Jan M. Folena

During a recent Independent Directors Council (IDC) webinar, partner Jan Folena, co-chair of the firm's securities and regulatory enforcement practice, discussed the evolving U.S. Securities and Exchange Commission (SEC) enforcement landscape, procedural reforms within the commission, and the implications for fund boards, advisers and independent directors. Her remarks focused on how changes in leadership, litigation outcomes and internal SEC processes are reshaping regulatory risk and enforcement strategy heading into 2026.

The following summarizes the key takeaways from her presentation.

SEC Enforcement Is Returning to 'Basics'

The SEC is centering on enforcing clear statutory and regulatory obligations rather than using enforcement actions to advance broader policy objectives. This reflects a shift toward fundamental investor-protection principles and a renewed focus on violations that fall squarely within the SEC’s core mandate.

This also signals enforcement priorities are increasingly aligned with traditional areas such as fraud, fiduciary breaches and misconduct that produces real economic harm. This “back-to-basics” framework is intended to restore predictability and legal clarity in enforcement decision-making.

Procedural Changes Affect How Investigations Play Out

Procedural reforms within the SEC are changing how investigations are conducted. These include earlier access to information for respondents, expanded opportunities for engagement with enforcement staff and longer timelines for responding to Wells notices. These changes are designed to make the enforcement process more transparent and to allow regulated entities to meaningfully engage before formal charges are pursued.

In addition, the SEC has shown renewed willingness to litigate unsettled legal issues rather than resolving them through enforcement settlements alone. This reflects an effort to obtain judicial clarity and reduce regulatory uncertainty.

Examination Priorities Are Aligning with Enforcement Focus

SEC examinations are becoming more closely aligned with enforcement priorities, particularly in areas tied to investor protection. Rather than treating examinations and enforcement as separate regulatory tracks, the SEC is increasingly integrating the two functions to identify issues earlier and resolve them more efficiently. Examinations are expected to play a larger role in surfacing compliance weaknesses, with greater emphasis on remediation and corrective action. This alignment reflects a regulatory strategy that prioritizes prevention and early intervention over punitive action where investor harm has not yet occurred.

Board Oversight Practices Can Influence Regulatory Risk

Independent directors and fund boards play a critical role in the regulatory framework. Boards are viewed by regulators as essential gatekeepers, particularly in areas where legal obligations are clearly defined. How boards exercise oversight, document decisions and frame compliance discussions can materially affect regulatory outcomes.

Boards should focus on understanding the precise scope of their legal responsibilities, rather than adopting overly expansive interpretations of their role. Clear documentation, informed questioning and structured oversight practices can significantly reduce regulatory risk and provide important protection in the event of examinations or enforcement inquiries.

Enforcement Strategy Continues to Evolve Around Investor Harm

Investor harm has become a central organizing principle in SEC enforcement strategy. Enforcement actions are increasingly being evaluated through the lens of whether conduct resulted in tangible harm to investors, rather than whether a technical violation can be identified. This approach reflects a broader effort to prioritize regulatory resources and avoid enforcement actions that lack meaningful investor impact.