SEC Regulatory Updates

Key dates

2025-01-01

Beginning of the general period identified by the SEC during which the charged entities allegedly filed Forms ADV containing material misrepresentations; the publication does not specify an exact start date.

2026-08-27

The SEC announced the charges, disclosed the requested remedies, stated that the 38 ERA filings had been removed from its website, and referenced its related investor alert.

Suggested considerations

• Compliance teams may wish to perform a documented, line-by-line validation of Form ADV Part 1 and applicable Form ADV Part 2 disclosures, including business addresses, telephone numbers, websites, ownership, control persons, regulatory status, assets, private funds, clients, and service providers.
• Firms should consider retaining contemporaneous evidence supporting material Form ADV representations, such as lease or office records, corporate and ownership documents, fund records, audited financial statements, auditor engagement evidence, and records supporting reported assets and advisory activities.
• ERA and registered adviser compliance programs may wish to establish independent verification of counterparties' SEC registration or ERA status through the Investment Adviser Public Disclosure system and should avoid treating an SEC filing, certificate, or website badge as conclusive proof of legitimacy.
• Firms that market investment advice to individuals should consider reviewing whether their regulatory status, Form ADV disclosures, and marketing materials accurately describe whether they are registered, exempt reporting, or otherwise authorized to provide services to retail investors.
• Compliance teams may wish to investigate repeated or highly similar ownership structures, numerical disclosures, addresses, telephone numbers, websites, auditor names, or filing patterns across related advisers as potential indicators of coordinated fraudulent filings.
• Firms should consider escalating unanswered SEC requests for records and preserving relevant books, records, communications, websites, and filing-support materials, because the SEC expressly relied on alleged failures to substantiate Form ADV information.
• Private fund sponsors and allocators may wish to verify that purported fund audits were performed by identifiable independent public accounting firms with appropriate federal or state registration or licensing, rather than relying solely on statements in Form ADV.
• Financial-crime and onboarding teams may wish to incorporate the SEC's PAUSE list, investor alerts, foreign-jurisdiction indicators, website authentication checks, and independent corporate-registration checks into risk-based due diligence for purported U.S. advisers.

What changed

This publication announces enforcement complaints rather than a new rule or generally applicable filing requirement. The SEC alleges violations of Section 204(a) of the Investment Advisers Act of 1940, which governs adviser records and reports including Form ADV, and Section 207, which prohibits untrue statements or omissions in applications and reports filed under the Act. The SEC seeks permanent injunctions, conduct-based injunctions preventing the defendants from filing Forms ADV as exempt reporting advisers, and civil penalties.

Key dates

2025-09-10

Tricolor and affiliates filed for Chapter 7 bankruptcy and moved toward liquidation.

2025-12-17

The U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Tricolor executives in connection with the alleged fraud.

2026-08-18

The SEC announced the civil enforcement action against Daniel Chu, Jerome Kollar, and Ameryn Seibold in the U.S. District Court for the Southern District of New York.

Suggested considerations

• Firms should consider performing a targeted review of whether the same receivable, loan, vehicle, inventory item, or other asset can be pledged across multiple warehouse facilities, securitizations, lenders, or managed accounts, including through affiliates and special-purpose vehicles.
• Compliance teams may wish to test collateral eligibility and borrowing-base reporting back to source-level records, payment histories, lien and ownership data, servicing systems, and independent third-party evidence rather than relying solely on management certifications.
• Securitization sponsors, underwriters, and investors should consider reviewing controls for detecting loans that are delinquent, charged off, non-paying, fictitious, materially impaired, or otherwise ineligible but reported as current or eligible.
• Firms should consider reconciling loan-level collateral tapes across all funding channels and establishing exception escalation, independent sign-off, segregation of duties, and documented remediation for duplicate identifiers or inconsistent pledging data.
• Finance and compliance functions may wish to assess whether offering documents, investor presentations, lender certificates, and management meetings accurately describe liquidity constraints, funding needs, collateral encumbrances, and portfolio performance.
• Boards and senior-management committees should consider reviewing governance over collateral operations, securitization disclosures, liquidity reporting, related-party or affiliate financing, and controls over executive certifications.
• Investment managers and lenders may wish to incorporate independent collateral verification, borrowing-base audit rights, data-access rights, concentration and duplication analytics, and covenant triggers into new and renewed transactions.
• Firms with relevant exposure should consider preserving records, communications, collateral tapes, system audit trails, certifications, underwriting files, and exception reports in light of parallel SEC and criminal proceedings.

