the years to come, Bragança thinks it’s possible that while federal regulation ebbs, state-by-state regulation will increasingly come into focus, with states stepping in to take a potentially more rigorous approach.

“Typically, state regulators defer to what the Feds are doing,” she said. “It’s not clear that that’s going to be the paradigm this coming year or in the coming years.”

“You cannot just look at what is going on at the very top, at the federal level,” Bragança said. Even in the most extreme what-if cases—like, say, the president saying fraud cases are fully a thing of the past—“that would not change the states, and it would not change the requirements that apply to CFOs as accountants,” Bragança noted.

“Maybe in a decade, the states will follow, and all the other organizations will be in perfect sync with a new regulatory regime from the federal government,” she acknowledged. “But usually these things happen more slowly, and there is more time for consensus and then you don’t have those discontinuities.”

Updated January 9, 2026

When a prospective client call us, they often tell us they don’t understand why they are being investigated because no customer complained and nobody lost any money. They believe once they show the SEC or FINRA or a state securities regulator that there is was no harm to any customer, the investigation will end with no action. Unfortunately, this is NOT TRUE.

This Violation Has No Victim; This Violation Needs No Victim

We typically understand a “victimless crime” is an act that breaks the law but does not directly harm another person – things like illegal gambling and speeding in a deserted area. In the highly complex and regulated business of finance, the line between a technical legal violation and a crime with a clear victim simply does not matter. Many government enforcement and criminal actions, from insider trading to market manipulation, are built on a theory that does not require any identifiable victim. For individuals and companies facing an investigation of such an offense, understanding this “myth of the victimless crime” is the first step in reckoning with the possible consequences of a government investigation.

Technically…That’s a Securities Law Violation

While the current Trump administration changing a lot, the SEC has continued to investigate and bring cases seeking to impose substantial civil penalties on financial services companies for what most would consider entirely technical violations of the securities laws. For example, there are the recent “off-channel” electronic communication settlements, where firms failed to ensure communications financial advisors had with clients on WhatsApp were retained in the firm’s books and records. In addition, the current administration has targeted financial firms for:

• Violations of “the custody rule” (SEC’s Rule 206(4)-2), a requirement that registered investment advisors (“RIAs”) arrange and submit to “surprise” annual examinations of their account recordkeeping (the firms violating the rule by failing to identify themselves to the SEC);
• Running afoul of Rule 105 of Regulation M which regulates certain short selling activities; and
• Failing to keep proper records for backdating certain documents subject to an SEC review.

In none of these cases was any investor harm alleged and all imposed substantial penalties and/or injunctive relief.

Where’s the Fraud?

There are many federal securities laws and regulations (as well as FINRA rules) completely unrelated to customer harm that can lead to fraud charges. Here are some examples:

• Insider Trading: Consider a classic insider trading case. An executive uses non-public information to sell shares of company stock. The person who bought those shares on the open market was already there, willing to buy at that price from any seller. They were not coerced or directly deceived by the executive. Had the executive not sold, they would have simply bought from someone else. While the executive had an informational advantage, it is difficult to argue that the counterparty to the trade was a “victim” in the conventional sense. Nor is that required.  

It is important to recall that in an insider trading case, the harm is to the owner of the information that was misused. Nevertheless, the government makes no effort to use the funds “disgorged” or recovered from the violator to compensate the owner of the information or the counterparty to the trade.

• Market Manipulation: Certain forms of alleged market manipulation, such as “spoofing” or “wash trading,” are prosecuted because they create a false appearance of market activity that moves markets. While the government argues this deceives the entire market, the government does not have to identify a specific trader who was concretely harmed. Even if there are identifiable victims (like market makers), the funds “disgorged” to the government are not paid to the victims.

• Acting as an Unregistered Broker – Federal and state securities law require that securities be sold only by registered brokers. Often salespeople discover after the fact that they are under investigation for selling an investment they were reasonably led to believe was not a security or fell within an exemption from registration as a security. That was the basis for many charges brought against cryptocurrency platforms that sold digital tokens the SEC and state regulators concluded met the definition of “securities.” While the current administration has backed off of cryptocurrency enforcement actions, there are many other types of investments that securities regulators have concluded were securities therefore required to be sold only by registered brokerage firm agents.  

