Enforcement

SEC Order on Crypto Asset Registration Proceedings

Summary: On February 2, 2026, the U.S. Securities and Exchange Commission issued Release No. 33-11407, an adjudicatory opinion concerning administrative proceedings related to registration statements filed under the Securities Act and the Exchange Act. The proceedings arose from 2021 Form 10 and Form S-1 filings to register two crypto asset tokens. After the registrant sought to withdraw the filings, the SEC reconsidered earlier actions and, considering developments in crypto regulation, determined that the registrations had been effectively withdrawn and dismissed the proceedings as moot. The Commission did not take a position on the merits of the allegations or on whether the tokens constitute security.

Why it matters: This order illustrates how the SEC is handling crypto asset registration proceedings and withdrawals as market participants reassess regulatory strategies amid an evolving policy landscape. The dismissal underscores that effective withdrawal of registration statements can render administrative proceedings moot, even where earlier withdrawal requests had been denied. Although the Commission did not opine on the underlying merits or the securities status of the assets, its reference to broader regulatory developments, including federal stablecoin legislation and executive policy initiatives, signals how shifting crypto policy considerations are influencing administrative outcomes.

Potential action: Advisers, issuers, and compliance teams involved with crypto asset offerings should assess the implications of this order for registration strategy, particularly when evaluating whether and how to pursue registration in a rapidly changing regulatory environment. Careful documentation of withdrawal requests and a clear understanding of the regulatory context at the time of filing remain critical when navigating SEC administrative proceedings, along with ongoing monitoring of policy developments that may affect registration and disclosure obligations.

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CFTC Enforcement Action Addresses Misappropriation and Kickback Scheme

Summary: In February 2026, the Commodity Futures Trading Commission announced that a federal district court entered a consent order against a Texas resident in connection with a scheme involving the misuse of confidential information and the direction of business in exchange for improper payments. The court ordered the individual to pay more than $7.7 million in restitution for losses suffered by an employer, along with over $6.5 million in disgorgement representing ill-gotten gains, resulting in total monetary relief exceeding $14 million. The order also permanently bars the individual from trading and from registration with CFTC. The consent order resolves all claims brought by the CFTC arising from conduct that was previously the subject of a civil enforcement action and related proceedings involving other individuals connected to the same scheme. The misconduct also formed the basis of a parallel criminal case, which resulted in a prison sentence imposed in 2024.

Why it matters: This action highlights the CFTC’s continued focus on protecting market integrity and policing misconduct involving confidential information, kickbacks, and breaches of trust within trading and commercial environments. The magnitude of the monetary sanctions and the imposition of a permanent trading and registration ban underscore the seriousness with which the CFTC views abuse of access to proprietary or nonpublic information. For market participants, the case serves as a reminder that conduct occurring within corporate or employment settings can give rise to significant regulatory and criminal exposure when it implicates commodities markets or related transactions.

Potential action: Firms should reassess internal controls governing access to sensitive information, personal trading restrictions, and conflicts of interest, particularly where employees interact with counterparties or direct business on behalf of the firm. Strengthening surveillance, reinforcing training on prohibited conduct, and maintaining clear escalation and reporting channels may help identify and address potential issues before they develop into enforcement actions.

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SEC Temporarily Suspends Trading in U.S.-Listed Stock

Summary: In early February 2026, the U.S. Securities and Exchange Commission issued an order suspending trading in the securities of a foreign-incorporated company listed on a U.S. stock exchange for a one-day period beginning at 4:00 AM ET and ending at 11:59 PM ET on February 2, 2026. The Commission determined that the suspension was necessary in the public interest and for the protection of investors based on information suggesting potential market manipulation involving social media-driven recommendations to purchase, hold, or sell the company’s stock and to share screenshots of trading activity. The SEC exercised its authority under Section 12(k) of the Securities Exchange Act of 1934 to affect this temporary suspension, cautioning brokers, shareholders, and prospective purchasers to consider this development along with all other publicly available information.