What changed

The publication does not introduce a new rule, threshold, filing requirement, or compliance deadline. It announces an enforcement complaint under the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934, including alleged control-person liability against Chu and aiding-and-abetting liability against all three defendants. The SEC seeks injunctions, disgorgement with prejudgment interest, civil penalties, and officer-and-director bars against Chu and Kollar.

Key dates

2026-08-18

The SEC published the Chairman’s statement and proposed Regulation Crypto Assets, including the proposed startup exemption, fundraising exemption, and investment-contract safe harbor.

2026-03-17

The SEC issued its interpretation concerning the application of the federal securities laws to certain crypto assets and transactions, which the Chairman identifies as a basis for the proposed framework.

Suggested considerations

• Compliance teams may wish to treat the package as a proposal rather than a currently usable exemption and continue applying the existing Securities Act, Exchange Act, and applicable state-law analysis until final rules become effective.
• Potential issuers should consider mapping planned token offerings against the proposed $5 million/four-year and $75 million/12-month limits, including aggregation, timing, resale, and interaction with other registration exemptions once the proposing release is reviewed in full.
• Issuers considering the fundraising exemption should consider preparing systems for principles-based crypto disclosures, financial-condition information, audited financial statements at the applicable thresholds, and ongoing reporting.
• Legal and compliance functions may wish to assess whether existing investment-contract documentation contains essential managerial promises and whether operational evidence could support the proposed certification required for the safe harbor.
• Crypto trading venues and intermediaries should consider inventorying assets currently treated as securities or investment contracts and evaluating how a future safe-harbor determination could affect onboarding, trading permissions, disclosures, custody, surveillance, and state-law analysis.
• Firms may wish to monitor the Federal Register publication, the SEC comment period, any revisions to the proposal, and the status of the CLARITY Act, which the Chairman described as necessary for durable market-structure rules.
• Compliance teams may wish to review independent commentary emphasizing that the proposal is a major policy shift toward tailored token fundraising but that the practical scope remains uncertain until the detailed conditions, audit thresholds, eligibility criteria, and final text are settled.

What changed

The proposed rules would establish two exemptions from Securities Act of 1933 registration for qualifying crypto-asset investment contracts. The startup exemption would permit offerings of up to $5 million during a four-year period. The fundraising exemption would permit offerings of up to $75 million during each 12-month period, subject to principles-based crypto-asset disclosures, financial-condition disclosures, financial statements, ongoing reporting, and audited financial statements at specified capital-raising thresholds; the publication does not state those audit thresholds.

Key dates

2026-03-17

The SEC issued its earlier interpretation clarifying how federal securities laws apply to certain crypto assets and transactions involving crypto assets.

2026-08-18

The SEC announced the proposed Regulation Crypto Assets framework and opened the process for public comment, subject to publication of the proposing release in the Federal Register.