The “Market” is the Victim Even if Nobody in the Market is Hurt

The SEC and other federal and state authorities argue in these types of cases that the victim is not necessarily a single person but the integrity of the U.S. financial markets as a whole. The SEC’s view is that such conduct leads to an erosion of trust by harming public confidence in the stock market. If investors believe the market is a “rigged game” where insiders and manipulators have an unfair advantage, they will be less likely to invest. This can theoretically damage capital formation and the health of the economy. In fact, even during the recently concluded government shutdown when over 90% of SEC staff was on furlough, none of the new cases filed by the remaining “skeleton staff” sought the type of emergency relief such as temporary restraining orders or asset freezes that would indicate the SEC was concerned about about redressing individual investor harm.

Of course, it is hard to square the SEC’s supposed concern about “market integrity” at the same time the SEC is overhauling its regulations to allow or encourage even the most unsophisticated investors to purchase private equity – an asset class subject to virtually no disclosure requirements.

Even in the criminal context, the Supreme Court affirmed the principle that no monetary loss need even be alleged for someone to be found guilty of fraud. In Kousisis, et al. v. United States, 145 S. Ct. 1382 (May 22, 2025), the Supreme Court unanimously upheld the conviction of a contractor and one of its managers for getting a contract with the Pennsylvania Department of Transportation (PennDOT) based on the false promise that it would obtain materials from a “disadvantaged business enterprise.” Although there was no allegation that the work was not performed in compliance with the contract, the contractor was found guilty of fraud. The Supreme Court upheld the conviction, concluding the defendants could be convicted for fraudulent inducement even if prosecutors did not allege that PennDOT lost any money as a result of the defendants’ lies. Obtaining money through lies was sufficient to support the conviction.

How bad can it be?

• Disgorgement of Fees and Commissions: Even in scenarios where no investor suffered a direct financial loss, an individual or entity might be charged with improperly obtaining payments when the law was violated. The SEC has the authority to seek “disgorgement” of these payments (called “ill-gotten gains”), which is an equitable remedy designed to prevent wrongdoers from profiting from their illegal conduct. This means that any benefit derived from the violation – profits, avoided losses, fees, or commissions – can be sought by regulators as disgorgement. For example, a corporate executive who sells shares based on material non-public information, thereby avoiding a significant personal loss before negative company news is publicly announced, would typically be considered by regulators to have obtained an “ill-gotten gain” in the form of the avoided loss. This is true even if other investors didn’t lose money because of that specific trade.
• While there is some dispute among the courts as to whether disgorgement is allowed when there is no showing that investors suffered a pecuniary loss, the majority position is that disgorgement is allowed in such situations. The U.S. Supreme Court agreed to hear the appeal of the Ninth Circuit’s opinion affirming a disgorgement judgment where no pecuniary loss was established. See Ongkaruck Sripetch v. SEC, No. 25-466 (Oct. 14, 2025). Importantly, the SEC had taken the fairly unusual step of agreeing with the petitioner that the Supreme Court should hear the case, but only because it wants the Supreme Court to resolve the circuit split and affirm that pecuniary loss is not necessary for the SEC to obtain disgorgement in such circumstances.

• Imposition of Civil Penalties: Beyond disgorgement, the SEC can impose significant civil monetary penalties for violations of securities laws. These penalties are distinct from disgorgement and serve as a direct punishment for the misconduct.

As the Supreme Court affirmed in SEC v. Jarkesy, 601 U.S. 109 (2024), when the SEC seeks civil penalties for securities fraud, these penalties are punitive in nature, designed to punish or deter the wrongdoer rather than solely to restore the status quo. This distinction underscores that the SEC’s ability to seek civil penalties is not contingent on demonstrable investor loss or the ability to provide restitution to specific individuals.

• Industry Bars: Furthermore, the SEC possesses the critical power to issue industry bars, prohibiting individuals from serving as officers or directors of public companies, or from participating in various capacities within the securities industry (e.g., as a broker-dealer, investment adviser, or accountant). These bars are supposed to remove individuals who have violated the securities laws from positions where they could commit further violations, to protect the public and the markets, independent of whether specific victims are present in a given case.

