Historically, companies have resolved SEC enforcement proceedings by agreeing to pay a fine or penalty, with the payment funds drawn from the corporate treasury. More recently, the agency has signaled an interest in ensuring that enforcement action resolutions involving individual liability, as a means of encouraging both accountability and deterrence. In the following guest post, Ashwin J. Ram, a partner at the Buchalter LLP law firm, examines the SEC’s individual accountability approach and considers the implications. I would like to thank Ashwin for allowing us to publish his article as a guest post on this site. Here is Ashwin’s article.
***********************
For the better part of a decade, SEC enforcement followed a familiar script: the company pays a substantial penalty, neither admits nor denies the findings, and everyone moves on. Officers and directors watched from the sidelines while the corporate treasury absorbed the blow. Shareholders — the people the SEC is supposed to protect — ended up paying for the misconduct through diluted earnings and depleted reserves.
That script may be a relic of the past.
At SEC Speaks 2026, Acting Enforcement Director Sam Waldon and Deputy Director Nekia Hackworth Jones made the new posture explicit: the Commission is no longer interested in collecting large corporate penalty checks while individuals escape accountability. Waldon framed it as a quality-over-quantity mandate; Hackworth Jones provided the operational details — evaluating individual culpability, scienter, and severity before recommending remedies. Individual liability is now the primary deterrent mechanism. The 2006 Statement Concerning Financial Penalties — largely dormant for years — is back as the governing framework for corporate penalty recommendations. And the threshold question the staff must now answer before recommending a corporate penalty is whether the penalty will harm the very shareholders the enforcement action is meant to protect.
Assuming this is not rhetoric, it is an operational directive that will likely reshape how SEC investigations are conducted, how cases are resolved, and how companies, officers, and D&O carriers should respond.
The 2006 Penalty Statement: What It Actually Says
The 2006 Statement was the Commission’s attempt to articulate when corporate financial penalties are appropriate. It identified two threshold considerations: (1) whether the penalty will harm innocent shareholders more than it deters future misconduct, and (2) whether individual liability — rather than entity penalties — would be a more effective and equitable deterrent.
The Statement also adopted the so-called Seaboard factors for evaluating corporate cooperation: self-reporting, remediation, cooperation with the investigation, the quality of compliance programs, and whether the entity obstructed the investigation. These factors never went away in theory. In practice, they were overwhelmed by a regime that prioritized headline penalty numbers.
What changed at SEC Speaks is that the Commission publicly recommitted to applying the Statement as written: start with the individual, and calibrate the corporate penalty to cooperation and remediation rather than headline impact.
Why This Shift Matters More Than It Appears
On the surface, prioritizing individual liability sounds like a narrowing of enforcement. It is the opposite.
Under the old regime, a company could resolve an SEC investigation by negotiating a penalty amount, implementing remedial measures, and moving on — often without any individual officer facing charges. The investigation ended when the check cleared. Defense counsel for individuals could reasonably argue that the matter was resolved and that bringing a follow-on case against their client would be duplicative or disproportionate.
The new posture eliminates that off-ramp. The Commission is now building individual cases from the outset of an investigation, not as an afterthought once the corporate resolution is complete. Waldon’s remarks made clear that Enforcement is hiring — and that the quality-over-quantity directive does not mean fewer cases. It means each case will be more focused on individual conduct, individual scienter, and individual consequences.
For corporate officers, this means several things simultaneously.
Separate counsel is no longer optional — it is a necessity. Joint representation between a company and its officers has always been fraught with the potential for conflicts. Under the new regime, those potential conflicts will be tested early. The company’s interests — cooperate, remediate, minimize the penalty — might be structurally adverse to the officer’s interests in a way they were not when the corporate penalty was the endgame. Officers who delay retaining personal counsel risk having their fate negotiated by lawyers whose primary obligation runs to the entity.
D&O carriers need to re-evaluate their exposure models. The shift toward individual liability directly increases the frequency and severity of D&O claims. Under the prior regime, many investigations resolved at the entity level without triggering Side A coverage (which covers individual officers when the company does not indemnify). Under the new regime, individual enforcement actions will become more common, individual defense costs will increase, and individual settlements or judgments will be larger. Carriers underwriting D&O risk based on historical claims data that reflected the old enforcement posture are pricing an outdated risk exposure model.
Early notice to D&O carriers is now a strategic imperative, not an administrative task. When the SEC opens an investigation that may target individual officers, the notice clock starts. Late notice remains one of the most litigated coverage defenses. Under the old regime, companies sometimes delayed notice because the investigation appeared headed toward a corporate resolution that would not trigger individual coverage. That calculation is no longer safe. Defense counsel should advise immediate notice to all potentially implicated towers upon learning of any SEC investigation that involves individual conduct — even if no Wells notice has been issued to any officer.
