Author: Walker Newell
In February, the Securities and Exchange Commission's Division of Enforcement (SEC Enforcement) made significant revisions to its Enforcement Manual. April, SEC Enforcement published an annual report highlighting the agency's investigations, settlements and litigation in 2025. Soon after releasing the report, the SEC named David Woodcock, a partner at Gibson Dunn and a former SEC Regional Office leader, as the new Director of Enforcement.
What should companies take from these developments? How will new leadership define the SEC Enforcement mission in the coming years?
The clearest message can be found in SEC Chairman Paul Atkins' remarks accompanying the 2025 report results:
Most commentators have interpreted the 2025 report (which showed a downtick in the overall number of enforcement actions filed) and Chairman Atkins' remarks as a new era for SEC Enforcement. Here's how several prominent SEC Enforcement defense firms characterized the results:
- "[A] significant recalibration of the SEC's enforcement program" (Debevoise & Plimpton1)
- Results reflect "the current administration's much-publicized change of priorities" (Cooley2)
- Results "underscore a post-inauguration shift toward pursuing cases centered on traditional 'bread and butter' securities law violations, including Ponzi schemes and other offering frauds, market manipulation, insider trading, and breaches of fiduciary duty" (Morrison Foerster3)
- Developments indicate the SEC is "committing not to bring enforcement actions where clear rules do not already exist" (Quinn Emanuel4)
The future of SEC enforcement for public companies
As we can see, there seems to be a broad consensus that the current SEC leadership will be more selective in choosing which cases to investigate and file.
But SEC Enforcement has authority across several domains. For example, cases against registered financial services entities — broker-dealers, investment advisers and exchanges — are different from industry-agnostic cases against publicly traded companies.
In the public company arena, SEC Enforcement has access to various legal theories. Here are some of the most common legal theories the SEC has investigated and pursued against public companies in recent years:
- Section 10(b) of the Securities Exchange Act of 1934 prohibits fraud with "scienter" (i.e., intent, although the intent requirement may be satisfied by recklessness in some jurisdictions). This is also the legal theory most commonly alleged in private securities class action litigation against public companies.
- Section 17(a) of the Securities Act of 1933 prohibits "negligent" fraud in connection with securities offerings. In recent years, the SEC has often included this legal theory — which doesn't require a showing of bad intent — in settled enforcement actions against public companies. Section 17(a) doesn't include a private right of action, so we don't see this legal theory in private securities class actions (although Section 11 of the Securities Act looks similar and serves a similar purpose for post-IPO private litigation).
- SEC Enforcement has frequently brought Internal Controls, Disclosure Controls and Books and Records charges against publicly traded companies in recent years. These cases don't require a showing of fraud.
- Section 14(a) of the Securities Exchange Act and Item 402 of Regulation S-K govern the disclosure of public company executive perquisites (or perks). Over the past decade, SEC Enforcement has brought numerous cases against publicly traded companies for allegedly inaccurate disclosures in response to these requirements.
These provisions and rules remain on the books. As individual SEC lawyers and accountants seek to carry out the goals of new leadership, it remains to be seen exactly what public company enforcement actions will look like in the years ahead.
Will executive perquisites, books and records, and internal controls investigations and charges be disfavored? What about negligence-based charges? How many Section 10(b) fraud cases will be brought in comparison to years past?
From a Directors and Officers (D&O) risk perspective, the answers to these wonky questions about charges matter.
Perhaps an even more important question: How many investigations — even if no charges are brought — will the SEC staff open into publicly traded companies?
"Entity investigation coverage" for public companies
When SEC Enforcement conducts a non-public investigation into a publicly traded company, the agency's goal is to develop evidence of whether the company or any individuals have violated federal securities laws. Investigations often take a very long time to resolve.
Even if the government doesn't bring any charges, a company's investigative defense costs can add up very quickly.
In today's competitive D&O insurance marketplace, carriers are offering endorsements that may help public companies defray defense costs for SEC investigations. Commonly called "entity investigation coverage" (to differentiate it from coverage for individual defense costs in investigations), these endorsements may be attractive to some companies depending on exact terms and pricing.
Indeed, pricing and terms vary significantly. As companies evaluate this coverage, here are some things they should be thinking about:
