Enforcement Central and Garrett 2026: SEC back to basics, not backing down

Key takeaways

• SEC officials stressed that the Division of Enforcement (Division) is still opening investigations and is refocusing on “bread and butter” fraud, insider trading, and holding individuals and gatekeepers accountable. It is not retreating from regulatory violations. This is in response to the enforcement numbers being down and preliminary counts suggesting a further decline of about 25% in fiscal year 2026.

• Financial reporting and new risk areas are top priorities. Expect more cases involving financial reporting, accounting fraud, and auditor cases. Additionally, offering frauds tied to emerging technologies, prediction markets, AI-enabled fraud, and “AI-washing” are areas most likely to draw increased scrutiny.
• The revised Enforcement Manual adds evidence disclosure in the Wells process, longer Wells response deadlines, and a more detailed cooperation framework. The SEC has also rescinded the “no admit, no deny policy.” These changes shift the dynamics of investigations and settlements.
• A two-member Commission raises questions about governance. With only two sitting commissioners, the SEC amended its rules so that two members constitute a quorum.

Earlier this month, Chicago drew hundreds of defense attorneys, former regulators, in-house counsel, and others for wide-ranging discussions on the current enforcement landscape, SEC rulemaking, insider trading, AI, financial reporting, and more. The back-to-back conferences—the Securities Enforcement Forum Central 2026 (October 1) and the 46th Annual Ray Garrett Jr. Corporate & Securities Law Institute (October 1–2)—included panelists such as SEC Deputy Director of Enforcement Paul Tzur, who oversees the Chicago, Atlanta, and Miami regional offices, and senior Division of Corporation Finance officials.

The tone was candid. Private practitioners questioned the administration’s direction, but, by contrast, current SEC officials were persistent about their stated priorities—both in Chicago and in recent speeches.

Enforcement state of play

Back to basics: The enforcement agenda

The Commission conveyed the message that it is not standing down; it is refocusing, not retreating. Deputy Director Tzur described an enforcement division that is actively opening investigations and “being very thoughtful” about which cases to pursue. As panelists acknowledged, Enforcement Director David Woodcock and Chairman Paul Atkins have consistently emphasized quality over quantity—a return to policing “bread and butter” securities fraud. Under this approach, individuals remain squarely in the crosshairs as the Commission has prioritized charging individual bad actors for violating federal securities laws, and Tzur said the Division is “thinking long and hard” about whether to charge companies in addition to, or instead of, individuals—with particular attention to gatekeepers.

Regulatory violations

On the question of so-called “technical” enforcement, Tzur pushed back, emphasizing that regulatory violations are “sometimes deliberate and intentional” and that the Division is “not backing down from enforcement of regulatory violations.” Where a company has identified an issue, self-remediated, and caused no investor harm, staff may decline to pursue enforcement on a case-by-case basis. In these instances, the Division has recommended, and the Commission has approved, reduced penalties or no action. Panelists who had recently self-reported described the staff as receptive. However, repeat violators or entities that know about violations harming investors should expect enforcement.

Enforcement by the numbers

Nonetheless, as acknowledged by private practitioner panelists, the numbers paint a different picture. The SEC reported 456 enforcement actions in fiscal year 2025, including 303 standalone actions and 69 follow-on administrative proceedings, and $17.9 billion in ordered monetary relief, down from 583 total actions in fiscal year 2024.¹ The Commission framed the FY2025 results as a deliberate reset, criticizing prior years’ efforts to “pursue media headlines and run up numbers.” Yet, Securities Enforcement Forum panelists cited preliminary counts suggesting a further decline of roughly 25%, with a burst of filings in the final days of the fiscal year, in what appears to be an attempt to boost numbers before the deadline. Undercutting the “numbers don’t matter” message further, panelists expect the SEC’s official results to again report the number of cases closed. Not surprised by the lower numbers, panelists noted that a change in administration always brings a shift in priorities, but panelists called this transition “more profound” than others.