• Obey the law injunctions/orders:  The SEC and state regulators routinely seek injunctions or administrative orders requiring a defendant to obey the securities laws. That might seem innocuous, but it has serious collateral consequences. First, being subject to an injunction may mean you are considered a “bad actor” who cannot be part of management of a firm that is selling securities or that has investors. Second, an injunction or administrative order may have to be disclosed in various contexts, like on personal loan applications, in applications for government licenses, or when seeking to raise money for a business venture. These injunctions and administrative orders do not terminate on their own so the risk of inadvertently violating them years down the road is significant.It should be noted, however, that while it is still not the majority approach, courts are increasingly rejecting orders which simply require defendants to “obey the law” for failing to specify the particular conduct being enjoined.

What Should You Do?

If you sell anything that you conceivably think could be considered an investment product, if you are working in the finance industry, or if you are involved in raising money for a business venture, you should seek advice to ensure you are complying with the law. If you receive a subpoena from the SEC or other securities agency, you should not respond on your own – even if you are not aware of any harm to anyone. The lack of harm is not going to lead the regulator to go away. You need to immediately retain a lawyer who can assist you with responding to the subpoena or information request to help you get the best possible result while taking steps to protect you from having something administrative or civil escalate into a criminal prosecution.

Under Investigation? Why You Must NOT Talk to the SEC or Government Agents Without a Lawyer

If you or your company receive a subpoena or get a call or visit from the Securities & Exchange Commission (SEC), FBI, or another governmental authority, it’s not likely because they want to help you. Even if you are convinced of your innocence, you need to be very careful in how you respond.

First and foremost: Do not speak to anybody from the government until you’ve first contacted an experienced lawyer.

The Danger of Unprotected Statements

Many potential clients are shocked when the SEC moves forward with an investigation or brings charges after the clients believed they could convince the SEC of their innocence. As the late criminal attorney James Neal famously noted in an episode of the PBS series, Ethics in America, “There are very few deaf and dumb people in the penitentiary.” Indeed, cooperation with the government might be a good strategy, but only if you get the help of an experienced defense attorney.

Your Best Friend: The Fifth Amendment Privilege

The Fifth Amendment to the U.S. Constitution provides that no person “shall be compelled in any criminal case to be a witness against himself.”

• Broad Application: The Fifth Amendment Privilege applies to any government investigation or proceeding where your testimony could potentially expose you to criminal liability like SEC investigations, DOJ inquiries, and federal and state regulatory examinations. It doesn’t matter if your statements are being sought in a routine examination by a civil authority. Your statements can be given to criminal prosecutors who can bring charges against you.
• No Formal Charges Needed: You do not need to be formally charged with a crime to invoke the Fifth Amendment Privilege. The privilege applies whenever there is a reasonable possibility that your statements could be used against you in a future criminal prosecution. You need an attorney to advise you about what kind of criminal charges you could possibly face.
• Securities Cases: Securities investigations almost always raise the possibility of criminal charges. That is because the definition of securities fraud is extremely flexible and broad and the conduct can constitute not just civil securities fraud but also federal criminal securities fraud or wire fraud.

Why Securities Cases Demand Particular Caution

Investigations by the SEC and state securities regulators present significant dangers that make Fifth Amendment Privilege especially important:

• Parallel Proceedings: Securities matters routinely involve simultaneous civil (SEC) and criminal (FBI/DOJ or state) investigations. The SEC discloses in tiny print on its forms and often orally that statements you make and documents you provide to the SEC can be provided to criminal prosecutors. The SEC often seeks to convince criminal prosecutors at the Department of Justice to bring criminal fraud charges based on the evidence they have obtained. Sometimes the SEC is investigating at the same time the DOJ has convened a grand jury to investigate. As a result, without the representation of an experienced attorney, there is no safe way to provide information without risking it being used against you by criminal prosecutors.
• Complex Regulatory Framework: Securities laws are intricate, technical, and often counterintuitive. What seems like an innocent explanation to a layperson may constitute an admission of a material element of a securities violation. People often come to us after having basically admitted to securities fraud. To avoid that, contact an attorney at the beginning of the investigation.
• The Perjury Trap: Once you begin answering questions (whether under oath or not), you create a record. Inconsistent answers create the potential of being charged with perjury (18 USC §§ 1621 and 1623) or a violation of the “false statement” federal statute (18 USC § 1001). These “process crimes” can be easier to prove than the underlying securities violation and carry severe penalties. Remember, Martha Stewart did not go to prison for insider trading, but because she was convicted of making false statements to federal agents in an interview. See also US v. Cohen, No. 25-1746 (7th Cir. Nov. 24, 2025) (sentence of 21 months affirmed for individual who made false statement to U.S. Marshals Service regarding residence of a convicted sex offender).
• No “Talking Your Way Out”: Clients, particularly successful business people, routinely overestimate their skills of persuasion. They are convinced that if they explain their conduct, the government will just drop the case. In reality, investigators frequently have reached a preliminary conclusion about the conduct of the person they contact before they make contact. That means they are not looking for information that will help you, they are looking for information that confirms what they already think. You need a lawyer to help you get them to hear evidence that shows you did not violate the law.