Why it matters: This action illustrates the SEC’s willingness to use temporary trading suspensions as a tool to address potential manipulation and market integrity concerns, even over short time frames. Suspensions like this are part of the Commission’s authority to intervene when there is information that trading activity may be influenced by artificial price or volume effects tied to social media or other coordinated behavior. For market participants, including broker-dealers, compliance teams, and advisers, the order reinforces the importance of monitoring emerging risks associated with social media-driven trading dynamics and understanding the regulatory mechanisms the SEC may deploy to protect investors and maintain fair and orderly markets.

Potential action: Firms should revisit internal surveillance and oversight frameworks to identify atypical trading patterns linked to public-facing platforms, social media, and investor outreach. Integrating proactive monitoring of unusual volume and price movements with procedures to escalate concerns may help firms prepare for potential regulatory interventions. Additionally, advisors and broker-dealers should update investor communications to include reminders about the risks of trading in securities subject to regulatory actions and ensure that disclosures reflect relevant suspension or halt information.

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What Regulators are Saying

CFTC Issues Interpretation on Legacy Swap Status

Summary: In early February 2026, the Commodity Futures Trading Commission staff published an interpretive letter addressing how a corporate reorganization affects the regulatory classification of certain legacy swaps for margin and clearing purposes. The interpretation was issued jointly by the Market Participants Division and the Division of Clearing and Risk and stemmed from a merger that occurred as part of an internal reorganization of a registered swap dealer. Based on the facts presented, staff concluded that the swaps subject to the reorganization would continue to qualify as legacy swaps under the CFTC’s uncleared swap margin rules and thus remain exempt from those margin requirements. Staff also determined that the merger would not cause the swaps to lose their legacy status for purposes of the CFTC’s swap clearing requirements, preserving their prior regulatory treatment.

Why it matters: This interpretive guidance provides clarity for market participants and compliance professionals on how internal reorganizations can affect legacy swaps, a category of over-the-counter derivative contracts grandfathered under longstanding CFTC requirements. Legacy swap status carries significant compliance implications, particularly regarding exemptions from uncleared margin obligations and clearing mandates. Staff’s conclusion that status persists through the reorganization, based on the specific facts and structure in the interpretive request, reinforces that the legacy classification turns on the substance of how a swap is maintained and treated post-transaction.

Potential action: Firms with legacy swap portfolios should consider reviewing internal reorganizations and merger activities to determine whether similar interpretations might apply to their arrangements. Assessing and documenting the regulatory status of swaps following structural changes can help ensure continuity of compliance with margin and clearing requirements and support preparation for examinations or regulatory inquiries.

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CFTC Designates New Contract Market Under Commodity Exchange Act

Summary: In early February 2026, the Commodity Futures Trading Commission announced that it has issued an order designating a previously unregistered trading venue as a designated contract market under Section 5 of the Commodity Exchange Act. The Commission determined that the applicant demonstrated its ability to comply with the statutory and regulatory requirements applicable to designated contract markets, including adherence to core principles designed to ensure market integrity, equitable access, and transparent operations. As a result of the designation order, the newly approved exchange is required to comply with all provisions of the Commodity Exchange Act and applicable CFTC regulations that govern designated contract market operations. The CFTC also maintains and periodically updates its public list of registered designated contract markets and applicants for registration.

Why it matters: This designation reflects the CFTC’s ongoing oversight of trading venue registration and its role in maintaining a regulated infrastructure for derivatives and futures markets in the United States. Securing designated contract market status signals that a venue has met the Commission’s standards for compliance capabilities and risk management practices, which can influence market confidence and the availability of regulated trading alternatives. For firms and market participants that interact with designated contract markets, including brokers, clearing members, and end-users of derivatives, understanding registration outcomes and evolving venue landscapes is important for routing order flow and ensuring that execution and clearing arrangements align with regulatory expectations.

Potential action: Market participants should review the designation of the new contract market and evaluate whether its products, rules, or operational features align with their trading and risk-management needs. Compliance and legal teams may also wish to update internal vendor and execution policies to reflect the expanded set of regulated trading venues and revisit any due diligence checklists that incorporate venue registration status.