Financial Reporting and Accounting Unit

The establishment of the Division’s Financial Reporting and Accounting Unit, announced by the SEC in an August 5, 2026, press release and discussed by Woodcock in a September 18, 2026, speech persisted as a recurring theme across conferences, panels, and panelists. The unit is the successor to the Financial Reporting and Audit Task Force that Woodcock led in 2013, but panelists drew a critical distinction: Unlike a task force, a dedicated unit has its own staff, management structure, and resources—more akin to the SEC’s Cyber and Emerging Technologies Unit in terms of institutional permanence.

Panelists expect the unit to pursue public company accounting fraud, non-GAAP disclosure cases, and auditor/gatekeeper matters. Life sciences, healthcare, pharmaceutical, and medical device companies were flagged as sectors of particular interest to the current administration. Speakers cautioned, however, that financial reporting cases are inherently complex and typically take approximately two years to develop; the first year will likely involve matters already in flight. Defense counsel reported that staff in at least some accounting-related investigations are pushing for testimony earlier in the process—sometimes before document productions are complete—signaling a shift in investigative tempo.

Enforcement areas of focus

Insider trading

Insider trading was a focal point of both conferences, accounting for approximately 22% of third-quarter enforcement matters. Panelists highlighted a major case charging roughly 21 individuals—including personnel at a prominent law firm—with parallel prosecution by a U.S. attorney’s office. The SEC’s increasing use of data analytics to identify suspicious options-trading patterns was a recurring theme. Tzur confirmed that insider trading frequency has increased and that the Division is working closely in parallel with DOJ, particularly the Southern District of New York.

The U.S. Court of Appeals for the Ninth Circuit’s pending decision in SEC v. Panuwat, No. 24-6882 (9th Cir.)—the “shadow trading” case—drew significant discussion. Panelists noted that on appeal, the SEC appears to have narrowed its theory, relying on the defendant’s company’s insider trading policy rather than a traditional agency/entrustment theory, and several speakers suggested the case may be remanded for a new trial.

Prediction markets

Perhaps the most novel discussion concerned prediction markets. Panelists described a rapidly evolving enforcement landscape involving the Commodity Futures Trading Commission (CFTC), DOJ, and potentially the SEC. Notable developments include a DOJ indictment of a U.S. Army soldier who used government information to trade on Polymarket; a case involving a Google employee trading on search-trend data; and a teleprompter operator who traded on “mention markets”—event contracts tied to the content of speeches—generating over $100,000 in profits.

The CFTC has issued a staff advisory flagging the heightened manipulation risk inherent in mention markets, and exchanges such as Kalshi have begun self-regulating by delisting contracts deemed susceptible to manipulation. Panelists recommended that general counsel monitor event contracts tied to their companies and update insider trading policies to cover prediction markets.

AI

Both conferences underscored the intersection of enforcement risk and artificial intelligence. Tzur described AI-enabled fraud tactics—deepfakes, social engineering, relationship investment scams, and AI-driven pump-and-dump narratives—as a growing area of SEC attention. The Division is continuing to apply traditional antifraud provisions to “AI-washing,” cases in which regulated entities exaggerate or misstate their use of AI. Speakers also flagged the governance challenges posed by agentic AI systems, which may optimize for goals in unexpected ways and require entities to rethink their oversight and control frameworks.

On the SEC’s own use of AI, panelists noted that the Commission has launched a next-generation Office of AI and Data Analytics within the Division of Enforcement, using AI for anomaly detection, document processing, transcript review, and blockchain analysis. Speakers cautioned that subpoenas may increasingly request information about a company or individual’s use of AI, including prompts and chatbot logs, raising novel privilege and preservation questions.

Crypto

In the crypto space, panelists discussed the SEC’s evolving interpretive framework, which now categorizes digital assets into five types—digital commodities, digital collectibles, digital tools, GENIUS Act stablecoins, and tokenized securities—with proposed exemptions and safe harbors for startups and certain trading platforms.

