The Ticker Tape: Issue 9
- Nicolas Morgan
- Nov 19
- 8 min read
Fall 2025
Behind the Headlines:
Quiet SEC Moves With Major Consequences
November 19th, 2025
Dear ICAN Partners,
While the government shutdown paused most federal activity over the last few weeks, it certainly hasn’t meant ICAN is taking a break. Our team has continued moving forward on several important fronts, and we’ve had a number of notable developments I’m proud to share with you.
In many ways, this moment highlights exactly why ICAN exists. When regulatory activity slows — whether due to a shutdown or a new administration shifting direction — it is easy to assume that the pressure on small investors and entrepreneurs also slows. But the consequences of past decisions, especially those made during years of unchecked regulatory expansion, continue to ripple through the system. Hundreds of cases initiated one, five, or even ten years ago are still working their way through the courts, often carrying with them the threat of new precedents that, if left unchallenged, could cement past expansionary efforts and pave the way for future overreach.
Our work has never been more important, and in this issue, we’re sharing just a few examples of what we’ve been focused on this fall, including two new cases in which ICAN is using creative strategies to defend small investment advisers. Each case represents yet another example of how the SEC, under its previous leadership, sought to expand its jurisdiction incrementally, not grounded in statute – practices that cannot be allowed to go unchallenged.
We’ve also had several positive developments in ongoing ICAN cases over the past few weeks, including SEC v. Barry, for which we received two new amicus briefs supporting our petition for en banc review — one from CalAlts and one from Atlanta Blockchain Center. The briefs underscore the broader significance of the case for market participants nationwide, and are a welcome boost as we work to take it to the Supreme Court. And today, we filed an amicus brief in the Supreme Court on behalf of those same clients in another case in which the SEC is pressing a similarly aggressive theory of ‘victimless disgorgement’ that seeks to chip away at the Court’s prior limits on that remedy.
Finally, I’m proud to share a couple of internal updates. Our team was recently honored when ICAN Board Member and Co-Founder Tom Zaccaro, ICAN Advisory Board Member Sarah Heaton Concannon, and I were all named to the Securities Docket Enforcement Elite, a list of the best securities enforcement defense lawyers in the country. And while we were sad to see Advisory Board Member Jennifer Schulp step away from the board, it was for the best possible reason: She has been appointed Senior Legal Advisor to Chairman Atkins, placing a thoughtful and principled voice inside the Commission at a critical moment.
These internal developments reflect the level of expertise driving ICAN’s work and strategy. Our team combines decades of SEC experience with on-the-ground legal work representing individuals and businesses facing the full weight of the government. That combination of technical expertise and real-world perspective has become one of our team’s greatest strengths. Our national network continues to grow, our insights are increasingly sought after, and many of the issues we have championed for years have now become central to the national conversation about regulatory reform.
Thank you for your continued support. Together, we are building a legal bulwark that will protect investor choice and opportunity for years to come.
With appreciation for your partnership in this crucial work,
Nick Morgan
Founder and President of ICAN
P.S. Giving Tuesday is soon approaching. If you'll consider including ICAN in your end-of-year donations and would like more information on our 2026 plans or anything else, please don't hesitate to let us know. Even $1,000 goes a long way with our strategic litigation efforts. You can donate online here, or reply to this email for other options.
Creative Approaches in Defending Small Investment Advisers from SEC Mission Creep
ICAN exists to stand with those who would otherwise be overwhelmed by novel and unauthorized theories of enforcement. Right now, we’re fighting for two small investment advisers with our own innovative strategies designed to push back against the SEC's efforts to stretch its authority beyond what Congress has authorized.
A New Client and a Novel Path Forward: Calling for a Section 21(a) Report
ICAN recently took on a new client (whose details we must keep confidential) who is facing an enforcement action under Rule 206(4)-8 — a rule that has long drawn criticism, including from Chairman Atkins during his time as a Commissioner. The rule allows the SEC to impose liability for negligent conduct even when no deceptive intent or wrongful purpose is present, stretching the concept of “fraud” far beyond what Congress authorized in Section 206(4) of the Advisers Act.
In our client’s case, the conduct at issue involved short-term, fully authorized, and immaterial operational loans, none of which harmed investors or involved any misleading statements. Despite this, SEC staff advanced an expansive interpretation of Rule 206(4)-8 that attempts to frame these benign activities as “negligent fraud.”
Rather than accept a settlement requiring penalties for conduct that did not violate any clear rule — and that caused no investor harm — ICAN proposed a different, more appropriate approach. We urged the Commission to issue a Section 21(a) Report clarifying that Rule 206(4)-8 cannot be used to treat ordinary negligence as fraudulent behavior in situations where Congress required something more than a mistake or oversight.
A 21(a) report is a powerful tool the SEC has used on rare occasions to explain the boundaries of its jurisdiction and to guide the market without punishing parties caught in unclear or unsettled areas. This matter presents an ideal opportunity for that kind of transparency. Another benefit of our strategy in asking for this as a “settlement” is that the staff working on the matter are obligated to present any written settlement offer to their client, meaning the commissioners. This flags the case in a meaningful way as one that staffers are continuing on with, despite the public sentiments made by the Chairman.
Importantly, concerns about Rule 206(4)-8’s overreach are not new. During the original rule making, the American Bar Association, the Managed Funds Association, and the Investment Adviser Association each warned that the rule was drafted so broadly that it could turn ordinary negligence into a federal enforcement issue. In 2007, then-Commissioner (now Chair) Atkins said explicitly about the new rule, “I do not believe that a negligence standard is consistent with the Commission’s authority . . .”
