Enforcement

UBS Assessed Millions in Coordinated FINRA and CFTC AML Actions

Summary: FINRA fined UBS Financial Services for repeated AML failures involving foreign-currency wires totaling billions of dollars. FINRA found that UBS continued using deficient monitoring after a prior settlement and later configured an automated system with incomplete data. The CFTC separately imposed an additional penalty for related supervisory failures affecting commodity accounts.

Why it Matters: The coordinated actions emphasize that purchasing automated surveillance technology does not satisfy AML obligations unless firms validate data completeness, system configuration, alert logic, and remediation. Repeat findings may also lead to substantially increased penalties.

Potential Action: Broker-dealers and FCMs should reconcile source-system activity against transactions received by AML platforms, test data transformations, and exclusions, document model changes, and independently verify completion of prior remediation commitments.

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SEC Charges REIT and Founders in Alleged Offering Fraud

Summary: The SEC charged RAD Diversified REIT and its founders with allegedly misleading investors regarding profitability, property valuations, liquidity, and redemption rights. The complaint also alleges the use of unregistered sales agents and the diversion of funds to an affiliated entity, including amounts allegedly used for personal expenses.

Why it Matters: The case highlights recurring private-offering risks involving unsupported valuations, stale performance information, redemption representations, affiliate payments, and transaction-based compensation paid to unregistered solicitors.

Potential Action: Private fund sponsors and advisers should confirm that valuations remain current and independently supportable, liquidity disclosures match actual practices, affiliate transfers are authorized and documented, and capital-raising personnel are appropriately registered or compensated without transaction-based fees.

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CFTC Brings Manipulation Action Involving Event Controlled by the Trader

Summary: The CFTC ordered former Congressman George Santos to disgorge profits and pay a civil penalty for trading an event contract tied to whether he would attend the 2026 State of the Union. The CFTC found that he made misleading public statements about an event he personally controlled while holding positions that benefited from resulting price movements.

Why it Matters: The action establishes a clear enforcement precedent for event contracts where traders possess control over—or unique nonpublic knowledge concerning—the underlying event. It also shows that social-media statements can form the basis of manipulation charges.

Potential Action: CPOs, CTAs, proprietary traders, and firms providing event-contract access should prohibit trading where personnel control the outcome, establish event-specific restricted lists, monitor public statements against trading activity, and address manipulation and misuse of information in surveillance procedures.

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SEC Obtains Judgment for False ERA Form ADV Disclosures

Summary: A federal court entered a default judgment against Adamant Stone Limited for allegedly making false and unsubstantiated Form ADV representations concerning its ERA status, U.S. office, assets under management, private fund, and relationship with another adviser. The judgment bars the firm and its leadership from filing as an ERA and imposes a civil penalty.

Why it Matters: The case demonstrates that the SEC may independently verify Form ADV information, including office locations, fund existence, regulatory status, AUM, and relationships with other advisers. ERAs remain subject to Advisers Act recordkeeping and truthful-filing requirements despite their exemption from registration.

Potential Action: RIAs and ERAs should substantiate every material Form ADV response, reconcile filings against fund documents and affiliated-adviser disclosures, retain support for claimed AUM and offices, and promptly respond to SEC requests for verification.

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Rulemaking

CFTC Proposes Conflict Rules for Vertically Integrated Market Structures

Summary: The CFTC proposed amendments addressing affiliations among derivatives clearing organizations, designated contract markets, swap execution facilities, FCMs, market makers, and other market participants. The proposal focuses on conflicts arising when affiliated entities perform multiple trading, execution, clearing, custody, or market-making functions.

Why it Matters: The proposal could materially affect emerging vertically integrated derivatives and digital-asset platforms. It may also influence governance, information barriers, risk management, impartial access, and conflict disclosures for affiliated intermediaries and trading venues.

Potential Action: Affected firms should inventory regulated affiliates, identify overlapping commercial and regulatory functions, review information barriers and governance arrangements, and assess whether existing conflicts are adequately mitigated and disclosed. Comments will be due 60 days after publication in the Federal Register.

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