Each month, we publish a roundup of the most important SEC enforcement developments for busy in-house lawyers and compliance professionals. This month, we examine:
In mid-February, Chairman Atkins made back-to-back appearances before the House Financial Services Committee and the Senate Committee on Banking, Housing, and Urban Affairs. At the hearings, Democratic Members of Congress criticized the SEC’s dismissals of several crypto-related actions (covered in our February 2025, May 2025, and January 2026 client alerts) and suggested that political influence from the White House was at play. While Chairman Atkins would not comment on specific enforcement actions, he flatly denied acting at the direction of the White House. Chairman Atkins stated that dismissed crypto actions had “flaws” and explained that the Commission is “calibrating our enforcement efforts . . . so no more sort of gotcha types of things, no regulation through enforcement.” Democratic Members also raised concerns about the smaller size of the Enforcement Division and the reported decline in enforcement actions and penalties. Chairman Atkins disputed certain of the statistics and defended the agency’s “very robust enforcement division that is going after fraud in the market.”
In his testimony, Chairman Atkins promised that the SEC’s enforcement program would return to “first principles” by focusing on fraud and investor harm, such as cases involving offering frauds, insider trading, accounting and financial frauds, and investment advisers’ breaches of fiduciary duties. Settled and litigated enforcement actions in February 2026 reflect this “first principles” approach, with cases involving insider trading, alleged misrepresentations about the efficacy and regulatory approval of a biopharmaceutical company’s lone product, alleged real estate offering fraud, alleged misleading statements about a software company’s product and misappropriation of investor funds, and an alleged offering fraud targeting elderly investors.
Under Director Margaret Ryan, who resigned after less than seven months, the Division of Enforcement issued a comprehensive update to the Enforcement Manual on February 24, 2026, the first such update since 2017. The Enforcement Manual is a reference guide for SEC enforcement staff in conducting investigations. While the Manual is not binding and is not intended to be a “rule, regulation, or statement of the Commission,” it provides transparency to the public and targets of SEC investigations about the Division’s policies and practices and helps promote uniformity in enforcement investigations. Key changes include:
Director Ryan previewed certain of the Wells process changes, and the SEC’s enforcement priorities generally, on February 11 during her first public speech after her appointment in September 2025. In that speech, she reaffirmed the Division’s focus on core fraud and market integrity cases, emphasizing fairness, transparency, and timely resolution.
On February 25, 2026, the SEC announced settled charges with a formerly registered investment adviser, alleging that it failed to account for COVID-related market disruptions when pricing loans sold in 2020 to affiliated private credit funds. Without admitting or denying the findings, Madison Capital LLC agreed to a $900,000 penalty, censure, and a cease-and-desist order.
Madison Capital offered lending to middle-market companies to facilitate leveraged buyouts by private equity firms and then sold portions of the loans in principal transactions to affiliated funds, typically after holding the loans for 30 to 60 days. The funds’ advisory agreements and disclosures required Madison Capital to sell the loans at fair market value following an independent review, but the advisory agreements expressly stated there would be no third-party valuation of the loans. For each loan sold to the funds, Madison Capital certified to the funds’ independent review agent that the purchase was an arm’s-length transaction and that Madison Capital believed the sale to be at fair market value.
Madison Capital’s practice was to value recently originated loans at par value less the unamortized loan fee. According to the SEC, between March 2020 and May 2020 (at the start of the COVID-19 pandemic), Madison Capital continued to price loans in the same manner. Madison Capital did increase monitoring of portfolio companies during this period of market disruption but did not take steps to determine if the fair market value of the loans had changed since origination.
The SEC charged Madison Capital with negligence-based fraud claims under Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 for failing to adjust the fair market value of the loans due to pandemic-related market conditions.[1] According to the Commission, in response to a deficiency letter issued by Commission examination staff in 2021, Madison Capital promptly took remedial actions: it voluntarily reimbursed the funds over $5 million plus interest as compensation for the sale of loans valued at purchase price less the unamortized loan fee and voluntarily made enhancements to its loan transfer disclosures and policies. Nevertheless, it was subject to a civil monetary penalty from the Commission.
In 2024, the Supreme Court held in Loper Bright Enterprises v. Raimondo that courts “may not defer to agency interpretation of the law simply because a statute is ambiguous,” overruling longstanding judicial deference to federal agencies. On February 24, 2026, the Second Circuit vacated in part a judgment against a pro se litigant, citing Loper Bright.
In SEC v. Amah, the SEC alleged that Amah was acting as an “investment adviser” under the Advisers Act, relying on the SEC’s longstanding interpretation of the term. In particular, the Act requires that advisory services be performed “for compensation,” but Amah received no compensation from the investors. The SEC, however, has long construed the “for compensation” element broadly and the Commission’s brief on appeal asserted that “actual receipt of compensation is not required” and “[o]nce an individual falls within the definition of an investment adviser as to one client, that individual is an investment adviser as to all clients, even those that do not pay for investment advisory services.”
The Second Circuit found that under Loper Bright, it could not defer to the SEC’s interpretation alone. Because the SEC and district court “treated the SEC’s prior interpretation of the Advisers Act as authoritative” and the SEC pointed to no other precedent interpreting the statutory language, the Second Circuit remanded the case to the district court for consideration of the Advisers Act definition. The district court’s Exchange Act and Securities Act judgments were affirmed.
On February 11, 2026, the SEC released its annual Whistleblower Report. According to the Report, the SEC awarded more than $60 million to whistleblowers in FY 2025, a significant decrease from the $225 million awarded in FY 2024. The SEC also reported receipt of an estimated 27,000 whistleblower tips in FY 2025, the highest since the program’s inception in 2011. Notably, a significant percentage of tips were attributable to two individuals who made 12,000 tips in FY 2025 and 14,000 tips in FY 2024. The Commission also permanently barred five individuals in FY 2025 from participating in the whistleblower program for submitting frivolous claims.
On February 26, following a long string of denial orders, the Commission issued its first whistleblower award since September 30, 2025. Under the order, three claimants—each of whom the Commission determined voluntarily provided original information that led to the successful enforcement, as required by the Exchange Act—were awarded $110,000, $270,000, and $190,000 respectively. According to the order, the three claimants provided varying levels of assistance to the Commission during the investigation that included: providing information that ultimately led the staff to key evidence, informing staff of violations that would have otherwise been difficult to detect, participating in interviews, providing documents, suggesting witnesses, and identifying additional evidence.
[1] All three Commissioners approved the settlement, but Commissioner Peirce declined to approve the Section 206(4) and Rule 206(4)-8 charges.