ICAN’s work in this matter builds directly on those earlier critiques. While the trade associations raised the statutory and policy concerns, ICAN now brings a real-world case and live facts that highlight exactly how the rule’s flaws play out in practice. Our role complements these groups by translating their warnings into action — demonstrating to the Commission why the rule’s breadth is not just theoretical, but has meaningful consequences for advisers seeking to operate responsibly.
This case is a textbook example of why ICAN called for increased use of 21(a) reports in our 2025 SEC Action Plan. The issue is novel, the rule’s foundation is shaky, and there is no allegation of harm. Clear guidance — not enforcement — is the right outcome.
ICAN’s deep experience with SEC processes allows us to identify opportunities like this, advancing outcomes that protect our clients while also benefiting the entire advisory industry by encouraging clarity, fairness, and a shift away from regulation through enforcement.
The Cutter Financial Case: A Clear Example of Jurisdictional Overreach
Another small adviser matter ICAN is engaged in is the SEC’s case against Cutter Financial Group. In 2023, the Commission launched a case against Cutter, despite no allegations of investor harm, in an attempt to advance an untested theory that licensed insurance agents must disclose insurance commissions on fixed index annuities—a disclosure never required by SEC rule. This move by the SEC was an incremental step in expanding the agency's authority into the state-regulated insurance arena.
A Massachusetts jury later rejected all of the SEC’s allegations that suggested any intentional wrongdoing or violations of core compliance duties. Despite that clear outcome, the SEC is still pressing a much narrower claim based only on alleged negligence. This continued pursuit — even after a jury dismissed the main accusations — demonstrates how an enforcement-first mindset can propel cases forward based on momentum rather than merit.
ICAN filed an amicus brief supporting Cutter’s motion to dismiss. This week, we followed up with a letter urging the new Commission — under Chairman Atkins’ leadership — to close the matter entirely. Doing so would align the agency with its recent course corrections in the dealer and crypto campaigns and reinforce its commitment to fair notice, due process, and regulatory restraint.
ICAN’s Recent Commentary & Advocacy
FINRA’s PDT Rule Reform: Paternalism Doesn’t Equal Protection
The FINRA board recently voted to approve changes to the Pattern Day Trading (PDT) rule and will submit them to the SEC for final approval. The timing was fitting — the announcement came the same day we recorded a new episode of SEC Roundup with Ross Cameron, who discussed the rule’s real-world impact on traders and market access.
For more than two decades, the PDT rule imposed an arbitrary $25,000 wealth threshold that had little connection to risk and everything to do with exclusion. Instead of promoting safety, it pushed many traders into riskier workarounds or offshore platforms. At ICAN, we believe regulators should focus on transparency and education, not exclusion. Protecting investors means providing them with the tools and information to make informed choices - not denying them the freedom to participate until they reach a financial milestone.
ICAN called for eliminating the rule in our 2025 Action Plan, and we welcome FINRA’s move. We now urge the SEC to act quickly so that these long-overdue changes can take effect.
See more from our interview and trader survey here.
Podcast Spotlight: Incentives at the PCAOB
We also explored enforcement incentives inside the PCAOB in a recent SEC Roundup episode featuring professors Maksymov, Eldar, Nate Cannon, Noah Myers, and Phil Lamoreaux. Their research — Is the PCAOB Enforcement Approach Aligned with Its Mandate? Perspectives of Sanctioned Auditors and Former PCAOB Enforcement Staff — mirrors many of ICAN’s own concerns.
Staff incentives reward racking up enforcement actions, often targeting smaller firms and minor procedural lapses instead of cases with demonstrable investor harm. This fosters a punitive approach rather than one that genuinely boosts audit quality. As the professors propose, mandating clear "investor harm" explanations in every order could realign incentives, enhance transparency, and ensure fairness—without weakening enforcement.
Their work brings valuable academic clarity to an issue ICAN has raised for years: metrics matter, and misaligned incentives can distort an agency’s mission.
Watch the full episode here.
Looking Ahead: Building Toward 2026
ICAN’s structure, experience, and network enable us to operate with agility while maintaining a focus on long-term impact.
This month’s work underscores why ICAN plays an essential role in the national conversation. In just a few weeks, we have:
Advanced critical small investment adviser cases that push back against unauthorized expansions of SEC authority, using creative strategies that highlight where past Commissions exceeded their statutory limits and where clear guidance is overdue.
Advanced key developments against “victimless disgorgement” in our SEC v. Barry case, including securing two new amicus briefs in support of our en banc petition and filing our own Supreme Court amicus brief to preserve Supreme Court-imposed limits on enforcement remedies.
Expanded ICAN’s thought leadership through substantive commentary and research amplification, including new Substack analysis, podcast discussions, and academic insights that support reform of enforcement incentives and strengthen calls for due process and accountability.
With an “all-star roster” — including team members recognized among the Enforcement Elite — and a growing nationwide network of elite legal partners, we enter 2026 with strong momentum and a clear mandate.
ICAN remains the only nonprofit public interest law firm solely dedicated to pushing back against SEC overreach and expanding access to capital markets. And because of our strategy — combining targeted litigation, policy advocacy, and a nationwide network of elite legal partners — every dollar of support goes further. Your partnership enables us to take on precedent-setting cases, file impactful briefs, and drive reforms that improve fairness and opportunity for millions of investors. We look forward to sharing a full recap soon of just how far we’ve come in 2025, and how your support has helped make that progress possible.
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