After slim year for SEC muni enforcement actions, some expect a pickup in 2026

While 2025 has been a slim year for Securities and Exchange Commission municipal securities enforcement actions, some expect to see more actions announced next year as the SEC has continued to signal its concerns regarding unregistered municipal advisors and other issues.

The SEC's accounting tallies only four 2025 municipal securities enforcement actions either by lawsuit or administrative proceeding, two that each involved a municipal advisor charged with failing to register with the SEC. Another of the muni actions for 2025 relates to an SEC complaint filed in 2022.

Victor Hsu, a partner at law firm Norton Rose Fulbright, doesn't expect 2026 to be a replay of this year's limited muni enforcement activity.

"The slow pace of SEC enforcement activity in the municipal securities market during 2025 can be attributed to changes in leadership under the new Administration and a reorienting of the SEC's enforcement priorities, as well as staff attrition," Hsu said. "I expect to see more SEC muni enforcement actions next year."

SEC Chairman Paul Atkins was sworn into office on April 21 after being nominated by President Donald Trump.

Brian Garzione, a partner at Hawkins Delafield & Wood LLP, said the number of SEC muni enforcement actions listed for 2025 is "the lowest number of actions that we have seen in many years." Unlike Hsu, Garzione expects that SEC municipal securities enforcement activity in 2026 likely will continue the reduced enforcement activity trend of 2025.

"Part of this can be attributed to a move away from regulation by enforcement," he said. "As Chair Atkins begins his second year leading the SEC, it is likely that we see enforcement actions based on established legal obligations, rather than using the enforcement process for policy-making."

However, it wouldn't be surprising "to see further growth in municipal advisor enforcement actions," Garzione said.

"For the most part, these cases involve a failure to register, which is [a] fairly straight-forward regulatory violation if the SEC establishes that the individuals were providing advice with respect to municipal financings," he said. "Once that is shown, there are concerns over the municipal advisor's fiduciary duty to its client and conflicts of interest."

The area has been a focus for Dave Sanchez, director of the SEC's Office of Municipal Securities, "who has identified a range of concerns that might arise from unregistered municipal advisor activity in the market," Garzione said.

Hsu, agreed that Sanchez, a former Norton Rose Fulbright colleague, has cited unregistered municipal advisory activity as a focus.

"In particular, he has warned against professionals providing MA services without being registered as MAs and has pointed to charter school and P3 transactions as examples of where this might happen," Hsu said.

Like Hsu, Andrew Kintzinger, counsel at Hunton Andrews Kurth, expects to see more SEC muni enforcement actions announced next year. Kintzinger flagged three areas to watch in 2026 when it comes to potential for muni-related SEC enforcement activity. First, he pointed to a speech SEC Chairman Atkins gave at the New York Stock Exchange earlier this month.

While the SEC chairman's remarks were focused on reporting companies rather than municipal issuers, Atkins "emphasized that he wanted to see disclosure regulation get back to fundamentals ? particularly, he wanted to see disclosure regulation focus on financial materiality," Kintzinger said.

"And this is something that the Public Finance Abuse Unit in the [Division of Enforcement] at the SEC has been very effective at doing in recent years," he said. "Their bread and butter, their staple case is disclosure fraud, particularly materially inaccurate or incomplete financial disclosure."

The unit's work in that regard "I believe continues unabated," Kintzinger said.

"I believe that they remain very active in that space," he said. "It may not be showing up in numbers of cases, but their staff is clearly watching disclosure documents and watching financial disclosure."

A second area Kintzinger pointed to involves municipal securities broker-dealers, and he sees two areas of concern in the year ahead. One involves SEC Rule 15c2-12, which applies to underwriters.

Underwriters' compliance people "are always very concerned that they monitor compliance with Rule 15c2-12 carefully because if enforcement comes in and finds a willful violation of the rule, that then enables the commission to pursue civil penalties," he said.

By way of example, Kintzinger pointed to the most recent 2025 muni securities action listed on the SEC's website, which involves Oppenheimer & Co. On Dec. 10, a "final consent judgment" was entered in the SEC's civil enforcement action against Oppenheimer, the SEC announced Dec. 12.

The action concerned "Oppenheimer's repeated failures to comply with the requirements of the 'Limited Offering Exemption,' which exempts certain 'Limited Offerings' of municipal securities from the general requirement to provide disclosures to investors," according the SEC's 2022 complaint, filed in the U.S. District Court for the Southern District of New York.

Without admitting or denying the SEC's allegations, Oppenheimer consented to entry of the final judgment, which, among other things, permanently enjoined Oppenheimer from violating Rule 15c2-12 and ordered it to pay a $1.2 million civil penalty.

"The other issue for broker-dealers is a continued focus on how they are carrying out their due diligence obligations, with respect to the offer and sale of securities," Kintzinger said. "I know that there are multiple broker-dealers in the past year that have increased their training for their associates and personnel to ensure thorough and good due diligence practices should the SEC ever come in to evaluate whether their due diligence is satisfactory."

The third area is municipal advisors, Kintzinger said.

"This remains a heavy focus of both the commission's Division of Examinations as well as the Division of Enforcement," he said, noting that the Division of Examinations in November announced its examination priorities for fiscal year 2026.

"And, in addition to unregistered activities, they said they would be focusing on issues of fiduciary duty, duty of care, conflicts of interest," Kintzinger said. "And if Division of Examinations finds cases that they believe are worth enforcement reviewing, they can refer that case over to enforcement."

Beyond the focus on unregistered MA activity, "I think the challenges for municipal advisors are significantly in the areas of how they are demonstrating their fiduciary duty of care, which calls into mind the Fieldman, Rolapp case."

In September 2023, the SEC announced settled charges against registered municipal advisor Fieldman, Rolapp & Associates and one of its principals, Anna Sarabian, concerning an alleged breach of its duty of care relating to cost analyses of funding options for a community project. FRA and Sarabian agreed to settle the charges without admitting or denying the findings in the SEC's order.

Also with regard to duty of care, if municipal advisors are taking on disclosure responsibilities for their issuer clients, how MAs conduct "their disclosure work and their disclosure due diligence" is an area that Kintzinger believes will be one of increased focus for the SEC.

"The issues for municipal advisors are many," he said.