So, SEC—which way is it?
A Tale of Two SECs—
The One That Promises Access, and the One That Goes to Court
September 23rd, 2026
Dear ICAN Partners,
Over the last week, ICAN filed motions in two federal courts. One of them asks a judge to sanction the Securities and Exchange Commission.
We filed that one in New York, and it’s a new case we’re sharing with you that we are working on with our co-counsel, Molly White and Lauren Mann of McGuireWoods. You can read it here. Asking a court to sanction a federal agency is rare, and we did not do it lightly. We did it because the Commission sued our client without doing the work the rules require of every plaintiff, government included.
We filed the other in Texas in our case that you may already be familiar with, Kapszukiewicz & Healthcare Shares, P.B.C. v. SEC. On the surface, the two cases look nothing alike. The Texas case is brought by an investor who was kept out of a deal. The New York one defends a lawyer accused of letting investors into a deal. What connects them is a single rule — the SEC’s definition of an “accredited investor,” the wealth test that decides who is allowed to invest in private companies—and the fact that in both cases the Commission went to court to defend that rule's reach.
At the same time, the Commission continues to insist publicly that it is committed to widening access to private markets—a commitment completely at odds with its actions against both of our clients.
Texas: a screenshot was enough
By now you may already know Emily Kapszukiewicz’s case; if not, the details are here. The bottom line is that she fell just short: her income was roughly $195,000 against a $200,000 threshold, her net worth roughly $850,000 against $1 million. Two verification services she used each confirmed she did not qualify as an accredited investor, and, as a result, a small healthcare fund turned her away twice, in March and April 2025. With co-counsel Angela Brown and Chris Davis of Gray Reed, we sued to challenge those wealth and income thresholds for her and for Healthcare Shares, the company that needed her capital and her expertise.
Her case shows how arbitrary the wealth test is. Nothing about those numbers describes what Emily understands. They describe what she has.
The Commission’s answer was not that Emily is wealthy enough. It was that she should have found another way in, and it pointed to her role as an advisor to the fund. To find the path the agency says was open to her, Emily would have had to look past the accredited investor definition to a provision that defines nothing on its own, jump from the Securities Act into the Investment Company Act, apply a 1997 SEC rule, follow four layers of cross-reference through six-part definitions of “affiliated person” and “covered company,” locate the term “advisory board” in a statutory definition, and reconcile all of it against a 2014 staff no-action letter built on a chain of earlier ones.
Byzantine is the only word for it.
The Commission's evidence that Emily had already walked that path was a line in our complaint describing her as an "advisor" to Fund I and a screenshot of her LinkedIn profile listing "Member of the Board of Advisors, Healthcare Shares." From that, its motion to dismiss concluded that she "appears to qualify as an accredited investor with respect to an investment in Fund I," "appears to fit into this category," and "appears to be an 'advisory board member' of an 'Affiliated Management Person' of the fund." Three hedges in two pages. The court turned them into a jurisdictional holding. And had she walked the path, the letter at the end of the chain says the determination is not even hers to make. It belongs to the fund manager, who is expected to write down why the person qualifies. Nothing in the record shows that determination was ever made, and neither the Commission nor the court identified one. A wrong guess would not have cost Emily alone, either: it is the fund that carries the risk when a purchaser turns out not to qualify.
On September 2, the court adopted the Commission’s theory and dismissed the case, and this week we asked it to reconsider (read motion here). The Commission’s own exhibit, the fund’s public filing, names a different company as the fund’s general partner and names Fund GP, LLC as the fund's general partner rather than Healthcare Shares, and does not list Healthcare Shares among the fund's related persons at all. And her constitutional claims were never addressed.
A route an investor cannot find, cannot invoke, and cannot safely guess at is not an option. It is an argument made after the fact.
New York: 72,000 pages were not enough
Speaking of who bears the risk: here’s what happened when the Commission sued a firm that wrote all of it down.
Before we get to what happened to our newest client Mona Shah, a word about the rule our motion rests on. Rule 11 of the Federal Rules of Civil Procedure says what a lawyer promises by signing a complaint: that they investigated first, and that what backs the accusation is evidence as of the day they sign, not a theory discovery might fill in later.
