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 a speech this month, Chairman Atkins continued to emphasize his “first principles” approach to enforcement and the end of “regulation by enforcement,” while eschewing an enforcement program centered around record penalties or the number of actions. Atkins explained that the SEC was redirecting resources to cases involving fraud, market manipulation, and abuses of trust, and he promised a “broader, thorough review of enforcement processes,” the first since the Wells Commission, whose recommendations led to the Wells process.
This month, the SEC also released its draft Strategic Plan, which, among other things, calls for clarifying the scope of securities laws over digital assets and resolving the SEC-CFTC jurisdictional divide to give crypto markets “clear and principled rules of the road.” A separate but notable SEC-CFTC regulatory harmonization initiative was opened this month, with the agencies issuing a joint request for public comment on definitions of certain swaps and derivatives products, which could impact regulatory oversight of prediction markets.
Finally, the Supreme Court in a widely expected decision eliminated “for cause” removal restrictions for independent agencies, allowing the president to fire such officials at will. The SEC, for its part, currently has no Democratic commissioners and, to date, the White House has not announced any nominations for the two vacant seats.
On June 4, 2026, the Supreme Court issued a unanimous decision in Sripetch v. Securities and Exchange Commission, No. 25-466, holding that the SEC does not need to prove that investors suffered financial harm as a condition of obtaining disgorgement.[1] The case involved an individual who engaged in fraudulent schemes involving at least 20 penny-stock companies, including pump-and-dump operations, and who argued that the SEC could not obtain disgorgement under Liu v. SEC, 591 U.S. 71 (2020), without evidence that his schemes caused losses to investors. Writing for the Court, Justice Gorsuch drew a distinction between legal damages, measured by the plaintiff’s loss, and equitable remedies that can be measured by the defendant’s gain. The Court rejected the argument that permitting disgorgement absent pecuniary loss would be inconsistent with Liu’s requirement that disgorgement be awarded to victims, explaining that equity has traditionally preferred stripping a defendant of unjust gains over allowing him to benefit from his misconduct simply because the plaintiff’s financial position has not changed. The Court declined to resolve whether 15 U.S.C. § 78u(d)(7), which was adopted post-Liu and expressly authorizes the SEC to seek disgorgement, freed the Commission from Liu’s holding. The Court in a future case will likely address the scope of the SEC’s disgorgement authority in cases where distributions to investors may not be feasible or if the Commission returns to its prior practice of sending disgorgement collections to the U.S. Treasury instead of investors.
Justice Thomas concurred in the result but wrote separately to argue that disgorgement under § 78u(d)(7) is a legal remedy for which the Seventh Amendment requires a jury trial, a question that may require additional judicial attention should the SEC ever return to pursuing contested matters seeking disgorgement in in-house administrative proceedings.
On June 27, 2026, U.S. District Judge J. Philip Calabrese of the Northern District of Ohio dismissed the SEC’s civil enforcement action against Charles E. Jones, the former CEO of FirstEnergy Corporation. Notably, in a departure from typical practice, the SEC publicly announced the trial court loss.
The case arose from FirstEnergy’s contributions to support then-Ohio State Representative Larry Householder’s return to the speakership of the Ohio House of Representatives and the passage of legislation that would benefit FirstEnergy’s legacy nuclear operations. Over a three-year period, FirstEnergy paid approximately $60 million to a tax-exempt 501(c)(4) controlled by Householder, including through a tax-exempt 501(c)(4) entity created at Jones’s direction to conceal the source of the payments. The SEC filed a six-count complaint alleging that Jones made false statements to hide FirstEnergy’s involvement, asserting violations of Section 10(b) of the Securities Exchange Act (the “Exchange Act”), Rule 10b-5, Section 17(a) of the Securities Act of 1933 (the “Securities Act”), and various reporting and certification rules. The SEC’s fraud claims rested on Jones’s assertions that FirstEnergy acted “ethically,” “properly,” and “transparently” in connection with the Ohio state legislation, and that he and FirstEnergy were not involved in the decisions of FirstEnergy Solutions (FES), its former nuclear subsidiary.
The court rejected the first category of statements as non-actionable corporate puffery. On the claim that Jones’s use of the word “transparently” was misleading, the court found that the law does not require disclosure of donations to 501(c)(4) organizations, noting that since Citizens United v. FEC, 558 U.S. 310 (2010), political spending through such entities has increased precisely because no donor disclosure is required. As to the FES relationship, the court held that allegations of “coordination, even close coordination or pressure of an independent actor” did not make Jones’s statements false. The court also dismissed the fraud claims on the basis that the challenged statements were not made in connection with the purchase or sale of a security. The court rejected the SEC’s reliance on FirstEnergy’s 34% stock-price drop following Householder’s indictment, reasoning that “a public corruption scandal surrounding important legislation for a company would cause that company’s stock price to fall even in the absence of fraud.”
Ultimately, the court framed its ruling as a boundary on the SEC’s enforcement authority, finding that “the SEC effectively attempts to use the federal securities laws to enforce a disclosure regime where none presently exists.” At the same time, the court stressed the narrow scope of its decision: “That does not mean the conduct of FirstEnergy and Mr. Jones was right, moral, or exemplary. . . . Mr. Jones might even have other civil or criminal liability for his actions.” Jones continues to face separate state and federal criminal charges related to the alleged bribery scheme.