Practical Guidance: Dos and Don’ts

If and when you are contacted by the SEC, DOJ, FBI, or any other government agency, follow these steps without deviation:

Addressing Common Concerns

Your Fifth Amendment Privilege is a fundamental constitutional safeguard. Asserting this right is not an admission of wrongdoing; it is a prudent exercise of the protections our legal system affords. You can invoke the Fifth Amendment Privilege and – with the help of an experienced attorney – still provide information to the government that leads to no civil or criminal charges.

The core rule is: Do not speak to anybody from the government until you’ve first contacted an experienced lawyer.

If you are contacted by any government agent or investigator, please contact us immediately. We will navigate this matter together, strategically and with your rights fully protected.

Photo by Chris Linnett on Unsplash

One of the fastest-growing cyberfrauds is the closing payment scam — the theft of home-purchase money wired for closings. How does this scam work? How can you protect yourself? How can you recover losses if you are a victim of this scam?

Closing Payment Scam

In this scam, the fraudsters hack the email account of a real estate agent or title company. The fraudsters then send an email to the buyer with instructions for wiring the payment for closing.The homebuyers wire the money to the account as instructed. When the homebuyers arrive at closing, they discover their money is not there. If homebuyers cannot come up with other funds to close, the closing is delayed.

Recovering Losses

Victims of this scam may be able to recover their funds from banks, title companies, real estate agents, and others. If you are lucky, you find out quickly enough to notify the bank so it can freeze the scammer’s account before all the money has been withdrawn. If the scammers have made off with your money, you may still have claims for breach of contract or negligence.

Even if the scammers transfer your money out of the country, the FBI may be able to recover it. One generally unknown FBI tool is the “Financial Fraud Kill Chain.” The Financial Fraud Kill Chain (FFKC) is a process for recovering large international wire transfers stolen from US victim bank accounts. The FFKC utilizes the FBI’s relationships with foreign law enforcement and financial regulators to recover the proceeds of wire fraud. The FFKC can be used if: the wire transfer is $50,000 or more; the wire transfer is international; a SWIFT (wire transfer) recall notice has been initiated; and the wire transfer has occurred within the last 72 hours. Upon receiving notice of a fraudulent wire transfer, a bank should notify the FBI so an FFKC can be initiated.

Even when a domestic bank is able to freeze the fraudulently transferred funds, it can take weeks, if not months, for the victims to recover those funds. Banks may be concerned about competing claims for the funds in the scammers’ account. As a result, banks may require releases and indemnification before they will return money to the victims. This can result in substantial delays.

Steps to Prevent Wire Fraud

If you plan to wire funds to purchase a house make sure that you take multiple steps to verify that the wire instructions you receive are genuine. If you receive closing or wiring instructions via email, verify the instructions with your title company and your real estate broker by telephone or in person. If you get an email with last minute changes to wiring instructions, take extra precautions to verify by telephone or in person that the instructions are not from scammers.

The single most important thing to do is immediately notify your bank, your local FBI office, and file a report at www.ic3.gov, the FBI’s internet complaint center. Then contact a lawyer who has experience recovering these kinds of losses.

Lisa Bragança has experience recovering funds for victims of closing payment scams. Lisa also recovers losses for investors, protects whistleblowers, and defends individuals and businesses in investigations by SEC, FINRA, and others. As a Branch Chief with the SEC Division of Enforcement, Lisa supervised a wide range of investigations. In private practice, she has recovered losses for investors, obtained insurance coverage for policyholders, and represented individuals and firms in government investigations. You can reach Lisa at (847) 906-3460 or BragançaLaw@gmail.com and follow her on Twitter @LisaBragança.

Disclaimer: This information is for general purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. The information on this website is not legal advice and does not create an attorney-client relationship.