Suggested considerations

• Compliance teams may wish to map planned and existing token offerings against the proposed $5 million four-year and $75 million 12-month thresholds, including aggregation across related issuers, affiliates, projects and offering periods once the proposing release is reviewed.
• Issuers should consider documenting which exemption they would use, the relevant measurement period, investor eligibility and transfer restrictions, and controls intended to prevent exceeding the applicable offering cap.
• Firms should consider preparing draft principles-based narrative disclosures and, for the $75 million exemption, assessing financial-statement readiness and the systems needed for ongoing SEC reporting.
• Project sponsors may wish to inventory all essential managerial efforts represented or promised to investors and establish evidence, governance approvals and public communications supporting any future safe-harbor position based on completion or permanent cessation of those efforts.
• Exchanges, broker-dealers and trading platforms should consider assessing how the proposed safe harbor and state-law preemption could affect asset classification, listing reviews, customer disclosures, surveillance, custody and secondary-market controls.
• Industry participants may wish to review the full proposing release and consider submitting comments within 60 days after its publication in the Federal Register; the specific deadline should not be assumed until the Federal Register publication date is confirmed.
• Firms should continue treating the proposal as non-final and should not represent that an exemption, safe harbor or state-law preemption is currently available.

What changed

The proposed framework would add two exemptions from Securities Act of 1933 registration requirements for qualifying investment contracts involving crypto assets. The first would allow aggregate offerings of up to $5 million during a four-year period on a one-time basis; the second would allow offerings of up to $75 million during each 12-month period. Issuers relying on either exemption would need to make specified principles-based narrative disclosures available to investors.

Key dates

2026-08-14

The SEC announced the enforcement action and filed the complaint in the U.S. District Court for the Southern District of New York.

2020-12-01

Approximate beginning of the conduct period alleged by the SEC.

2025-06-30

Approximate end of the conduct period alleged by the SEC.

Suggested considerations

• Firms should consider reconciling every investor-facing statement about upfront fees, markups, commissions, carried interest, advisory fees, transaction spreads, and total acquisition cost against actual fund and affiliate-level economics.
• Compliance teams may wish to map all principal transactions and related-party transfers between advisers, sponsors, general partners, feeder funds, and portfolio-acquisition vehicles, with documented conflict reviews and valuation support.
• Firms should consider testing whether each person soliciting private-fund interests is properly registered or otherwise operating within an applicable broker-dealer exemption, and whether compensation arrangements create broker-dealer registration or supervision concerns.
• Compliance teams may wish to review cold-calling scripts, call recordings, lead-generation practices, sales-agent training, and escalation controls for high-pressure claims, guaranteed or implied returns, scarcity statements, and misleading descriptions of pre-IPO access.
• Firms should consider verifying offering exemptions, investor eligibility, registration status, subscription documentation, and disclosure delivery for each private fund and distribution channel.
• Compliance teams may wish to perform targeted surveillance of retail and retiree sales, including cancellation or cooling-off requests, unusual concentration, complaints about undisclosed fees, and differences between quoted and realized investor charges.
• Firms should consider preserving communications, transaction records, fee calculations, investor files, sales-agent compensation data, and valuation materials in anticipation of regulatory inquiries or investor claims.

What changed

This is a civil enforcement action, not a new rule or generally applicable safe harbor. The SEC alleges violations of the antifraud, securities-registration, and broker-dealer-registration provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940, together with control-person liability and aiding-and-abetting violations by Spaventa.

Key dates

2019-11-01

Approximate start of the alleged fraudulent conduct described by the SEC

2023-06-30

Approximate end of the alleged fraudulent conduct described by the SEC

2026-08-13

SEC announced the enforcement action

Suggested considerations

• Compliance teams may wish to review whether any compensated solicitors or referral sources are engaging in broker-like activity without registration.
• Firms should consider testing whether solicitation, negotiation, and fund-collection roles could create broker-registration exposure under Exchange Act Section 15.
• Firms may wish to reassess use-of-proceeds controls and verify that investor funds are not being diverted outside disclosed purposes.
• Firms should consider enhancing monitoring for Ponzi-like payout patterns, especially where distributions appear funded by new investor money rather than operating cash flow.
• Compliance functions may wish to review marketing and fundraising materials for consistency with the firm’s actual registration status and authority.
• Firms operating in relationship-driven communities may wish to evaluate affinity-based fraud risk and strengthen independent verification of investors, counterparties, and cash flows.

