SEC Going Back-to-Basics

In the past few months, while embracing innovation, the SEC has also continued its “back‑to‑basics” enforcement under Chair Paul S. Atkins, focusing heavily on fraud, disclosure and investor harm. The SEC has reinforced its focus on core compliance and anti-fraud priorities, issuing several enforcement actions in July alone that should prompt proactive review by investment adviser compliance teams.

Notably, the Commission brought charges in multiple cherry-picking schemes, including against North East Asset Management and its principal, where over 90% of profitable trades were directed to favored accounts, and against adviser Eric Cobb, who, according to the SEC’s complaint, systematically allocated losses to client accounts while reserving gains for personal benefit. In a separate matter, Sourcerock Group LLC was sanctioned for violating Rule 105 by participating in a public equity offering shortly after short-selling the same securities, resulting in a $250,000 penalty and cease-and-desist order, though the firm’s cooperation and remediation were credited. The SEC also charged a crypto-FX promoter in a $198 million fraud involving misappropriation of investor funds for personal luxury purchases, and separately pursued a $91 million Ponzi scheme involving fictitious trust-based investment returns. Enforcement around off-channel communications remains active, as the SEC declined requests to modify prior settlements.

Fund managers and compliance officers should ensure that trade allocation procedures, communication archiving systems, and disclosures around fund operations are current, accurate, and tailored to SEC expectations. These recent actions illustrate the agency’s continued willingness to bring aggressive cases tied to allocation abuses, disclosure failures, and fraud.