LITIGATION TRENDS 2025 | 141 T O C E M P E S G A N T I I P C A P R O W C S P O R T C O N T A C T I N T A P P P A T C C L S E C reasonably designed policies and procedures; disseminating advertisements that included untrue or unsubstantiated statements of material fact; or disseminating advertisements that included testimonials, endorsements, or thirdparty ratings that lacked required disclosures. These cases often involved misleading marketing to retail clients, which the current Commission has said will be a focus of this administration. Insider Trading This likely will continue to be an area of interest for the SEC, which often conducts these investigations in parallel with the DOJ. The SEC has developed substantial in-house expertise in analyzing voluminous trading data to identify patterns of suspicious trading, and has compiled an impressive record of filing successful insider trading actions where the investigation was generated through such in-house analysis. We would urge public companies and SEC registrants to continue to have robust compliance policies and procedures (e.g., annual trainings, certifications, etc.) regarding the treatment of confidential information and broad prohibitions on insider trading, and promptly seek advice from counsel if routine compliance measures identify any red flags. Off-Channel Communications Cases We do not expect to see any more stand-alone SEC enforcement actions against registered broker-dealers and investment advisers for their failure to maintain and preserve electronic communications. This sweep, colloquially known as the “WhatsApp” sweep garnered a lot of attention during the Gensler Commission, but also elicited a strong dissent last fall from Commissioners Peirce and Uyeda, who argued that, while recordkeeping by regulated entities is important, the use of off-channel communications is “an industry-wide problem that we will not solve through enforcement” and, therefore, the Commission should “reconsider [its] current approach to the offchannel communications issue.” The views of both Uyeda and Peirce are expected to carry weight in the Atkins administration. Unregistered Dealer Cases We expect to see few, if any, SEC enforcement actions in the unregistered dealer space. These cases typically allege that an investor (e.g., a fund adviser) failed to register as a securities dealer even as it engaged (through a privately managed fund) in the business of purchasing convertible debt securities from issuers, converting those securities into shares of stock at a large discount from the market price, and selling those newlyissued shares into the market at a significant profit. Under the Gensler Commission, there were numerous such actions filed, eventually leading to a dissent last year by then-Commissioner (now Acting Chairman) Uyeda, who faulted the Commission for “attempting to achieve policy objectives through enforcement, instead of rulemaking.” On March 12, 2025, the SEC moved to dismiss, with prejudice, its action against Auctus Fund Management, a Boston-based hedge fund adviser, alleging that the firm, which had engaged in the above-described pattern of conduct, should have registered as a dealer with the Commission. SEC’s Pay-to-Play Rule Cases We expect to see few, if any, SEC enforcement actions addressing violations of its pay-to-play rule, promulgated under the Investment Advisers Act of 1940 (“Advisers Act”). This is a prophylactic rule designed to address abuses involving campaign contributions made by certain investment advisers (or their covered associates) to government officials who are in a position to influence the hiring of investment advisers to manage government client assets, e.g., the assets of public pension funds or other public entities. Under the Gensler Commission, several enforcement actions were filed addressing violations of this rule, leading to multiple dissents by Commissioner Peirce, who labeled the rule “an exceedingly blunt instrument” and such SEC actions as “do[ing] more harm than good.” C White Collar Defense 140 | Weil, Gotshal & Manges LLP
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