Enforcements

SEC Sanctions RIAs for Misstating Form ADV Fees, Conflicts, and Business Practices

Summary: The SEC’s Litigation Release No. 26416 charges six entities with making false statements in their Forms ADV—including fabricated office locations, misstated AUM, and unsupported fund affiliations—and for failing to respond to SEC requests for records.

Why it matters: The action highlights the SEC’s continued focus on ADV accuracy and the expectation that advisers substantiate every representation they make. Misreported operations or unverified disclosures remain a clear enforcement trigger.

Potential action: Managers should review their Form ADV for accuracy, ensure all disclosures can be fully supported with documentation, and maintain readiness to promptly respond to SEC information requests.

Read More Here (SEC)

US. Regulators Probe $400M in Borrowing From HPS Investment Partners

Summary: According to a report in the Financial Times, U.S. regulators are probing companies that borrowed approximately US $400 million from the private-credit firm HPS Investment Partners, with the investigation focused on entities controlled by Bankim Brahmbhatt. The borrowing is alleged to involve “brazen” fraud and has drawn scrutiny from both the lender and regulatory authorities.

Why it matters: For private-fund managers and advisers, this situation underscores the heightened regulatory and lender scrutiny within the private-credit space. When large sums are borrowed from specialized credit providers, firms must ensure their documentation, risk-controls, borrower-disclosure and counterparty oversight are strong. The case illustrates that private-fund-credit transactions are not immune from enforcement and lender-driven investigation.

Potential action: Managers engaged in private credit or investing alongside private credit vehicles should review their borrower-due-diligence frameworks, ensure that borrower representations and risk disclosures are supported by audited documentation, confirm oversight of large-borrower relationships, and verify that any counterparty investigations or disputes are tracked in risk registers. In addition, consider aligning mock-exams or governance reviews to include lender-driven investigations in the private-credit context.

Read More Here (FT)

SEC Bars CPA for Insider-Trading Misconduct

Summary: SEC’s Litigation Release No. 26417 announces a final judgment against a CPA, permanently barring him from association with investment advisers, broker-dealers, and other regulated entities, and suspending him from practicing before the Commission for ten years. The action stems from allegations that he tipped others and traded on material non-public information related to pending M&A transactions.

Why it matters: The case underscores the SEC’s heightened focus on insider-trading risks and the misuse of confidential deal information. Private-fund managers should expect regulators to scrutinize information barriers, employee access to MNPI, and the effectiveness of trade-surveillance and personal-trading controls.

Potential action: Managers should review insider-trading policies, ensure access to sensitive or deal-related information is properly limited, verify that pre-clearance and surveillance systems operate effectively, and incorporate real-world enforcement matters like this into employee training and mock-exam preparation.

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What regulators are saying

SEC Shifts Exam Focus Away from Crypto in 2026 Priorities

Summary: According to a Reuters report, the U.S. Securities and Exchange Commission (SEC) has dropped its explicit focus on crypto-asset firms in the FY 2026 examination priorities published by its Division of Examinations. The 2026 agenda instead emphasize traditional risk-areas such as fiduciary duty, custody standards, customer data privacy and conduct standards.

Why it matters: For private-fund managers and advisers, this signals that the SEC may shift its inspection resources away from crypto-specific ecosystems toward core compliance themes. Firms that had positioned heavily on crypto-asset custody or advisory services may interpret reduced dedicated mention as a less imminent exam threat—but should remain vigilant since the SEC noted the list is not exhaustive.

Potential action: Managers should review whether their compliance programs remain aligned with the core priorities: fiduciary obligations, custody protocols, investor data protection and conduct oversight. Even if crypto-specialized operations may face lower intensity right now, firms should not use that as a reason to deprioritize crypto-asset governance. Instead, they should maintain robust policies, documentation and internal testing for any crypto-related exposures, while emphasizing the main exam pillars highlighted by the SEC.

Read More Here (Reuters)

SEC’s 2026 Exam Priorities: Cybersecurity, Fiduciary Duty, Conflicts, and AI Oversight

Summary: The SEC’s Division of Examinations issued its FY-2026 priorities, emphasizing fiduciary duty, custody compliance, standards of conduct, and oversight of newly registered advisers. The Division also highlighted increased focus on implementing the amended Regulation S-P, including data-protection, incident-response, and vendor-oversight requirements.

Why it matters: Private-fund managers should expect continued scrutiny of core compliance areas and heightened attention to cybersecurity readiness and Reg S-P implementation. Newly registered advisers should anticipate early and in-depth examinations.

Potential action: Firms should ensure their compliance programs align with the SEC’s stated priorities, confirm Reg S-P updates are fully implemented and documented, and use these themes to guide internal reviews and mock exams.

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SEC Expected to Target Advisor M&A and Alternatives in 2026 Exams

Summary: According to a former regulator quoted in FA Magazine, the Securities and Exchange Commission (SEC) is expected to put advisor M&A activity and alternative-investment strategies at the center of its 2026 examination agenda. The shift signals heightened scrutiny of deal-related dynamics, alternative‐asset structures, and the governance around transaction-driven growth.

Why it matters: For private-fund managers and emerging advisers, the anticipated emphasis means that acquisitions, integrations, alternative strategy launches and fund structure changes can trigger exams. The warning underscores the need for clear documentation, transaction-related controls, valuation oversight and integration of newly acquired or new‐product entities into compliance programs.

Potential Action: Managers should assess whether their M&A or alternative strategy plans carry elevated exam risk: review transaction-integration processes, governance of new product lines, pre-transaction due diligence and disclosure oversight. Ensure your compliance program covers valuation methods, conflicts of interest arising from deal activity, and that newly launched funds or products are incorporated into your risk-inventory and testing frameworks.

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In the news

Evergreen PE Funds Drive Up Prices in the Secondaries Market

Summary: The Wall Street Journal reports that “evergreen” private-equity funds—semi-liquid vehicles targeting wealthy individuals and 401(k) channels—have been paying above-market prices for secondhand PE stakes. With more than 250 such funds launched since 2022 and roughly $450 billion raised, deployment pressure has driven these vehicles to pay an estimated 4.3 percentage-point premium for LP interests in early 2025.

Why it matters: Premium pricing in the secondary market may compress returns, distort valuations, and introduce liquidity and governance risks, particularly as evergreen structures blend retail inflows with private-market assets.

Potential action: Managers should assess how elevated secondary-market pricing affects valuation, underwriting discipline, and liquidity planning. Evergreen and secondary-focused strategies should ensure policies around valuation, investor disclosure, and liquidity risk are clearly defined and defensible.

Read More Here(WSJ)

Orical Publications

Orical’s latest publication, FY2026 Examination Priorities - Issue in Focus examines the SEC’s newly released exam priorities, which signal a sharpened regulatory lens on cybersecurity, fiduciary duty, conflicts of interest, and the expanding use of AI-driven tools across advisory firms. While the themes align with long-standing expectations, the SEC’s framing reflects a clear shift toward deeper, more risk-targeted reviews, particularly for newly registered advisers and firms navigating operational growth. Advisers should ensure their compliance programs are fully implemented, well-equipped, and prepared to withstand heightened scrutiny in the year ahead.

Read More Here (Orical)