Regulatory Update

SEC Names Enforcement Division Director.

08.22.25.The SEC announced that Judge Margaret “Meg” Ryan has been named Director of the Division of Enforcement, effective Sept. 2, 2025. Acting Director of Enforcement Sam Waldon will return to his previous role as Chief Counsel for the Division. “I am thrilled to welcome Judge Ryan to the SEC,” said SEC Chairman Paul S. Atkins. “She brings to the Commission decades of experience as a respected judge and practitioner of the law. She is fulfilling a critical role. Judge Ryan will lead the Division guided by Congress’ original intent: enforcing the securities laws, particularly as they relate to fraud and manipulation.”Judge Ryan is a senior judge of the United States Court of Appeals for the Armed Forces. She was nominated to the court in 2006 by President George W. Bush, was confirmed by the United States Senate, and served the entirety of her term through July 2020. She reached senior status in August 2020. Judge Ryan currently is a lecturer on military law and justice at Harvard University Law School. “It is my honor to join the Commission as Director of the Division of Enforcement,” said Judge Ryan. "I look forward to joining the Commission in its important work to ensure that the Division is true to the SEC’s mission in taking action on behalf of investors harmed by those who break the securities laws and providing an effective deterrent against fraudulent and manipulative activities in our financial markets."

In the Matter of Emerson Equity, LLC, Release No. IA-6904.

08.11.25. Emerson is a dually registered broker-dealer and investment adviser.One of Emerson’s registered representatives allegedly violated Regulation Best Interest’s Care Obligation when they recommended certain speculative corporate bonds (“L Bonds”) issued by GWG Holdings, Inc. (“GWG”) to retail customers without exercising reasonable diligence, care, and skill to have a reasonable basis to believe the recommendations were in the best interest of each retail customer.The unrated L Bonds were illiquid, risky, and only suitable for investors with a high-risk tolerance according to the L Bonds Prospectus.GWG filed for Chapter 11 bankruptcy in April of 2022. The Customer-Specific Prong of Regulation Best Interest’s Care Obligation requires a broker-dealer or its associated person, in making a recommendation of any securities transaction involving securities to a retail customer, to exercise reasonable diligence, care, and skill to, among other things, have a reasonable basis to believe that the recommendation is in the best interest of a particular retail customer based on that retail customer’s investment profile and the potential risks, rewards, and costs associated with the recommendation. Emerson, acting through its registered representative, recommended L Bonds to 10 retail customers for whom it did not have a reasonable basis to believe that the L Bonds were in the customers’ best interest. The totality of these retail customers’ circumstances, which included factors such as age, annual income, liquid net worth, and concentration of liquid net worth in L Bonds, were a mismatch for high-risk, potentially speculative, illiquid investments such as L Bonds. Most of these 10 customers were at or near retirement age, and they invested between 16% and 72% of their liquid net worth in L Bonds based on a recommendation from the registered representative.

In the Matter of Munakata Associates LLC, Release No. IA 6901.

08.01.25. The SEC alleges that registered investment adviser Munakata failed to comply with Advisers Act Rule 206(4)-2 (the “Custody Rule”).As outlined in previous SEC Risk Alerts, advisers often fail to recognize that they have custody of client assets.Munakata had custody of client’s funds or securities in at least three ways:First, Munakata’s President, the firm’s sole principal and chief compliance officer, served as a co-trustee of two trusts that were Munakata’s advisory clients. The trust agreements granted each co-trustee “broad investment and other powers under the trust agreement and applicable law to enter into transactions and to trade, buy, sell, sell short or otherwise acquire, receive, deliver, assign, endorse for transfer, hold or dispose of all manner of securities, futures, currencies and commodities . . . .” as well as “broad powers under the trust agreements and applicable law to engage in borrowing and other loan and credit transactions . . . .” The agreements further stated that each co-trustee may act independently. Thereby, the adviser had access to and the ability to obtain possession of trust funds and securities without the consent of the respective co-trustees. Second, the President also had signatory authority on four clients’ accounts whereby he had the same ability to instruct the broker as to delivery of the accounts’ funds and securities as did the beneficial owner of the account. As a result, Munakata had access to and the ability to obtain possession of client funds and securities.Third, the President acted as an authorized agent with power of attorney on five clients’ accounts whereby he had “the power to place orders in an account, request disbursements and make inquiries concerning the account such as obtaining account balances” as well as the power “to make gifts or other transfers of . . . money or other property from [the client’s] account during [the client’s] lifetime, without restriction, to any one or more persons, including the agent himself or herself.” (emphasis in original). Consequently, Munakata had access to and the ability to obtain possession of client funds and securities. As a result, Munakata had custody of client funds and securities under the Custody Rule and was required to obtain surprise examinations in accordance with Rule 206(4)-2(a)(4) but failed to do so.

In the Matter of TZP Management Associates, LLC, Release No. 6908.

08.15.25. The SEC charged TZP Management Associates, LLC (TZP), a registered investment adviser, for breaches of fiduciary duty regarding management fee calculations for its private fund clients related to compensation TZP received from portfolio companies. TZP agreed to pay more than $680,000 in monetary relief and to conduct a distribution to harmed investors. TZP provides investment advisory services to private funds, each of which is governed by a limited partnership agreement (LPA). The LPAs allow TZP to receive management fees from the funds, as well as transaction fees from portfolio companies, but require that TZP credit back to each fund a portion of the transaction fees to reduce or offset the management fees the funds owe to TZP. The order finds that TZP breached its fiduciary duty to the funds by engaging in two fee offset calculation practices related to its receipt of transaction fees that created conflicts of interest that were not adequately disclosed to the funds or their limited partners (LPs) and were inconsistent with the relevant LPAs. First, the order finds that TZP failed to adequately disclose that it received interest on deferred transaction fees from five portfolio company investments and did not include those amounts in the corresponding fee offsets. Second, the order finds that, for at least one portfolio company investment in which multiple funds invested, TZP improperly duplicated transaction fee reductions when calculating certain fee offsets. The order finds that TZP charged the funds more than $500,000 in excess management fees as a result of these practices.TZP consented to the entry of the SEC’s order finding that it violated Section 206(2) of the Advisers Act. In addition to a cease-and-desist order and censure, TZP agreed to pay $508,877 in disgorgement and prejudgment interest and a $175,000 civil penalty and was ordered to conduct a distribution to harmed LPs.