What changed

This is an enforcement action, not a rulemaking or guidance release. The SEC complaint alleges that Leor Moshe solicited investments through Capital Funding ASAP LLC by claiming investor money would fund short-term business loans, while allegedly diverting more than $11 million for personal use and more than $850,000 for Ponzi-like payments to earlier investors.

Key dates

2026-08-12

SEC announcement of the administrative proceeding

2026-08-22 Deadline

Payment deadline for the $28 million penalty by Wells Fargo Clearing Services, LLC and the $7 million penalty by Wells Fargo Advisors Financial Network, LLC, within 10 days of entry of the order

Suggested considerations

• Compliance teams may wish to review whether written supervisory procedures specifically address the risks of cash sweep and bank deposit sweep arrangements.
• Firms may wish to assess whether product selection, monitoring, escalation, and exception-handling controls are documented and operating as intended.
• Broker-dealers and advisers may wish to test whether disclosures, advisor training, and supervisory review processes match the actual operation of sweep programs.
• Firms may wish to examine whether affiliated deposit-product conflicts, yield incentives, and client-cash allocation defaults are identified and mitigated in practice.
• Operational risk and compliance functions may wish to evaluate whether periodic reviews capture changes in interest-rate conditions and client behavior that can affect sweep-program risk.

What changed

The order reflects SEC action under Sections 203(e) and 203(k) of the Investment Advisers Act and Section 15(b) of the Exchange Act, with cease-and-desist relief for violations of Section 206(4) of the Advisers Act and Rule 206(4)-7. The SEC’s settled resolution imposed a censure and civil penalties of $28 million on Wells Fargo Clearing Services, LLC and $7 million on Wells Fargo Advisors Financial Network, LLC, payable within 10 days of entry of the order.

Key dates

2026-08-12

SEC administrative proceeding and release for Santander Securities LLC

Suggested considerations

• Compliance teams may wish to review mutual fund share-class selection controls to confirm lower-cost alternatives are identified and used when available.
• Firms may wish to reassess whether 12b-1 fee compensation is clearly disclosed in client-facing materials and account documentation.
• Supervisory teams may wish to test whether review procedures flag cases where a cheaper share class was available but not selected.
• Firms may wish to examine whether representative compensation or revenue-sharing arrangements could bias share-class recommendations.
• Compliance functions may wish to verify that remediation processes can identify and reimburse affected clients where share-class selection increased costs.

What changed

The SEC charged Santander Securities LLC with willful violations of Advisers Act Sections 206(2) and 207 in connection with recommending mutual fund share classes that paid 12b-1 fees while lower-cost share classes were available for the same funds. The order alleges inadequate disclosure of the conflict created by the firm’s and associated persons’ receipt of 12b-1 compensation, and it describes the conduct as a breach of fiduciary duty and disclosure obligations.

Key dates

2014-01-01

Start of the relevant conduct period during which Trustcore selected and held mutual fund share classes paying 12b-1 fees where lower-cost alternatives were available

2018-03-28

End of the relevant conduct period examined in the SEC’s administrative proceeding

2019-03-11

Date of the SEC’s administrative order against Trustcore Financial Services, LLC under the Investment Advisers Act of 1940

2020-12-31

Closure date of Trustcore’s affiliated broker-dealer, TrustCore Investments, LLC, referenced as subsequent context

Suggested considerations

• Firms should consider reviewing mutual fund share class selection methodologies to confirm that, where multiple classes of the same fund are available, the process appropriately prioritizes lower-cost share classes for clients unless a documented, client-specific rationale justifies a different choice.
• Compliance teams may wish to assess whether existing Form ADV, advisory agreements, and other client-facing disclosure documents clearly describe 12b-1 fees, revenue-sharing, and other distribution or affiliate compensation, including how these payments arise from share class selection and the resulting conflicts of interest.
• Advisory firms should consider mapping and documenting all compensation flows between the adviser, affiliated broker-dealers, and associated persons that are tied to mutual fund holdings, including 12b-1 fees and other distribution-related payments, to support clear conflict identification and disclosure.
• Firms may wish to evaluate supervisory controls and surveillance around mutual fund share class usage, including periodic reviews or exception reports designed to detect legacy, higher-cost, or revenue-generating share classes that remain in client accounts where lower-cost alternatives exist.
• Compliance teams should consider testing whether advisory personnel understand the firm’s fiduciary obligations under the Advisers Act in the context of fee-driven product selection, and whether training materials adequately cover share class conflicts and disclosure expectations.
• Advisory firms may wish to implement or enhance procedures requiring documentation of the rationale for any recommendation or retention of mutual fund share classes that pay 12b-1 fees or other distribution fees, especially where cheaper classes of the same fund are available to the client.
• Firms should consider reviewing and, where needed, updating policies governing interactions between advisory and brokerage affiliates, to ensure that incentives tied to fund distribution or 12b-1 fees do not undermine client best interest or the adviser’s fiduciary duty.
• Compliance teams may wish to benchmark their practices against prior SEC share class selection initiatives and enforcement matters, using this order as an example of the types of conflicts, disclosure gaps, and remedial undertakings the SEC is prepared to pursue.

What changed

This publication does not introduce new rules but memorializes a final SEC enforcement action and related undertakings under the Investment Advisers Act of 1940. The SEC imposed a formal cease-and-desist order against Trustcore Financial Services, LLC for violations of Section 206(2) (fraudulent conduct by an investment adviser) and Section 207 (untrue statements or omissions of material fact in filings with the SEC), in connection with the adviser’s selection and retention of mutual fund share classes that paid 12b-1 fees where lower-cost share classes were available.

Key dates

2019-04-01

Start of the period covered by the SEC’s findings on untimely SAR investigations and filings

2024-03-31

End of the period covered by the SEC’s findings on untimely SAR investigations and filings

2024-08-12

SEC press release and administrative order were posted

2024-09-11 Deadline

Civil penalty payment due within 30 days of the order’s entry, assuming the posted order date reflects the entry date

Suggested considerations

• Compliance teams may wish to review SAR investigation aging standards against current internal procedures, especially for matters involving subpoenas, law-enforcement requests, or regulatory inquiries.
• Firms should consider whether escalation triggers, ownership, and sign-off responsibilities for SAR determinations are clearly documented across surveillance, legal, and compliance functions.
• Broker-dealers may wish to test whether case-management tools can identify stalled investigations and flag items approaching internal filing deadlines or reasonable-period expectations.
• Dual registrants may wish to assess whether broker-dealer and advisory compliance workflows are coordinated for suspicious-activity matters that cut across business lines.
• Training for relevant personnel may wish to be reviewed to ensure that SAR timeliness expectations and escalation protocols are understood by front office, surveillance, legal, and operations staff.

What changed

The publication does not create new rules or thresholds. It documents an enforcement action under Exchange Act Section 17(a) and Rule 17a-8, which require broker-dealers to file SARs for suspicious transactions and related activity. The SEC’s order emphasizes that firms must conduct and complete SAR investigations within a reasonable period of time, especially when the activity is connected to law-enforcement or regulatory inquiries. The outcome also shows that the SEC may treat delayed investigation and filing as a standalone compliance failure even without a substantive fraud finding.

Key dates

2017-06-01

Beginning of the conduct period identified by the SEC for the undisclosed or inadequately disclosed rollover and referral incentive-compensation practices.

2022-02-01

End of the conduct period identified by the SEC for the disclosure and policies-and-procedures failures.

2025-01-17

The SEC issued the settled administrative order against Transamerica Financial Advisors, LLC.

