2025 saw the focus of the Securities and Exchange Commission(“SEC”) turn towards emerging technologies, advisory practices, and market integrity with renewed intensity. The guidance provided by these matters are helping firms to know what areas they should pay particular attention to in 2026, and what needs to be done.
This month’s Risk Management Tip will focus on those enforcement cases involving some of the industry’s biggest hot topics. We then provide a year-end checklist of action items firms should take leading up to the New Year.
In the matter of Presto Automation Inc. (AI Washing) – SEA Release No. 102177 (January 14, 2025)
Presto Automation Inc. was charged with making false and exaggerated claims regarding the AI technology used for Presto Voice, a speech recognition tool. Specifically, they misrepresented from November 2021 to May 2023 that the recognition technology was theirs and not a third party’s and required human intervention. The SEC found that the company violated Section 17(a)(2) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 when their AI development failed to perform as they stated it would.
Furthermore, the company’s claim of owning the AI technology was found to be misleading, and their claims of the technology’s capabilities (that it would eliminate “human-order taking”) were exaggerated.[1]
Takeaway for advisory firms – AI Washing or deceptive marketing tactics and exaggerated AI technology claims, is heavily on the SEC’s radar. Thus, a key takeaway for firms is as the world of AI keeps progressing, it is important to recognize that disclosures related to AI technologies must disclose limitations to the technology as well as material information related to the AI (such as whether it is proprietary or not). It is critical for firms to have disclosure controls and procedures in place to avoid omissions, misleading or fraudulent statements.
In the matter of American Portfolio Advisors (APA) (Inaccurate Advisory Fee Billing) – Administrative Proceeding 3-22488 (July 11, 2025)
The SEC found American Portfolio Advisors (APA) liable for $4,536,147 and $842,516.72 in interest for failing to disclose conflicts of interest, overbilling and collecting advisory fees on alternative investment positions, when no fees were supposed to be assessed on those positions. Additionally, the firm had backdated documents provided to the staff, failed to disclose compensation APA paid to its affiliated broker-dealers, and failed to provide a pro rata refund on any prepaid quarterly advisory fees.[2]
Takeaway for advisory firms – Investment advisory firms must recognize that disclosing and mitigating conflicts of interest and maintaining accurate billing systems is a core fiduciary obligation owed to clients. The SEC continues to aggressively enforce negligent or intentional failure to make disclosures related to compensation arrangements and fee billing, highlighting the need to be transparent and accurate.
In the matter of Meridian Financial, LLC (Marketing, Recordkeeping and Implementation of Policies and Procedures) – Administrative Proceeding 3-22525 (September 4, 2025)
The SEC found that Meridian Financial, LLC violated several regulatory requirements under the Investment Advisors Act of 1940, including the Investment Advisor marketing rule, recordkeeping and Rule 206(4)-7 for failure to implement certain compliance policies and procedures and conduct the firm’s annual review. Specifically, a website advertisement stated it “refused all conflicts of interest” which it could not substantiate. The firm also failed to maintain copies of its marketing materials, and also did not disclose its reliance on third parties for recordkeeping, documents, and policies and procedures for the firm’s annual review in violation of Rule 206(4)-7.[3]
Takeaway for advisory firms – The SEC is actively scrutinizing and enforcing obligations relating to accurate marketing statements and adequate compliance systems. It is imperative for firms to ensure that marketing statements are accurate, substantiated and consistent with actual practices. Moreover, firms must take steps to advance their compliance programs, including adherence to books and records requirements and policies for the firm’s regulatory obligations such as Annual Review.
In the matter of Rouzbeh Haghighat, Behrouz Haghighat, Kirstyn Pearl, Seyedfarbod Sabzevari and James Roberge (Insider Trading) – Litigation Release No. 26383 (August 2025)
The SEC charged Rouzbeh Haghighat, Behrouz Haghighat, Kirstyn Pearl, Seyedfarbod Sabzevari and James Roberge with insider tipping and trading in the securities of a multi-national pharmaceutical company, Chinook Therapeutics. Ross Haghighat, a former director at Chinook, had tipped his brother, stepdaughter, and friends with material non-public information about Novartis AG’s acquisition of Chinook. By acting on this inside information, they collectively made $500,000 in illicit profits. Haghighat also purchased the stock four days ahead of the announcement. The SEC ultimately sought injunctive relief, disgorgement and civil monetary penalties. Thhe U.S. Department of Justice previously announced criminal charges against all as well.[4]
Takeaway for advisory firms – Insider tipping violates the anti-fraud provisions of the Securities Exchange Act. The SEC imposes severe penalties for such conduct. Individuals will also be held personally liable if they are found to have participated in or benefited from insider trading. It is imperative that investment advisers adopt strong policies and educate employees on how to prevent and detect insider trading. If detected, it should immediately be escalated to compliance for further investigation.
In the matter of Ramil Ventura Palafox (Crypto Currency Misappropriation) – Litigation Release No. 26295 (April 29, 2025)
The SEC and the U.S. Attorney’s Office filed charges against PGI Global Founder, Ramil Ventura Palafox for orchestrating an international securities fraud scheme that misappropriated millions of dollars of investor funds through the now-defunct entity, PGI Global. The SEC sought injunctive relief, disgorgement, and civil penalties, while the U.S. Attorney’s Office pursued parallel criminal charges against him. PGI Global claimed to be a crypto asset and “forex” trading company which allowed it to obtain over $198 million in Bitcoin and misappropriation of $57 million through PGI Global’s unregistered securities, which Mr. Palafox used for his own personal expenses. Among other things, Palafox guaranteed investors high returns and provided referral incentives to encourage them to recruit new investors. [5]
Takeaway for advisory firms – The SEC has increasingly focused its enforcement efforts on investment schemes involving digital assets. It is imperative to conduct careful due diligence prior to offering digital assets to consumers. Moreover, fraudulent statements and misappropriation of investor funds can and will lead to criminal actions being aggressively pursued.
Conclusion
As the regulatory environment and internal controls, including policies and procedures and annual reviews continue to evolve, these notable 2025 cases underscore the need for investment firms and advisors to stay ahead of the challenges posed by new technologies and SEC focus areas. Accordingly, firms and advisers must prioritize accurate disclosures, implement robust reliable billing systems and controls, and take a proactive, compliance-focused approach when marketing and communicating information to clients.
For more information about JLG’s regulatory counsel services in representing firms and individuals in SEC-related matters, please contact us at (619) 298-2880 or at [email protected].
Author: Amandeep Kalhar, Attorney, and Michelle Jacko, Managing Partner, Jacko Law Group, PC.
JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks and corporate clients on securities and corporate counsel matters. For more information, please visit https://www.jackolg.com/.
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[1] For more information, see https://www.sec.gov/enforcement-litigation/administrative-proceedings/33-11352-s
[2] For more information, see https://www.sec.gov/enforcement-litigation/administrative-proceedings/ia-6893-s
[3] For more information, see https://www.sec.gov/enforcement-litigation/administrative-proceedings/ia-6916-s
[4] For more information, see https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26383
[5] For more information, see https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26295
Amandeep Kalhar is an Attorney at Jacko Law Group, PC. She focuses her practice on matters involving securities laws enforced by FINRA and SEC including arbitration proceedings and transactional supp...
