Enforcement

SEC Obtains Final Consent Judgment in Mutual-Fund Asset Diversion Case

Summary: The SEC obtained a final consent judgment against a mutual-fund manager based on allegations that fund assets were diverted through unauthorized, uncollateralized loan transactions to entities controlled by the manager, contrary to the fund disclosures and governing documents. The judgment permanently enjoins future violations of key anti-fraud provisions under the Securities Act, Exchange Act, Advisers Act (including Rule 206(4)-8), and Investment Company Act, and orders disgorgement and prejudgment interest with offsets tied to amounts returned to investors and related criminal restitution/forfeiture.

Why it matters: For RIAs and private-fund managers, the matter underscores that misuse of fund assets and deviations from disclosed investment parameters, especially transactions involving controlled or affiliated entities, remain core SEC priorities and can trigger liability under Rule 206(4)-8 even absent traditional “purchase or sale” securities fraud theories. It also highlights the practical reality of parallel civil and criminal exposure, and the importance of robust governance and cash-movement controls.

Potential action: Review controls around cash movements, lending/financing arrangements, and any transactions with affiliates or entities connected to personnel to ensure approvals, collateralization, and documentation align with fund documents and disclosures. Re-test disclosure accuracy and consistency across offering materials, investor reporting, and internal investment guidelines, and confirm compliance testing explicitly covers conflicts, related-party transactions, and asset-verification safeguards.

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Rulemaking

SEC Finalizes HFIA Act Rule Extending Section 16(a) Reporting to Foreign Private Issuer Insiders

Summary: The SEC adopted final rule and form amendments to implement the Holding Foreign Insiders Accountable Act, increasing transparency into the holdings and transactions of directors and officers of foreign private issuers (FPIs). The amendments remove the long-standing Section 16 exemption for FPIs but preserve exemptions from Section 16(b) (short-swing profit) and Section 16(c) (short-sale prohibition), and they exclude 10% holders of FPIs from Section 16(a) reporting.

Why it matters: RIAs and private-fund managers with portfolio exposure to FPIs, or with personnel serving as directors/officers at FPIs, should prepare for a new, U.S.-style insider reporting regime (Forms 3/4/5) beginning March 18, 2026, including electronic, English-language filings. This change can affect governance, trading-window controls, compliance surveillance, and how advisers manage MNPI and personal trading for insiders affiliated with FPIs.

Potential action: Identify any FPI positions where your firm’s principals, employees, or affiliates serve as directors/officers and confirm Section 12 registration status to determine coverage, then stand up a Section 16 compliance workflow (EDGAR access, calendaring, pre-clearance, and filing responsibility assignments) ahead of the March 18 effective date. Review personal trading/MNPI policies and board-service procedures to ensure insiders understand reporting triggers and timing, and coordinate with FPI counsel/issuer compliance teams to align filing mechanics and internal reporting processes.

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What Regulators are Saying

CFTC Names Former Federal Prosecutor and Crypto Lawyer David Miller as Director of Enforcement

Summary: Reuters reports that the CFTC appointed David Miller—formerly a federal prosecutor on the SDNY securities and commodities fraud task force and most recently a private-practice lawyer with digital-asset experience—as the agency’s top enforcement official. The move comes as the CFTC prepares to increase oversight of cryptocurrency and prediction markets under Chair Michael Selig.

Why it matters: For RIAs and private-fund managers trading or exploring crypto, derivatives, or event contracts, leadership changes at the CFTC Enforcement Division can quickly translate into sharper investigative posture, new case-selection priorities, and more frequent coordination with other agencies and venues. The appointment also signals that the CFTC expects active enforcement in these markets, particularly around fraud, manipulation, and information-misuse theories that can reach funds and their personnel.

Potential action: Confirm whether your compliance program expressly covers crypto assets, derivatives, and prediction markets (including MNPI, conflicts, personal trading, and surveillance) and that it applies consistently to fund and employee accounts. Reassess vendor and venue due diligence, trade-surveillance capabilities, and escalation protocols for unusual activity in event contracts or digital-asset products. Where applicable, refresh disclosures and investor communications describing these instruments, related risks, and the firm’s controls.

Read More Here(Reuters)

CFTC Enforcement Issues Advisory Warning on Insider-Trading and Fraud Risks in Prediction Markets

Summary: The CFTC’s Division of Enforcement issued an advisory warning following the public release of two matters involving alleged misuse of material nonpublic information and improper trading in prediction markets (event contracts) traded on KalshiEX, a designated contract market. The advisory emphasizes that even where a DCM’s internal enforcement program addresses misconduct, the CFTC has full authority to police illegal trading practices on DCMs, including insider-trading-type misappropriation under CEA Section 6(c)(1) and CFTC Rule 180.1.