Suggested considerations

• Compliance teams may wish to compare conflict disclosures against actual compensation practices to confirm that conditional language does not understate incentives that are being paid in practice.
• Firms may wish to review rollover-related compensation arrangements for specificity in Form ADV brochures, client agreements, training materials, and sales communications.
• Compliance teams may wish to test whether policies and procedures under Rule 206(4)-7 are designed to identify, monitor, and remediate gaps between business practices and client disclosures.
• Firms should consider whether representative-level incentive compensation tied to referrals or rollovers warrants heightened supervision, approval workflows, or additional conflict controls.
• Firms may wish to assess whether retirement rollover supervision includes review of disclosure consistency, repapering, and cross-functional sign-off when compensation structures change.

What changed

This is an enforcement action, not a new rule or interpretive release, so it does not amend the underlying regulatory text. The SEC found violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 because the firm allegedly paid incentive compensation to investment adviser representatives for referrals and retirement rollovers from at least 2017-06-01 through 2022-02-01, while earlier disclosures used language suggesting the firm merely 'may' provide incentives.

Key dates

2021-07-09

SEC announced settled administrative proceedings against Kestra Advisory Services, LLC and Kestra Private Wealth Services, LLC

2026-08-12

SEC administrative proceedings index and SEC newsroom list the Kestra Private Wealth Services matter under Release No. 34-106110

Suggested considerations

• Compliance teams may wish to review whether disclosures about affiliated compensation, markups, and related conflicts are specific and prominent enough for advisory clients.
• Firms should consider testing mutual fund trade processing and fee assessment workflows for undisclosed economic benefits to affiliates.
• Dual registrants may wish to assess whether advisory and broker-dealer compliance functions are coordinated so disclosures, operations, and compensation schedules are aligned.
• Firms may wish to examine whether written policies and procedures are detailed enough to detect and prevent conflicts tied to transaction fees and non-transaction service fees.
• Wealth management firms may wish to compare client-facing disclosures against internal agreements and operational fee flows to identify inconsistencies.
• Compliance teams may wish to consider periodic testing of conflict disclosures and fee practices to determine whether similar issues would be identified before an exam or enforcement review.

What changed

This is an enforcement order, not a rulemaking, so it does not create new requirements. It nonetheless reinforces that investment advisers must provide full and fair disclosure of conflicts created when an affiliated broker-dealer receives compensation from mutual fund trades and related services, including situations described by the SEC as fee markups. The order also underscores the need for written compliance policies and procedures reasonably designed to prevent violations, which the SEC tied to Rule 206(4)-7.

Suggested considerations

• Compliance teams may wish to review whether advertising approval workflows are designed to identify statements that could be materially false or misleading under Advisers Act standards.
• Firms may wish to verify that marketing claims are supported by current documentation before use, especially where claims relate to qualifications, capabilities, or other material attributes.
• Teams may wish to confirm that all promotional channels, including websites, PDFs, presentations, email campaigns, and social media, are included in supervisory review.
• Firms may wish to assess whether recordkeeping processes preserve final and pre-approved versions of advertisements and the support for material claims.
• Compliance teams may wish to consider whether training for marketing and advisory personnel clearly addresses the prohibition on untrue statements of material fact in advertisements.

What changed

This publication is an enforcement order, not a new rulemaking, so it does not create new generally applicable obligations. It applies existing Investment Advisers Act advertising standards by finding that the firm violated Section 206(4) and Rule 206(4)-1(a)(5) through advertisements containing untrue statements of material fact. The order also requires a cease-and-desist remedy and imposes a $200,000 civil money penalty, payable within 10 days of the order’s entry.