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In The News

SEC Appoints New PCAOB Chairman and Board Members

Summary: In late January 2026, the U.S. Securities and Exchange Commission announced a leadership overhaul at the Public Company Accounting Oversight Board, the independent audit regulator created under the Sarbanes-Oxley Act to oversee audits of public companies and broker-dealers. The SEC appointed a retired audit professional with decades of experience in public accounting as the new Chairman, along with three additional new Board members. A long-serving Board member who had been serving as Acting Chairman will remain on the Board once the incoming Chairman is sworn in, providing continuity during the transition. The changes follow a period of turnover and a strategic review of the PCAOB’s mission under SEC leadership.

Why it matters: The PCAOB plays a central role in protecting investors by setting auditing standards, inspecting audit firms, and enforcing compliance with auditing and related professional responsibilities. New leadership at the PCAOB — including a Chair drawn from extensive experience in audit practice and members with backgrounds in federal financial management and regulatory service, signals a potential shift in emphasis for the audit regulator. The move aligns with ongoing efforts by the SEC to emphasize efficient oversight and investor-focused audit quality, as reflected in public statements from the SEC Chair expressing confidence that the new Board will refocus on core statutory objectives of accurate, informative, and independent audit reporting. This leadership shift also comes amid broader discussions of the PCAOB’s budget, governance structure, and role in the evolving landscape for audit regulation and capital markets.

Potential action: Corporate audit committees, accounting firms, and compliance teams should take note of the new PCAOB leadership and assess how changes at the Board level might affect ongoing standard-setting, inspection priorities, and enforcement outlooks. Firms should monitor PCAOB rulemaking agendas, inspection scope changes, and inspector guidance that may reflect the new Board’s approach and consider engaging with audit regulators through comment processes or industry consultations. Continued attention to core audit quality metrics, audit documentation practices, and compliance with auditing standards remains essential as the PCAOB advances its mission under new leadership.

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Events

SEC Advisory Committee Discusses Finders and Private Secondary Market

Summary: The SEC’s Small Business Capital Formation Advisory Committee will hold a public meeting on February 24, 2026, to continue discussions on a potential regulatory framework for “finders”, intermediaries that help companies raise capital from accredited investors, and to begin examining issues related to the private secondary market. The agenda includes data on capital raising by early-stage and small-cap companies and a discussion of private secondary mechanisms, such as continuation funds, SPVs, and tender offers, used to provide liquidity outside traditional IPO or M&A paths. The committee’s discussions may inform future SEC recommendations on rules, guidance, and policy affecting small business capital formation.

Why it matters: This meeting reflects the SEC’s ongoing focus on enhancing capital formation in private markets, particularly for small and emerging companies, and on evaluating how intermediaries like finders operate within the current regulatory framework. With private secondary market activity growing as a means of liquidity for investors and employees, the committee’s work could shape future policy or clarify expectations around capital-raising intermediaries, addressing long-standing uncertainty in this space.

Potential action: Market participants and advisers should monitor developments from this committee and consider how potential regulatory changes related to finders and private secondary market practices may affect compliance programs, capital-raising strategies and disclosures for private offerings. Engaging with public meetings or submitting comments to the SEC’s advisory process may provide an early opportunity to influence this evolving policy discussion.

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IAA Investment Adviser Compliance Conference Returns to D.C.

Summary: The Investment Adviser Association will host its Investment Adviser Compliance Conference on March 18–20, 2026 in Washington, D.C. The conference brings together SEC staff, CCOs, legal advisers, and compliance professionals for practical discussions on current regulatory priorities and compliance best practices.

Why it matters: The event is a key forum for advisers to hear directly from regulators, stay current on exam and enforcement trends, and benchmark their compliance programs against industry standards.

Potential action: Firms should consider registering early, identifying priority sessions aligned with their regulatory focus, and using the conference to connect with peers and regulators.

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