A reprise of the Trump administration will likely bring a return to the US Securities and Exchange Commission’s (“SEC”) enforcement emphasis on combatting retail investor fraud.

In September 2017, approximately four months after Jay Clayton became the Chair of the SEC under the first Trump administration, the SEC announced that one of the key enforcement priorities would be to identify and pursue “misconduct impacting retail investors.” Sec. & Exch. Comm’n, SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors, Press Release No. 2017-176 (Sept. 25, 2017), https://www.sec.gov/newsroom/press-releases/2017-176. To that end, the SEC announced that it would create the Retail Strategy Task Force to “develop proactive, targeted initiatives to identify misconduct impacting retail investors.” Id.

Fast forward to February 2025. Less than a month into the second Trump administration, and even before chair nominee Paul Atkins could have a confirmation hearing before the US Senate, the SEC seems poised to return to one of its priorities of 2017.

Last Friday (February 14, 2025), the SEC signaled the return to the 2017 agenda by issuing an enforcement press release—the first one since the change in administration—to announce (and emphasize) that it brought what appears to be a modest settled administrative enforcement action against a registered investment adviser and one of its representatives for engaging in misconduct against retail investors—specifically, for misconduct related to advisory services provided to mostly elderly investors. See Sec. & Exch. Comm’n, SEC Charges One Oak Capital Management and Michael DeRosa with Breaching Fiduciary Duties to Clients, Press Release No. 2025-39 (Feb. 14, 2025), https://www.sec.gov/newsroom/press-releases/2025-39.

The SEC’s settled order provided that One Oak and its investment adviser representative violated their fiduciary duty when they failed to adequately disclose advisory fees to certain clients converting their brokerage accounts at an unaffiliated broker-dealer to advisory accounts at One Oak. See In the Matter of One Oak Capital Management, LLC and Michael DeRosa, Exchange Act Release No. 102425, Investment Advisers Act Release No. 6855, Admin. Proc. File No. 3-22453 (Feb. 14, 2025), https://www.sec.gov/files/litigation/admin/2025/34-102425.pdf. In particular, and according to the SEC, One Oak and its representative failed to adequately disclose that the conversions from brokerage accounts to advisory accounts would result in significantly increased costs for their clients without providing additional services or benefits, and One Oak and its representative failed to disclose the resulting conflict of interest. Id. ¶¶ 1, 12. The settled order states that the investment adviser and its representative violated, among others, the antifraud provisions of the Investment Advisers Act of 1940, and ordered US$225,000 in total for civil penalties and required the retention of an independent compliance consultant to review the policies and procedures of the investment adviser, as well as imposed a nine-month industry suspension for the representative. Id. at 7-10.

While the foregoing misconduct against senior citizens undoubtedly falls within the ambit of misconduct impacting retail investors, the SEC under the first Trump administration did not just pursue investigations of frauds perpetrated against the elderly in its “combat against retail investor fraud.” Jay Clayton, Remarks at the SEC Staff Roundtable on Regulatory Approaches to Combating Retail Investor Fraud (May 29, 2020), https://www.sec.gov/newsroom/speeches-statements/clayton-opening-remarks-investor-fraud-roundtable. Far from it. And given an early (and not-so-surprising) indication that the second Trump administration will be focusing more on alleged violations against retail investors, a review of what the first Trump administration considered as misconduct impacting retail investors may shed some light on what we can expect during this administration’s second act.

What the SEC Claimed It Would Do

In explaining its “Focus on the Main Street Investor” initiative in the 2018 SEC Enforcement Division’s Annual Report, the SEC stated that there were several issues that would impact retail investors, including “disclosures concerning fees and expenses and conflicts of interest for managed accounts; market manipulations; and fraud involving unregistered offerings.” Sec. & Exch. Comm’n, Div. of Enf’t, Annual Report (2018), at 6, https://www.sec.gov/files/enforcement-annual-report-2018.pdf. And in Chair Clayton’s words, the SEC’s focus on retail investors would involve, among others, “microcap ‘pump and dump’ frauds, Ponzi schemes, and the sale of unsuitable products.” See supra,Clayton, Remarks at the SEC Staff Roundtable.

In addition, the SEC provided in the 2018 Annual Report that, as part of investigating retail investor fraud, it “focused on misconduct that occurs in the interactions between investment professionals and retail investors.” See supra, SEC Div. of Enf’t, Annual Report (2018) at 8. In connection with this focus, the SEC announced that it embarked on, among other things, the “Share Class Selection Disclosure Initiative,” which “involved disclosure failures relating to marketing and distribution fees paid by advisory clients, often referred to as ‘12b-1 fees.’” Id. The SEC focused on how “advisers placed their clients in mutual fund share classes that charged 12b-1 fees – which are recurring fees deducted from the fund’s assets – when lower-cost share classes of the same fund were available to their clients without adequately disclosing that the higher cost share class would be selected.” Sec. & Exch. Comm’n, SEC Share Class Initiative Returning More Than $125 Million to Investors, Press Release No. 2019-28 (Mar. 11, 2019), https://www.sec.gov/newsroom/press-releases/2019-28.

What the SEC Accomplished

During the first Trump administration, the SEC brought numerous enforcement actions involving unregistered fraudulent offerings and Ponzi schemes; some very substantial (from hundreds of millions to over a billion dollars), and some involving cross-border issues, which targeted, among others, deaf investors, military servicemen and women, seniors, and certain ethnic and religious groups.

However, there were also a significant number of enforcement cases that focused on the interactions between investment professionals and retail investors. For example, the Share Class Selection Disclosure Initiative, which lasted from 2018 through 2020, resulted in almost 100 settled enforcement actions against many major investment advisory firms and payments of penalties and disgorgement in excess of US$139 million. Another example is the “Exchange-Traded Products Initiative,” a risk-based initiative, which “used trading data analytics to uncover unsuitable trades of complex exchange-traded [structured] products in retail investor accounts” against a number of investment advisers. Sec. & Exch. Comm’n, SEC Charges Investment Advisory Firms and Broker-Dealers in Connection with Sales of Complex Exchange-Traded Products, Press Release No. 2020-282 (Nov. 13, 2020), https://www.sec.gov/newsroom/press-releases/2020-282.   

The Takeaways: What the Second Trump Administration Is Likely to Do

The SEC’s recent enforcement press release in One Oak provides an early clue that the SEC under the second Trump administration will likely focus more on retail investor fraud. However, given what happened under the first Trump administration, it would be, at best, short-sighted to conclude that the SEC will merely investigate unregistered fraudulent offering or Ponzi scheme cases in its effort to combat retail investor fraud. If, as it appears probable, the SEC also focuses on the interactions between investment professionals (including investment advisory firms and broker-dealers) and retail investors, there will also likely be, under the second Trump administration, more disclosure failure, conflict of interest, and suitability cases involving a variety of complex products that are sold to retail investors.