Policy updates

Two-man commission

At the Commission level, Tzur noted that Commissioner Hester Peirce’s departure leaves the SEC with only two sitting commissioners. Because every charging and settlement decision requires a Commission vote, the SEC recently amended its rules so that two commissioners constitute a quorum. Tzur said he expects little practical effect on how the Division operates or makes recommendations. He explained that the cases the Division continues to bring—fraud, market manipulation, and insider trading—are largely noncontroversial.

Investigative practice

Panelists also observed a shift in day-to-day investigative practice. The SEC is increasingly using voluntary document requests, in part because formal orders of investigation are harder to obtain under the current administration. Panelists advised pushing for subpoenas where possible because subpoenas typically trigger directors and officers (D&O) insurance coverage obligations. Some subpoenas are returning in financial reporting cases, where documents from auditors usually require compulsory process.

Enforcement Manual

Although not new, Tzur devoted significant time at the Garrett Institute to the February 2026 Enforcement Manual—the first major revision since 2017, announced by the SEC in a February 24, 2026, press release. He framed its changes as a renewed commitment to fairness and transparency in the enforcement process. Staff must now disclose salient probative evidence, and Wells responses are due in four weeks instead of two, with further extensions harder to get. The manual also spells out what counts as meaningful cooperation and allows settlement and waiver requests to be considered together.

Rescission of the “no admit, no deny” Policy

Panelists also discussed the SEC’s May 2026 rescission of its longstanding “no admit, no deny” policy (Rule 202.5(e)), announced in an SEC press release. Defendants may now publicly deny allegations in SEC settlements, which practitioners described as a meaningful leverage point in negotiations. Tzur framed the change as a matter of fairness, since the old rule had operated as a de facto gag order. Panelists noted that settlement demands have moderated, though defense counsel should continue to negotiate the language of settlement documents carefully.

Corp Fin rulemaking

At the Garrett Institute, Division of Corporation Finance (Corp Fin) Deputy Directors Sebastian Gomez Abero and Christina Thomas outlined an ambitious rulemaking agenda aimed at making the U.S. public markets more attractive. With the number of listed companies at roughly 40% of its historical peak, Atkins has directed a comprehensive review of Regulation S-K grounded in “financial materiality,” which drew more than 100 comment letters. Other initiatives span a materiality overlay, simplified executive compensation disclosure, filer status simplification, optional semiannual reporting, and registered offering and proxy reform. Officials said the Commission does not favor topic-specific rules (e.g., for AI) and urged companies to keep SEC filings consistent with their marketing materials, including voluntary environmental, social, and governance (ESG) disclosures.

Conclusion

The conferences painted a picture of an SEC enforcement division in deliberate transition—smaller in volume but increasingly focused in its priorities. For public companies, boards, regulated entities, and individuals navigating this environment, practitioners offered the following guidance:

• Reassess the self-reporting calculus. The expanded cooperation framework and the new Financial Reporting and Accounting Unit create real incentives for voluntary disclosure—but the benefits diminish significantly once an issue is already public or once a subpoena has been served.

   

• Insist on subpoenas. With the SEC increasingly relying on voluntary document requests, counsel should push for subpoenas where appropriate, as they typically trigger D&O insurance coverage obligations.

   

• Update insider trading policies. Prediction markets, event contracts, and “mention markets” represent novel insider trading risk vectors. General counsel should monitor event contracts tied to their companies and ensure insider trading policies and codes of conduct address these instruments.

   

• Prepare for AI-related inquiries. Preserve AI prompts and chatbot logs, educate clients on privilege risks associated with AI use, and anticipate that subpoenas may request information about AI usage. Board members should not upload sensitive materials to public AI tools and should be vigilant about AI-usage representations.

   

• Ensure disclosure consistency. As Corp Fin refocuses on financial materiality, companies should ensure that SEC filings are consistent with marketing materials, investor presentations, and any voluntary ESG disclosures.

   

• Leverage settlement dynamics. The rescission of the no-deny policy and moderated settlement demands create new opportunities for negotiation.

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