There are numerous hidden fees that you should be looking for in employer retirement accounts like 401(k).

This piece by John Wasik tells you about some of the biggies — surrender fees, back-end loads, front-end loads, and 12b-1 fees, which are marketing and distribution fees that you should not be paying. Paying 12b-1 fees for an investment fund is like paying Budweiser a separate advertising/marketing fee each time you purchase a six-pack. Who would stand for that?  Read article.

There are other hidden fees and commissions. Your brokerage statement may report a sales commission for the purchase of an investment fund. That may not be all you are paying. Look closely at confirmation statements and account statements for more. You may find a note in small print disclosing a per share or per unit commission or fee of some type. Or you may see that the amount your broker invested for you is significantly less than the amount you sent to your broker to invest. That may be because your broker deducted the commission that is where it was buried — I mean “disclosed” —  without reporting it anywhere on your confirmations and account statements.

Clients have been shocked to learn they paid commissions of hundreds or even thousands of dollars when all their confirmation and account statements reported was a $5 or $10 commission.

Thank you John Wasik for covering this important issue.

Lisa Bragança recovers losses for investors all over the country, protects whistleblowers, and defends individuals and businesses in government investigations. As a Branch Chief with the SEC Division of Enforcement, Lisa investigated a wide range of investment fraud and Wall Street misconduct.

You can reach Lisa at (847) 906-3460 or BragançaLaw@gmail.com. You can follow Lisa on Twitter @LisaBragança.

Disclaimer: This information is for general purposes only and should not be interpreted to indicate a certain result will occur in your specific legal situation. The information on this website is not legal advice and does not create an attorney-client relationship.

When federal government employees recommend an investment adviser who steals employee retirement funds, “sovereign immunity” prevents recovery against the government.

In many ways, the retirement savings of federal employees are safer than employees of private companies. The Thrift Savings Plan and other 401(k)-like plans offered by the federal government have fewer of the inappropriate investment options that are in many private employer retirement plans. But, as a recent Eleventh Circuit Court of Appeals decision reveals, federal employee retirement savings are still at risk. Alvarez v. the U.S., Case No. 16-16479 (11th Cir. July 17, 2017), available here.

According to the Eleventh Circuit

In the late 1980s, Kenneth Wayne McLeod began contracting with various federal agencies to provide retirement advice to federal law enforcement employees in Florida. McLeod founded and ran the Federal Employee Benefits Group, Inc. (“FEBG”) Bond Fund. Most of the federal employee investors met McLeod at retirement seminars hosted by their agency employer, where McLeod spoke generally about finances and retirement and also pitched his fund. McLeod would sometimes follow up with individual employees, promising high, secure returns in the FEBG Bond Fund.

Not surprisingly, federal employees invested in the FEBG Bond Fund.  In 2010, when investigators questioned McLeod, he admitted the FEBG Bond Fund was a Ponzi scheme and committed suicide.

In an attempt to recover $30 million in losses, investors filed suit alleging that federal agency employees had failed to exercise reasonable care and made misrepresentations in recommending McLeod and the FEBG Bond Fund. So far, this is similar to many cases against private companies who recommend investment advisers to their employees.

But, unlike private employers, the government must consent to be sued. It has the discretion to invoke the defense of sovereign immunity — a doctrine that protects the government against lawsuits that it does not expressly authorize. Investors brought claims that the federal government was negligent in contracting with McLeod and that by doing so it gave the appearance of undue confidence in McLeod. They sought to fall within the Federal Tort Claims Act (“FTCA”), which authorizes certain tort claims against the federal government.

But, as the Eleventh Circuit said,

a court must strictly observe the ‘limitations and conditions upon which the Government consents to be sued’ and cannot imply exceptions not present within the terms of the waiver.” One such exception is the [FTCA] intentional tort exception, which bars:

[a]ny claim arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights . . .

The Eleventh Circuit ruled that that the alleged omissions during McLeod’s seminars, which gave investors “undue confidence in McLeod’s credibility,” constituted misrepresentations. The court found that all of the alleged negligent conduct of the agency employees from their failure to stop McLeod’s solicitation (non-communications) and their endorsement of McLeod was fundamentally based upon misrepresentations.

As a result, the federal government is immune from liability for recommending this scoundrel to its own employees.

Federal employees beware!