The Evolving Regulatory Landscape for Private Credit: Key Considerations for Lenders
Private credit has grown rapidly — and enforcement authorities are paying attention. The Department of Justice, including the U.S. Attorney’s Office for the Southern District of New York, has identified the private credit markets as an area of focus, with pending cases involving alleged borrower fraud, multiple pledges of the same collateral, and false financial information. Recent reporting also suggests scrutiny may extend to lenders themselves, including how private credit assets are valued and disclosed.
The enforcement risks extend beyond criminal investigations. SEC examination priorities include valuation practices, fees and expenses, conflicts of interest, and products with limited liquidity, while recent private litigation has challenged portfolio valuations, disclosures concerning credit quality, and adviser compensation. These developments highlight an increasingly important white collar and enforcement issue: the same valuation decisions, disclosures, diligence processes, and contemporaneous governance records can be tested by regulators, prosecutors, and private litigants.
In a new Sidley Global Finance Update, “The Evolving Regulatory Landscape for Private Credit: Key Considerations for Lenders,” our colleagues examine the changing regulatory and enforcement environment and practical steps private credit firms can take to mitigate risk — including strengthening valuation governance, disclosure consistency, data controls, and collateral diligence. Click here to read the full Update.
New SEC Unit Signals Continued Focus on Accounting and Auditing Misconduct
On August 5, the U.S. Securities and Exchange Commission (SEC) announced it is establishing the Financial Reporting and Accounting Unit (Unit) as a new unit within its Division of Enforcement. The Unit will be led by Timothy Zimmerman, who served as Deputy General Counsel of accounting firm RSM US following twelve years in private practice. It will focus on investigations of accounting and financial reporting fraud and general accounting and auditing misconduct. Establishing the Unit institutionalizes a priority area that both Chairman Paul Atkins and Enforcement Director David Woodcock highlighted in their prior public remarks.
Delaware Supreme Court Rejects Jarkesy-Based Jury Trial Challenge to State Administrative Enforcement Proceeding
On July 16, the Delaware Supreme Court held that defendants facing securities fraud and registration claims in administrative proceedings brought by the Delaware Investor Protection Unit are not entitled to a jury trial under the Delaware Constitution, distinguishing the U.S. Supreme Court’s decision in SEC v. Jarkesy. Applying its recently adopted Blue Beach Bungalows framework, the court concluded that the state statutory claims are not sufficiently analogous to common-law actions historically tried before a jury, despite the availability of monetary penalties.
The decision underscores that jury-trial challenges to state administrative enforcement actions will turn on the text and history of each state’s constitution and statutory scheme, rather than Jarkesy alone. With similar challenges pending in other jurisdictions, including Arizona, the ruling provides important guidance for regulators and litigants assessing the continued viability of administrative enforcement proceedings seeking civil penalties. Click here to read the full blog post.
What to Expect in SEC Rulemaking: Takeaways From the SEC’s Spring 2026 Regulatory Agenda
The SEC has released its Spring 2026 regulatory agenda. With nearly 40 action items in the prerule or proposed-rule stages and many proposals scheduled for October 2026, the agenda signals a robust effort focused on reducing compliance burdens, facilitating capital formation, and providing greater regulatory certainty for digital assets.
External Review Recommends Sweeping Changes to FINRA Enforcement Program
On June 30, the Financial Industry Regulatory Authority (FINRA) published an outside expert report setting forth significant recommendations for the management, investigation, review, and resolution of enforcement matters. FINRA commissioned the review in July 2025 as part of its FINRA Forward modernization initiative, retaining Professor Paul Eckert of William & Mary Law School and former SEC Commissioner Troy Paredes to evaluate opportunities for “meaningful, common-sense improvements” to FINRA’s enforcement program.
Supreme Court Upholds SEC Authority to Obtain Disgorgement Without Actual Loss But Leaves Important Questions Unanswered
The Supreme Court’s decision in Sripetch v. SEC gives the SEC a meaningful win, holding that the agency may seek disgorgement of ill-gotten gains without proving that investors suffered financial losses.
But the Court stopped short of resolving the broader questions that could prove even more consequential. It left open whether statutory disgorgement remains an equitable remedy subject to Liu’s limitations and whether defendants are entitled to a jury trial when the SEC seeks disgorgement under the Exchange Act.
Our latest blog post examines what Sripetch decided, the critical issues it left unanswered, and why those unresolved questions are likely to shape the next wave of SEC enforcement litigation.
Supreme Court Rules for SEC on Disgorgement Awards
In a win for the U.S. Securities and Exchange Commission (“SEC”), the U.S. Supreme Court ruled today in Sripetch v. SEC, No. 25-466 (June 4, 2026) that an SEC disgorgement award does not require proof of pecuniary loss by investors. The case involved the new statutory disgorgement remedy (in Exchange Act Section 21(d)(7)) that Congress added in 2021, following the Supreme Court’s decisions in Kokesh and Liu, which together curtailed the SEC’s disgorgement remedy by subjecting it to statutory time limits and equitable constraints.
The practical result is that the SEC will have a somewhat easier time obtaining disgorgement awards in future enforcement cases. But the Supreme Court’s decision explicitly left open a number of interesting questions: whether the equitable constraints identified in Liu apply to the new statutory disgorgement remedy (the Court assumed here that they do), whether disgorgement is available when it is infeasible to distribute funds to investors, and whether the Seventh Amendment jury trial right under Jarkesy is implicated by the disgorgement remedy. How the SEC pursues disgorgement awards going forward may implicate all those questions and lead to future litigation. We’ll be watching closely.
SEC Rescinds Its Gag Rule Policy
The SEC yesterday rescinded its so-called gag rule policy prohibiting parties from denying the allegations in no admit/no deny settlements. The SEC also announced it would not enforce gag rule provisions in existing settlements (which it pointed out was not enforced previously). Even with this policy change, the SEC can still agree to no admit/no deny settlements, and it noted that it may continue to require admissions in some cases.
The practical effects of this policy change remain uncertain, but we can predict at least two possible consequences despite the fact that this will be a welcome change for some settling parties. First, the SEC staff may seek to include more detailed allegations in settled orders to make it more difficult for settling parties to deny the allegations. Second, some settling parties have viewed the gag rule as helpful because it constrained their public statements after a settlement. Without the ability to rely on the “no deny” language, those parties may now face pressure to say more, which could introduce new risks.