Seward & Kissel studies all enforcement actions1 brought by the SEC against investment advisers2 to identify enforcement trends and risks.
In FY 2025,3 the SEC initiated 45 enforcement actions against advisers after initiating 98 in FY 2024. The headline is that 35 of the 45 actions came in a flurry of enforcement activity in the first four months of FY 2025, that is, Oct. 1, 2024—Jan. 20, 2025, leading to the departure of Chair Gary Gensler. There have been only ten enforcement actions against advisers since.
| RIA ENFORCEMENT ACTIONS | ||
| FY 2024 | FY 2025 | |
| Total Enforcement Actions4 | 98 | 45 |
| MONETARY SANCTIONS | ||
| Penalties | $474,354,842 | $322,465,000 |
| Disgorgement5 | $21,606,803 | $25,207,252 |
| Total | $495,961,645 | $347,672,252 |
The chart below identifies the number of actions involving each violation type:6
| ACTIONS BY TYPE | ||
| Category | FY 2024 | FY 2025 |
| 204A, MNPI Policies and Procedures | 3 | 1 |
| Beneficial Ownership Reporting | 3 | |
| Books and Records | 29 | 8 |
| Compliance Rule | 24 | 19 |
| Custody Rule | 10 | 2 |
| Failure to Supervise | 1 | 4 |
| Form 13F, Institutional Investment Manager | 7 | |
| Form 13H, Large Trader Reporting | 1 | |
| Form ADV | 2 | 1 |
| Form D | 1 | |
| Form PF | 7 | |
| Fraud, Negligent | 22 | 15 |
| Fraud, Scienter | 6 | 5 |
| Marketing Rule | 18 | 3 |
| Pay-to-Play Rule | 2 | |
| Registration | 1 | |
| Rule 105 | 2 | 1 |
| Unregistered BD Activity | 2 | |
| Whistleblower, Impeding | 2 | 1 |
Highlights
The five cases charging intentional or knowing (scienter) fraud in FY 2025 involved misappropriation; failing to honor redemption requests while misrepresenting the reasons why and overcharging management fees; and making false and misleading statements to raise capital from clients for the development of an advisory platform that purportedly would use artificial intelligence (AI) to trade a range of assets. There were no insider trading cases in FY 2025.
There is little point in trying to identify trends, this year, given the change in administration. However, in addition to two of the fraud actions noted in the preceding paragraph, the ten enforcement actions initiated by the SEC since the turnover have included:
- Three actions for failure to adequately disclose conflicts of interest in connection with incentive compensation arrangements for investment adviser representatives;
- One action involving management fee calculation practices for private equity fund clients and compensation the adviser received from portfolio companies;
- One for failure to disclose fees to clients converting accounts at an unaffiliated broker-dealer to accounts with the adviser;
- One involving a marketing rule violation for an advertisement that claimed the adviser “refuse[d] all conflicts of interest,” and related recordkeeping and compliance failures.
- An action for a single Rule 105 violation; and
- An action for repeated failures to comply with Custody Rule across eleven client accounts over a six-year period.
* * *
For more insight on Seward & Kissel’s RIA Enforcement Study, please contact the authors below or your primary Seward & Kissel attorney.