On June 5, 2026, the SEC settled charges against Pasadena-based investment adviser Western Asset Management Company, LLC (“WAMCO”), arising from allegations that the firm failed to take reasonable steps to detect and prevent a cherry-picking scheme conducted by its former co-Chief Investment Officer Stephen Kenneth Leech II. Leech pled guilty one week later, on the eve of his criminal trial, to one count of obstruction relating to his testimony before the SEC. The SEC had charged Leech in a separate litigated action in November 2024 with disproportionately allocating hundreds of millions of dollars in trades with net realized and unrealized first-day gains to certain “Favored Portfolios” and trades with net first-day losses to “Disfavored Portfolios,” from January 2021 through October 2023. According to the SEC, unlike other portfolio managers at the firm, Leech placed trade orders by telephone, did not document intended allocations before or at the time of trade placement, and routinely delayed entering allocation instructions until after the time the relevant exchange set daily settlement prices. The SEC found that multiple personnel within WAMCO, including supervisory operations and compliance staff, were aware of these practices, yet the firm failed to take reasonable steps to evaluate whether Leech’s allocation practices were consistent with its fiduciary duties or its representations to clients that investment allocations would be conducted in a manner that was fair and equitable.
The SEC found that WAMCO willfully violated Section 206(2) of the Advisers Act (fraud or deceit upon clients) and Section 206(4) and Rule 206(4)-7 (failure to adopt and implement reasonably designed compliance policies), and failed to reasonably supervise Leech within the meaning of Section 203(e)(6). Without admitting the SEC’s findings, WAMCO consented to the entry of the order. The firm was ordered to cease and desist from future violations, was censured, and agreed to pay a $100 million civil money penalty, which will be distributed to harmed investors to the extent feasible. The order noted that WAMCO took remedial efforts, including conducting an internal investigation, retaining outside counsel, and implementing additional policies and procedures regarding trade allocation practices.
June saw two notable insider-trading actions that highlight the breadth of the SEC’s enforcement focus in this area.
Nuclear Engineer’s Insider Trades. On June 24, 2026, the SEC filed a complaint against Casey Muggleston, a nuclear engineer who formerly worked at an energy company that owned part of a nuclear facility. The SEC alleged that Muggleston traded on material nonpublic information (MNPI) related to his employer’s planned restart of the facility and pending announcement it had entered into a 20-year power purchase agreement. According to the SEC, Muggleston’s illegal trading generated approximately $1.4 million in illicit profits. The District of Delaware United States Attorney’s Office filed a parallel criminal indictment against Muggleston.
Romantic Partner’s Laptop. On June 23, 2026, the SEC filed a complaint against Justin Jennings and his company, Vortex Strategies LLC (“Vortex”), alleging that Jennings misappropriated MNPI from his then-romantic partner’s work laptop. The partner worked at a strategic communications and investor relations firm that served public companies. Using the stolen information, Jennings allegedly traded ahead of eight corporate announcements in stock and options through brokerage accounts he and his firm held, generating approximately $2.7 million in illicit profits. The SEC charged Jennings and Vortex Strategies with violating Section 10(b) of the Exchange Act and Rule 10b-5. The District of New Jersey United States Attorney’s Office filed a parallel indictment against Jennings.
On June 8, 2026, the SEC settled charges against Foundations Investment Advisors, LLC (“Foundations”) and its former CEO, Bryon E. Rice, for breaches of fiduciary duty and other violations. The SEC’s order provided that Foundations failed to disclose multiple conflicts of interest related to investments it recommended to its advisory clients. These conflicts included: (1) a profit-sharing interest Rice held in a Foundations sub-adviser, which provided an investment model portfolio to Foundations’ clients that included an exchange-traded fund managed by another adviser; (2) an expense-sharing agreement with that other adviser related to four other ETFs that gave Foundations a financial incentive to recommend these products; and (3) affiliations between Foundations’ former Chief Investment Officer and other parties that acted as adviser and sub-adviser to Foundations and the ETF. The SEC further stated that Rice personally traded the ETF on 87 separate days through 279 trades while serving as CEO and sitting on Foundations’ investment committee and failed to pre-clear those trades as required by the firm’s policies. In addition, Foundation’s Form ADV during the relevant period inaccurately stated the firm had “no material financial interest in any securities being recommended.” Finally, the order provided that Foundations failed to properly implement compliance policies and to enforce its code of ethics relating to pre-clearance of trades.
The SEC charged Foundations with violations of Section 206(2) of the Advisers Act, Section 206(4) of the Advisers Act and Rule 206(4)-7, and Section 204A of the Advisers Act and Rule 204A-1, and Rice with a violation of Section 206(2). Without admitting the SEC’s findings, Foundations consented to a cease-and-desist order, and $1.2 million in civil penalties, $152,628 of disgorgement, and prejudgment interest. Rice consented to a cease-and-desist order, censure, $354,675 in civil penalties, $434,162 of disgorgement, and prejudgment interest.
One day after the Foundations settlement was announced, the SEC’s Division of Examinations issued a risk alert focused on compliance programs and conflict of interest disclosures. (For a more in-depth analysis of the risk alert, see our June 12, 2026 client alert.)
The pairing of the risk alert and this recent enforcement action reinforces that undisclosed conflicts, including through advisory agreements and Form ADV, remain a focus of SEC examinations and SEC enforcement activities.
[1] This is in contrast to the Private Securities Litigation Reform Act’s requirement that plaintiffs plead and prove economic loss. See 15 U.S.C. § 78u-4(b)(4).