SEC Enforcement

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In July 2025, the SEC settled charges against the Chief Compliance Officers (CCOs) of two investment advisers that involved backdating compliance documents and attempting to conceal these fabrications from examiners. The settlements imposed civil monetary penalties for both officers as well as a three-year bar for the more severe violation.

These actions reinforce a lesson that should be familiar: regardless of the party in power, regulators do not look kindly on backdated documents or attempts to mislead them. While most CCOs would never consider engaging in similar conduct, any action against a CCO in their personal capacity inevitably raise broader questions in the industry about what other actions could expose a CCO to personal liability. Put another way: most CCOs understand not to go 60 miles per hour in a school zone, but what if they roll through a stop sign?

On August 15, 2025, the Securities and Exchange Commission (“SEC”) issued an order settling proceedings against TZP Management Associates, LLC (“TZP”) for allegedly miscalculating management fee offsets between 2018 and 2023. The SEC’s action, based solely on a non-scienter claim, underscores the SEC’s ongoing focus on management fee calculation practices, despite talk of deregulation and a shift toward cases involving fraud and manipulation. Bread-and-butter issues such as fee miscalculations remain an enforcement priority.[1]

Amid a challenging environment for exits, especially in the wake of the recent market volatility, private fund managers continue to pursue alternative strategies, such as term extensions and liquidity solutions, to ride out the liquidity downturn. While these measures are designed to protect the value of the funds’ investments and are frequently requested by limited partners, they raise potential regulatory concerns that have been the subject of SEC scrutiny in the past. As noted by a senior staff member of the Division of Examinations in March, the SEC continues to conduct exams with a focus on the bread-and-butter issues like fees, conflicts and related disclosures. Therefore, as funds approach maturity, it is worth reviewing the areas that have received the greatest regulatory attention.

Private credit has become an essential source of financing globally, with fund sponsors enjoying strong demand from borrowers, market participants, and investors.  However, as the industry’s “golden age” continues, regulatory scrutiny is growing.  Media coverage and legislative inquiries have pressured agencies — particularly the SEC — to take action.

With Paul Atkins as the new SEC Chair, the agency’s priorities have shifted away from many of the aggressive policies of former Chair Gensler. The first four months of the Republican controlled SEC saw a dramatic shift in the approach to crypto with the dismissal or pause of major litigation, the termination of several longstanding investigations, the recission of accounting guidance regarding the safeguarding of crypto assets and the establishment of a new task force to help formulate the regulatory approach to crypto going forward. With the enforcement program under a new SEC undergoing significant changes, there will likely be a return to more traditional enforcement cases with greater emphasis on egregious conduct involving pecuniary gain or investor harm, moving away from “pushing the envelope” cases. Enforcement sweeps involving off-channel communications, late filings and other “broken windows” initiatives are expected to fall by the wayside. Regulation by enforcement could be replaced by increased interaction with the Staff, formal or informal guidance or lighter-touch rulemaking.

Over the past year, regulatory scrutiny of the credit markets has intensified, with the SEC investigating the potential use of material nonpublic information (“MNPI”) relating to credit instruments. The SEC brought a number of enforcement actions against investment advisers involving the failure to maintain and enforce written MNPI policies involving trading in distressed debt and collateralized loan obligations, even in the absence of insider trading claims. We anticipate that these investigations of trading in private credit instruments and related MNPI policies will continue, as SEC enforcement staff has increased their focus on these markets. 

Confession: writing this in May 2025, we cannot predict with confidence what the rest of 2025 will bring. The year has already seen four months of change and upheaval – political, regulatory, and economic. The new US administration has touted a business-friendly regulatory environment, with actual and promised tax cuts and deregulation. However, geopolitical tensions, tariff trade wars and political instability have introduced new risks and created a climate of extreme unpredictability. We should expect 2025 to hold several surprises still, whether that is a breakout of peace or new political themes obtaining prominence in one or more jurisdictions.

Paul Atkins, the nominee for SEC Chair, recently testified before the Senate Banking Committee in a hearing that covered how he could reshape the agency’s priorities. The alert below examines Atkins’ testimony on issues affecting the funds industry, including the rulemaking agenda, disclosure practices, cryptocurrency, and other key issues. We…