SEC Overhauls Enforcement, Cracks Down on Disclosure

The SEC's new posture reflects priorities set by Enforcement Director Gurbir Grewal, who has emphasized proactive enforcement and gatekeeper accountability since 2021. The manual's update formalizes a more aggressive stance, including an updated framework for criminal referrals and a focus on remedies like officer-and-director bars to deter misconduct. A key enforcement priority is cracking down on "off-channel" business communications on platforms like WhatsApp or personal email. This initiative has already resulted in over $2 billion in penalties against more than 100 firms, as the agency seeks to ensure all business-related communications are properly retained and accessible for oversight. The Holding Foreign Insiders Accountable Act, enacted December 18, 2025, eliminates a long-standing exemption for officers and directors of foreign private issuers (FPIs). Starting March 18, 2026, these insiders must electronically file reports of their equity holdings and transactions in English, similar to their domestic counterparts. This new rule specifically targets directors and officers, but not individuals who are solely 10% beneficial owners. While FPI insiders must now report transactions, they remain exempt from the short-swing profit recovery provisions under Section 16(b) of the Securities Exchange Act. The agency's focus on disclosure extends to executive compensation. Recently adopted "clawback" rules require listed companies to recover incentive-based pay awarded to executives based on misstated financials that later require an accounting restatement. This applies regardless of whether the executive was at fault for the error. The SEC has also been targeting "AI-washing," where companies make misleading claims about their use of artificial intelligence. In March 2024, two investment advisers were charged for marketing AI-powered services they weren't actually providing, signaling a new front in the agency's disclosure enforcement.