Key dates

2019-08-01

SEC civil action filed in the District of Massachusetts

2024-03-29

District court entered final judgment against Commonwealth

2024-04-01

Whistleblower notice lists the qualifying judgment/order date

2024-07-05

Whistleblower notice last reviewed or updated

Suggested considerations

• Compliance teams may wish to review whether Form ADV and client-facing disclosures describe revenue-sharing arrangements with enough specificity to explain the actual conflict and the related economic incentive.
• Firms may wish to assess whether disclosures address not only the existence of revenue sharing, but also whether it may steer recommendations toward higher-cost mutual fund share classes over cheaper alternatives.
• Firms may wish to test whether policies and procedures under Rule 206(4)-7 expressly cover identification, escalation, review, and disclosure of revenue-sharing conflicts.
• CCOs may wish to confirm that they are being kept fully informed of revenue-sharing arrangements and related conflicts, especially where those arrangements can affect product recommendations or supervision.
• Compliance functions may wish to evaluate whether representatives understand the structure of revenue-sharing payments and how those economics may influence client recommendations.
• Dual registrants may wish to align broker-dealer and advisory disclosures so that the conflict is not described in one channel while omitted or softened in another.

What changed

This was an enforcement action, not a rulemaking, so it did not create new industry-wide requirements. The SEC alleged violations of Section 206(2), Section 206(4), and Rule 206(4)-7 of the Investment Advisers Act based on inadequate disclosure of material conflicts of interest and failure to adopt and implement adequate compliance policies and procedures.

Key dates

2021-07-09

SEC announced and settled the Kestra Advisory Services administrative proceeding

2021-07-09 Deadline

Order required payment of disgorgement, prejudgment interest, and civil penalty within ten days of entry of the order

Suggested considerations

• Compliance teams may wish to review whether client disclosures describe all forms of affiliated compensation, revenue sharing, and other economic benefits that could influence recommendations.
• Firms should consider whether Form ADV narratives, client agreements, and supervisory documentation are consistent on affiliate compensation and conflict disclosure.
• Dual registrants may wish to map advisory and brokerage compensation streams in their conflict inventories to confirm that material conflicts are captured and escalated.
• Firms should consider whether written compliance policies and procedures are tailored to actual business practices, rather than existing only in generic form.
• Compliance functions may wish to test whether supervisory reviews can detect compensation arrangements that create disclosure obligations under the Advisers Act.
• Wealth management organizations may wish to assess training for advisers and supervisors on when affiliate compensation and shared revenue arrangements must be disclosed to clients.

What changed

This was not a new rulemaking; it was an SEC enforcement order applying existing requirements under Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. The Commission found that Kestra AS failed to disclose two types of compensation received by its affiliated broker-dealer and predecessor firm, including compensation tied to conflicts of interest, and that clients therefore lacked material information needed to assess those conflicts.

Key dates

2026-08-12

SEC release date for the administrative proceeding listing

Suggested considerations

• Compliance teams may wish to review municipal underwriting due diligence files to confirm that offering materials, issuer representations, and internal review steps are documented and consistent.
• Firms may wish to assess supervisory controls over municipal securities underwriting to ensure responsibilities, escalation paths, and sign-off procedures are clearly assigned.
• Broker-dealers may wish to re-check training for public finance personnel on disclosure accuracy, antifraud standards, and recordkeeping expectations.
• Firms with both brokerage and advisory businesses may wish to keep advisory fiduciary controls distinct from municipal underwriting controls so that governance frameworks do not blur separate regulatory obligations.
• Compliance functions may wish to compare this matter with prior SEC actions involving the firm to identify recurring control themes in disclosures, supervision, and product/distribution practices.

What changed

This publication does not introduce a new regulatory requirement or rulemaking obligation. It reflects an SEC administrative cease-and-desist proceeding under the federal securities laws, with the public descriptions indicating an antifraud theory connected to municipal securities underwriting and inadequate due diligence. The available materials also indicate this is separate from the firm’s earlier 2019 SEC matter involving share class selection and 12b-1 fee disclosure issues, so it should not be conflated with that prior advisory-fiduciary case.