That promise matters most when the government signs. The Commission runs on public money, and the public pays either way—for a case that should never have been brought, for the years of litigation that follow, and for the other side’s legal bills when a court says the rules were broken. Every dollar spent that way is a dollar not spent on the fraud the agency calls its priority.
In November 2023, the Commission sued Mona Shah, her law firm, and two affiliated entities. Mona is an immigration lawyer; her small New York firm does EB-5 work, helping people become permanent residents by investing in job-creating American businesses. One charge: selling unregistered securities. It rests on a single allegation—that investors in three EB-5 offerings were not “accredited,” meaning not wealthy enough to qualify for the exemption those offerings relied on.
Rule 11 asks one question here, and it is answerable in this case: in November 2023, what evidence did the Commission have to back up its allegation?
Her firm’s process with potential investors was thorough: two consultations with an immigration attorney, tax returns and bank statements and property records reviewed, a source-of-funds memorandum tracing every dollar of the $500,000 minimum, and independent confirmation of accreditation from the escrow bank before any money moved. When the firm could not satisfy itself that someone qualified, it turned the business away. A firm rubber-stamping investors to collect fees does not send paying clients out the door.
In July 2023, four months before it sued, the Commission questioned Ms. Shah under oath, and she told the staff the investor files existed and where they were kept. It never looked at them. It never interviewed anyone else at the firm either, though the offering documents name it as special counsel and its securities-qualified attorneys prepared them. Three days later, it subpoenaed the firm’s written policies and the checklist sent to investors—but did not ask for the files that could have answered their questions. On November 21, 2023, it sued anyway.
Two years later, in December 2025, we asked the Commission to formally admit that the investors were accredited. It refused, saying it lacked sufficient information and that the question remained the subject of discovery. In January 2026, we produced more than 72,000 pages of the records it had never requested. It sat on them for over a month, and read them only after Mona’s letter warning that she would seek sanctions—its own trial lawyer told a magistrate judge so.
Then we served our motion. The rules gave the Commission three weeks to fix the problem first. Six days before that window closed, it withdrew those answers and replaced them with flat denials. After nine months of saying under oath that it could not tell either way, it now says they were not, explaining that the evidence it held all along was enough to know. If that is true, it could have said so in December 2025.
Documents handed over two years after you sued are not an investigation. They are the investigation the Commission should have done before it ever walked into court—and this is why Rule 11 exists.
Mona has now spent a significant amount of money defending herself without being found liable for anything—and that counts only her legal bills, not what an SEC case sitting on a public docket does to a practice that runs on reputation.
So SEC—which way is it?
In Texas, the Commission tells a court that qualifying as an accredited investor is easy — so easy that it can assume Emily qualifies through a path it never has to prove, and be spared the case. In New York, it tells a court that qualifying is so demanding that a firm came up short despite collecting tax returns, bank statements, and property records, writing a source-of-funds memorandum for every investor, and turning away potential investors it could not verify. The SEC concluded all of this without ever looking at the underlying records.
Different arguments, one result.
One investor is told the door is open and shown no way through it. The firm that does the work of opening it is nearly three years and a significant amount of money into defending itself. If doing it carefully is no protection, and the alternative is a route the Commission can assert but never has to establish, what is a careful person supposed to do?
The SEC says it wants this to change. It has been promising to revisit the accredited investor definition for years, and in a December 2023 report it listed ICAN's own rulemaking petition among the reform proposals it had received. Its enforcement director, David Woodcock, told Law.com this month that the division is being selective with shrinking resources, concentrating on fraud and on cases involving real harm to investors and real individual accountability.
That is not what these two cases look like. In Texas, the agency went to court to keep the wealth thresholds in place against a woman who fell short by a rounding error. In New York, it is spending public money on a charge where no fraud and no investor harm has been alleged, and the only person who has clearly lost anything is Mona Shah, over an accusation the agency should never have brought in the first place.
A system built to protect investors and ensure robust markets does not look like this.
I have made this point before, and I will keep making it: what an agency announces at the top and what it does in an individual courtroom are two different things. Free and fair markets need someone whose full-time job is to watch. Selecting the right cases, staying with them to the end, and assembling the pattern where people can see it — that is why ICAN exists.
With gratitude,
Nick Morgan
Founder and President of ICAN
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