Why it matters: Private-fund managers and RIAs that trade event contracts (directly or through affiliates/controlled accounts) should treat these products as subject to familiar anti-fraud and MNPI principles, including restrictions on trading when the trader has influence over outcomes or access to confidential information through employment/affiliations. The advisory warning also increases regulatory attention to surveillance, audit trails, and rule enforcement by venues, and the likelihood that the CFTC may pursue cases where funds, employees, or related persons engage in MNPI-based strategies or other prohibited trading practices in these markets.

Potential action: Review your firm’s policies to ensure event contracts/prediction markets are explicitly covered under MNPI/insider-trading, conflicts, and personal-trading rules, including restrictions for employees with direct or indirect influence over an event’s outcome. Reassess trade surveillance and pre-clearance controls for accounts that may access prediction markets (including personal accounts), and document how the firm identifies affiliations (employment, advisory roles, sponsorships) that could create MNPI or influence-over-outcome issues. If your strategies include event contracts, confirm your onboarding and investor disclosures accurately describe the instruments, related conflicts, and the compliance framework governing these trades

Read More Here (CFTC)

In the News

SEC Names Rule FAQs Expand Practical Flexibility as the SEC Moves to Roll Back Names Rule-Related Form N-PORT Reporting

Summary: Morgan Lewis reports that SEC staff issued four new FAQs on the amended Names Rule (Rule 35d-1) and, in parallel, the SEC extended the compliance dates for Names Rule–related Form N-PORT reporting and proposed targeted amendments to Form N-PORT that would eliminate the Names Rule-specific N-PORT reporting adopted in 2023. The FAQs address practical issues including when 60-day notice is not required for certain non-material 80% policy changes, how cash held for unfunded commitments to private funds/SPVs may be treated for 80% policy purposes, limited circumstances where “growth/value” terms may not trigger an 80% policy, and confirmation that “merger/merger arbitrage” does not by itself require an 80% policy.

Why it matters: Even though the Names Rule and Form N-PORT are registered-fund regimes, they directly affect private-fund managers that sponsor registered products (interval funds, tender-offer funds, ‘40 Act funds) or allocate into private funds/SPVs through registered vehicles, especially given the FAQ position allowing certain cash held for private fund/SPV commitments to count toward an 80% policy if appropriately disclosed. The extended N-PORT compliance dates and the proposal to roll back Names Rule-related N-PORT items also signal shifting SEC thinking on data-collection burdens and front-running concerns, which can influence operational planning and disclosure strategy for managers operating across registered and private products.

Potential action: Review any registered products you advise (and any private fund/SPV sleeves they use) to confirm how unfunded-commitment cash is treated under 80% policies and ensure the registration statement includes clear explanatory disclosure if you intend to count that cash toward the 80% basket. Update Names Rule implementation plans and board materials ahead of the on-cycle compliance dates for the 2023 Names Rule amendments and reassess whether any planned N-PORT buildouts should be paused or staged given the extended compliance dates and the proposal to eliminate certain Names Rule-related N-PORT fields.

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Events

IAA 2026 Investment Adviser Compliance Conference — Effective Strategies and Best Practices

Summary: The Investment Adviser Association (IAA) opened registration for its 2026 Investment Adviser Compliance Conference, a two-day, in-person program taking place March 18–20, 2026 in Washington, D.C. The conference agenda is designed to provide investment advisers with current insights into the evolving regulatory landscape and features speakers including SEC officials, industry compliance professionals, and legal experts.

Why it matters: For RIAs and private-fund managers, this is a high-value opportunity to benchmark compliance programs against current SEC exam and enforcement themes, hear directly from regulators and practitioners, and gather practical best practices that can be incorporated into annual reviews, testing plans, and policy updates. It also provides an efficient forum for networking with peers and service providers on operational and governance issues impacting private funds.

Potential action: Register key compliance, legal, operations, and investor-relations stakeholders and align attendance with your 2026 compliance calendar (annual review, policy refreshes, Marketing Rule testing, Reg S-P implementation, etc.). Use the published agenda and speaker roster to identify priority sessions and prepare targeted questions tied to your firm’s risk areas, then schedule internal post-conference readouts to translate takeaways into concrete updates to procedures, disclosures, and testing.

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NSCP Compliance Seminar for Private Fund Managers — New York

Summary: NSCP is hosting a one-day, in-person “Compliance Seminar for Private Fund Managers” on Tuesday, April 21, 2026 (8:30 a.m.–5:00 p.m. ET) in New York, NY at Troutman Pepper Locke (875 3rd Avenue), with registration currently open through April 8, 2026.

Why it matters: This seminar is tailored specifically to private-fund compliance professionals and provides a practical forum to benchmark policies, controls, and current regulator focus areas with peers, useful for managers preparing for SEC exams and investor diligence on topics like conflicts, fees/expenses, valuation governance, marketing practices, and operational resiliency.

Potential action: Register compliance, legal, and operations stakeholders who own core private-fund controls and align attendance with your 2026 annual review and testing calendar. Use the posted agenda to identify the sessions most relevant to your strategy (e.g., credit, PE, hedge) and plan a post-event internal debrief to translate takeaways into policy updates, training, and targeted testing enhancements.

Read More Here(NSCP)