Suggested considerations

• Compliance teams may wish to review mutual fund share class selection logic to confirm whether lower-cost eligible share classes were available and used where appropriate.
• Firms should consider whether 12b-1 fee revenue is fully identified in conflict inventories and disclosed clearly in Form ADV and related client materials.
• Advisory supervision may wish to test whether recommendations are consistent with a client-first or best-interest framework when fund share class options differ in cost.
• Firms may wish to evaluate whether exception handling for higher-cost share class usage is documented, approved, and supported by a client-specific rationale.
• Compliance functions may wish to assess whether remediation and restitution calculations are available if historical share class selection issues are identified.

What changed

This was not a new rulemaking or interpretive release; it was an SEC administrative enforcement action based on alleged breaches of fiduciary duty and inadequate disclosure tied to mutual fund share class selection and 12b-1 fee revenue. The SEC’s order indicates the firm recommended, purchased, or held higher-cost share classes for clients despite lower-cost alternatives being available, and the firm received compensation through 12b-1 fees that created a conflict.

Key dates

2014-01-01

Start of relevant conduct period during which Investacorp Advisory Services, Inc. recommended or retained mutual fund share classes with 12b-1 fees despite lower-cost alternatives being available

2018-03-30

End of relevant conduct period covered by the SEC administrative order against Investacorp Advisory Services, Inc.

2026-08-12

SEC issues administrative order in Release No. 34-106089, File No. 3-19037, imposing cease-and-desist relief, censure, disgorgement, and prejudgment interest on Investacorp Advisory Services, Inc.

Suggested considerations

• Firms should consider reviewing mutual fund share-class selection policies and procedures to confirm that, where clients are eligible, the lowest-cost available share class of a given fund is systematically considered and documented, particularly in accounts where the firm or an affiliate receives 12b-1 fees.
• Compliance teams may wish to evaluate Form ADV Part 2A, advisory brochures, and other client disclosures to determine whether receipt of 12b-1 fees and similar distribution or servicing compensation is clearly described as a material conflict of interest, including the incentives it creates for advisers and affiliated broker-dealers.
• Advisory firms with affiliated broker-dealers should consider mapping compensation flows, including 12b-1 fees and revenue sharing, between entities to identify where those arrangements could reasonably influence share-class recommendations, and whether enhanced disclosure or conflict-mitigation controls are warranted.
• Firms may wish to implement or refine surveillance and testing to identify accounts invested in higher-cost mutual fund share classes when a lower-cost share class of the same fund appears available to that client, and to assess whether any such positions reflect policy exceptions or potential remediation candidates.
• Investment committees and disclosure governance bodies should consider comparing actual fund-share-class usage patterns against stated policies and disclosures in advisory brochures, wrap-fee program documents, and client agreements to confirm alignment and identify gaps in describing conflicts tied to 12b-1 fee receipt.
• Firms that historically received 12b-1 fees or similar fund distribution compensation during periods comparable to 2014–2018 may wish to consider whether a retroactive review of share-class selection and client eligibility is appropriate and whether any client reimbursement, remediation, or supplemental disclosure exercises are advisable in light of the SEC’s enforcement posture.
• Compliance and supervisory functions should consider updating training for investment adviser representatives and registered representatives to ensure they understand how mutual fund share-class selection, 12b-1 fee arrangements, and affiliated broker-dealer compensation can create fiduciary and disclosure risk under the Advisers Act.
• Legal and compliance teams may wish to revisit enterprise-level conflicts of interest inventories to ensure that mutual fund share-class selection practices, 12b-1 fee arrangements, and related revenue-sharing structures are explicitly captured, assessed, and tied to appropriate controls and disclosures.

What changed

The publication does not introduce new rules or amend existing regulations; it is an enforcement settlement applying existing fiduciary and disclosure obligations under the Investment Advisers Act of 1940, including Sections 203(e) and 203(k). The order confirms that the SEC considers the practice of placing advisory clients into mutual fund share classes that charge 12b-1 fees when lower-cost, non-12b-1 share classes of the same fund are available to be a material conflict of interest when the adviser or an affiliated broker-dealer receives those fees.