The Cooperation Calculus Flips
The Seaboard factors have always incentivized corporate cooperation. But under the new framework, cooperation means something different — and something more uncomfortable for the individuals involved.
The Commission evaluates whether the company made individuals available for testimony, produced communications promptly, and refrained from impeding the investigation of individual conduct. Under the old regime, companies could cooperate at the entity level while quietly coordinating with officers to present a unified narrative. That coordination is now riskier: a company that appears to be protecting its officers will not receive cooperation credit — and may face an enhanced corporate penalty on top of individual charges. The revised Enforcement Manual codifies cooperation credit factors but creates no tiers, no fixed credits, and no declination grid. It remains a qualitative, case-specific judgment with full staff discretion.
This creates an acute tension in the boardroom. Directors must balance their duty to the corporation (which favors maximum cooperation credit) against officers who may be investigation targets (which requires careful attention to individual rights). Boards that do not establish clear protocols for managing this tension — including retaining independent counsel for the board itself — will find themselves exposed on both sides.
What the ADM Case Tells Us
The Commission highlighted the In re Archer-Daniels-Midland Co. accounting fraud case as a paradigm for the new approach. In January 2026, the SEC charged ADM and three former executives — Vince Macciocchi, the former President of ADM’s Nutrition segment; Ray Young, the CFO; and Vikram Luthar, the former CFO of ADM’s Nutrition segment who later served as ADM’s overall CFO — for manipulating inter-segment transactions to inflate Nutrition’s operating profit. When Nutrition was in danger of missing its forecasts, management pressured employees to identify “adjustments” — retroactive rebates and pricing changes not available to third-party customers — that shifted operating profit from other ADM segments into Nutrition. The result was that ADM’s public disclosures claiming inter-segment transactions were recorded at amounts “approximating market” were false.
ADM paid a $40 million civil penalty. But the individual consequences tell the real story: Macciocchi agreed to disgorgement, a civil penalty, and a three-year officer-and-director bar. Young agreed to disgorgement and a penalty. Luthar is contesting the charges and preparing for trial.
Three features make this case a template. First, the enforcement action targeted individuals by name — not as an afterthought to the corporate resolution, but as the core of the case. Second, the evidentiary theory centered on the gap between what management knew internally (that the adjustments were artificial) and what it communicated externally (that inter-segment pricing approximated market). That gap — between private knowledge and public statements — is the template for the individual liability cases the Commission intends to focus on going forward. Third, the penalty structure tracks the new philosophy exactly: a corporate penalty calibrated to avoid excessive shareholder harm, paired with personal consequences (bars, disgorgement, penalties) designed to deter the individuals who made the decisions.
Defense counsel should advise clients to audit that gap now, before an investigation begins. The question is not whether the company’s disclosures are technically accurate. The question is whether internal communications — emails, Slack messages, board decks, earnings call prep materials — tell a different story than the public filings. If they do, the new enforcement regime makes it far more likely that the individuals responsible for that divergence will face personal consequences.
Practical Steps for Boards, Officers, and Carriers
For boards: Establish investigation-response protocols before the investigation arrives. Identify independent counsel for the board. Create clear guidelines for when individual officers should retain separate counsel. Review indemnification provisions and ensure they are current with the company’s actual exposure profile.
For officers: Retain personal counsel at the first sign of an SEC investigation touching your area of responsibility. Do not rely on company counsel to protect your individual interests. Preserve all communications — the document retention obligation attaches when an investigation is reasonably anticipated, and destruction of evidence in the current environment is an accelerant, not a defense.
For D&O carriers: Recalibrate loss models to account for increased frequency of individual SEC enforcement actions. Review notice provisions and ensure policyholders understand their obligations. Consider whether current Side A limits are adequate in an environment where individual defense costs and settlement values will increase. Engage proactively with insureds about early-notice protocols.
The SEC’s message is clear: the era of corporate penalty checks substituting for individual accountability is finished. Companies, officers, and their insurers who recognize this shift and prepare for it will navigate the new landscape far better than those who treat it as a temporary policy preference.
Ashwin J. Ram is a partner at Buchalter LLP in Los Angeles. A former Assistant U.S. Attorney in the Major Frauds Section, he focuses on white collar defense, securities litigation, and crisis management. He has successfully navigated D&O coverage issues in a variety of investigations, securities class actions, and SEC investigations. He can be reached at aram@buchalter.com.