By Sean Wilke, Head of Growth Strategy, U.S.
In the mid-20th century, an aeronautical engineer from Lockhead Martin pioneered the philosophy, “Keep it simple, stupid.” “KISS,” as it was later coined, became a popular approach utilized across business and military disciplines and is very much still in existence today. The U.S. Securities and Exchange Commission (SEC) seems to be the latest governmental agency to align to this philosophy with its “back to basics” approach to regulation.
In particular, the regulator has stated it’ll be focusing on investment advisers and their disclosure practices; a shift prioritizing core enforcement areas such as insider trading, accounting and disclosure fraud, market manipulation and breach of fiduciary duties.
As we race towards 2026, this article aims to provide a practical overview of the SEC’s enforcement focus on investment advisers with an emphasis on disclosure, based on recent developments and enforcement actions.
Key enforcement priorities
1. Disclosure and transparency
- The SEC is cracking down on investment advisers for inadequate, misleading or omitted disclosures. This includes misrepresentations about investment processes, fees, expenses or performance metrics. For instance, in FY 2024, the SEC settled charges against multiple investment advisers for violating its Marketing Rule by disseminating advertisements with untrue or unsubstantiated statements, such as misleading performance claims or third-party ratings without required disclosures
- A notable case involved an investment adviser charged with falsely claiming compliance with anti-money laundering (AML) procedures in disclosure documents, despite not conducting the stated due diligence. The firm was ordered to pay a $150,000 civil penalty, underscoring the SEC’s focus on accurate disclosure
- The SEC has also targeted “AI washing,” where advisers falsely claimed to use artificial intelligence in their investment processes, misleading investors about their capabilities.
2. Fiduciary duty breaches
- Investment advisers are held to a fiduciary standard, requiring them to act in clients’ best interests and fully disclose conflicts of interest. The SEC has pursued cases where advisers failed to disclose conflicts related to fees, expenses or personal use of client assets. For example, in March 2025, the SEC charged a New York-based investment advisory firm and its executives for misappropriating approximately $223,000 from a private fund for personal expenses, violating fiduciary duties
- Enforcement actions have also addressed undisclosed compensation and improper expense allocations, particularly in private fund advising.
3. Marketing Rule violations
- The SEC’s Marketing Rule (Rule 206(4)-1 under the Investment Advisers Act) has been a focal point, with enforcement actions targeting advisers for misleading advertisements. In September 2024, nine registered investment advisers (RIAs) were charged for violations including unsubstantiated performance claims and missing disclosures for testimonials or endorsements, resulting in $1.24 million in combined penalties
- Another case involved an adviser advertising the returns of a single investor as representative of overall fund performance, misleading prospective investors.
4. Recordkeeping and off-channel communications
- The SEC has intensified scrutiny of advisers’ failure to maintain required records, particularly off-channel communications (e.g. personal text messages or WhatsApp). The regulator brought its first enforcement action against a standalone RIA for off-channel communications in April 2024, citing violations of recordkeeping rules under the Advisers Act.
5. Thematic investing and ESG
- The SEC has focused on ensuring that disclosures related to thematic investing, such as environmental, social and governance (ESG) strategies, align with actual practices. In November 2024, an adviser was charged for misleading statements about the extent of ESG integration in its investment process, violating the Advisers Act
- The SEC’s Division of Examinations has prioritized reviewing advisers’ and funds’ disclosures for consistency with their investment processes, particularly for thematic strategies.
Broader context and compliance takeaways
- “Back to basics” approach: At SEC Speaks 2025, senior officials emphasized returning to “bread and butter” enforcement areas, prioritizing investor protection and individual accountability. This includes ensuring advisers’ disclosures are clear, accurate and consistent with their actions
- Compliance policies and procedures: Advisers must maintain robust policies to prevent violations, such as those related to material non-public information (MNPI) or recordkeeping. The SEC has charged advisers for failing to enforce written policies, as seen in a December 2023 case against a New York-based RIA for inadequate MNPI procedures
- Investor protection: The SEC’s actions aim to protect investors from fraud and ensure they receive material information needed for informed decisions. This aligns with the agency’s mission to maintain fair markets and facilitate capital formation.
Recommendations for investment advisers
- Review disclosures: Ensure all disclosures, including those in Form ADV, marketing materials and offering memoranda, are accurate and consistent with actual practices.
- Strengthen compliance programs: Implement and enforce policies for recordkeeping, MNPI and conflict disclosure. Regularly review these policies to address emerging risks like AI or ESG-related claims
- Monitor communications: Prohibit or monitor off-channel communications to comply with recordkeeping requirements under the Advisers Act
- Engage with experts: Promptly involve consultants or legal counsel when potential compliance issues arise to remediate and mitigate damage.
