During her first public remarks delivered between 11 and 13 February 2026, newly appointed SEC Enforcement Director Margaret Ryan confirmed a significant strategic pivot in enforcement priorities at the U.S. Securities and Exchange Commission.
Ryan stated that the SEC intends to move away from what critics have described as “regulation by enforcement” and refocus its efforts on prosecuting “genuine harm and bad acts.” The remarks signal a recalibration of enforcement philosophy with meaningful implications for financial institutions, investment firms, and compliance professionals.
What “Regulation by Enforcement” Means
The phrase “regulation by enforcement” typically refers to situations where regulators use enforcement actions to clarify or effectively create new rules, rather than relying on formal rulemaking processes.
Critics argue that such an approach can create uncertainty, particularly in emerging sectors where legal interpretations are still evolving. Ryan’s comments suggest that the SEC intends to prioritise cases involving clear misconduct and investor harm, rather than using enforcement as a primary policy tool.
Focus on Genuine Harm and Intentional Misconduct
In her remarks, Ryan emphasised that enforcement resources will be directed toward cases involving:
• Fraud and intentional deception
• Market manipulation
• Insider trading
• Misappropriation of investor funds
• Clear breaches causing measurable investor harm
The emphasis appears to be on conduct involving bad faith or demonstrable damage to market integrity, rather than technical or interpretive disputes.
For compliance teams, the pivot does not signal reduced scrutiny. Rather, it may indicate a shift in tone and prioritisation. Institutions should not interpret the announcement as relaxation of regulatory expectations.
Instead, firms should focus on strengthening controls in areas that present heightened risk of investor harm, including:
• Conflicts of interest management
• Disclosure accuracy and transparency
• Supervision of high risk business lines
• Escalation of red flags involving potential fraud
The renewed focus on intentional misconduct reinforces the importance of culture, governance, and ethical standards.
Impact on Emerging Sectors
The shift may have particular relevance for sectors such as digital assets, fintech, and emerging financial products, where enforcement actions have often been viewed as setting precedents in the absence of detailed rulemaking.
A pivot toward pursuing clear bad acts rather than interpretive disputes could provide greater predictability for market participants, although enforcement activity in cases involving fraud or investor deception is unlikely to diminish.
Governance and Senior Management Accountability
Ryan’s remarks also underscore the expectation that senior management and boards remain responsible for overseeing conduct that may give rise to genuine harm. Enforcement priorities that target bad actors frequently extend to supervisory failures and control breakdowns.
Institutions should ensure that internal reporting lines, whistleblower mechanisms, and independent compliance oversight remain robust.
While the SEC has not indicated a reduction in overall enforcement activity, the messaging suggests a more targeted strategy focused on material misconduct rather than expansive interpretive actions.
For compliance professionals, this reinforces the need to:
• Maintain clear documentation of legal interpretations
• Escalate potential misconduct promptly
• Align internal investigations with enforcement risk
• Monitor regulatory communications for further clarification
