Investment advisers registered with either the Commission or a state agency have a special relation with their clients. This is illustrated by the fact that under the federal securities laws they have not just a close relation but more – there is a fiduciary duty that runs between the adviser and the client. A fiduciary duty is the highest recognized under the securities law between a market professional and the client. It compels not just honesty and fair dealing but more. In sum, it imposes a special relation and duty between the adviser and client. The same kind of duty typically is imposed on advisers under state securities law. A failure to act in accord with that duty constitutes a serious breach of duty as illustrated by the Commission’s most recent case on this issue, SEC v. Nagler, Civil Action No. 25-cv-516 (D. N.M. Filed June 2, 2025).

Named as defendants in this action are: David A. Nagler and New Line Capital, Inc. Mr. Nagler is a resident of Sante Fe, New Mexico. He is registered with the state where he resides as an investment adviser representative. He is also registered with the state of Colorado and during the period of this case, the state of California until about December 2020. He is, in addition, the founder, sole owner and managing member of New Line. The company was founded in 2006 and withdrew its registration in August 2014. During the period of this action the firm was registered with the states of New Mexico, Colorado and New Jersey.

This matter focuses on the period April 2019 through the end of December 2024. During that period Defendants are alleged to have charged clients fees in excess of what they represented and promised. Two points are key.

First, Defendants are alleged by the complaint to have breached their fiduciary duties to New Line clients by making false statements and omitting material facts regarding the annual advisory fees charged to clients. Defendants claimed that they took care to cap their annual fees at 2%. The representation was incorrect. To the contrary, fees in excess of 2% were charged during the period. Defendants also did not disclose that they charged fees over 2%.

Second, Defendants breached their duty when billing clients for services by failing to provide notice that they were charging time charges prior to imposing them. Defendants failed to reveal that they may impose fees without notice. Nevertheless, during the period clients were billed and paid New Line and Mr. Nagler for about $325,000 in hourly fees. The complaint alleges violations of Advisers Act Sections 206(1) and 206(2). See Lit Rel. No. 26319 (June 4, 2025).

Mission: Chair Atkins began by declaring that “it is a new day at the SEC . . .” (emphasis original). That new day will focus on what he identified as the agency mission: 1) protecting investors; 2) capital formation and 3) “fair, orderly, and efficient markets . . .”

At the outset it is important to understand that it is “one thing to write a regulation, quite another for it to achieve its intended goal,” the Chair stressed. All will benefit from “clear rules of the road . . .” Thus the “SEC is returning rulemaking to regular order.” In this regard the Commission will focus on providing meaningful pathways . . .” by which to obtain capital.

Budget request: Here the Chair stated his view that the proposed budget be consistent with that of the President. The proposed budget for fiscal 2026 of $2.149 billion for operations returns the focus “to the core mission” of the agency.

Fees: The Commission is “required to set the fee rate to a level that generates fees equal to the Commission’s appropriated amount . . .” Here the agency set the FY 2025 appropriation amount at $0 per million, effective May 14. The prior rate was $27.80. Thus no further collections are required, according to the Chair.

Staff numbers: The agency has decreased its “headcount” by about 15% since the beginning of the current fiscal year. When the Chair left the agency in 2008 it employed about 3,600 people. At its largest the agency employed about 5,000 people and 2,000 contractors. Today it has a total of 4,200 employees and 1,700 contractors.

Digital assets: This may be a key area for the Commission. Mr. Atkin’s only comment, however, is that the agency will “focus on providing meaningful pathways for entrepreneurs to obtain the capital they need . . . [and there will be effective “enforcement against fraudulent activities”]. No other information was provided.

Fiscal year 2026 budget request: The present request for a budget for FY 2026 is the amount recommended by the President. It contemplates about 4,100 full-time equivalents which is about 447 less that FY 2025. It does not include amounts to cover a possible transfer of the PCAOB back to the Commission.

Fees: Funding for the agency is “deficit neutral, as by law any amount appropriated to the agency will be offset by fees on securities transaction. . .” the Chair stated. Earlier this year the agency stated most covered sales would be set at $0 per million. This is the “entire FY 2025 appropriation before the new fee rate of $0 [compared to the prior rate of $27.80]. Therefore, there will not be any further collections for the fiscal year.

Staff Numbers: The “headcount” at the agency has decreased by 15% since the beginning of the current fiscal year. Today the agency has 4,200 employees and 1,700 contractors. About one year ago the count was 5,000 employees plus 2,000 contractors.

Digital Assets: “A key priority of my Chairmanship will be to develop a rational regulatory framework for crypto asset markets that establishes clear rules of the road for the issuance, custody, and trading of crypto assets while continuing to discouraging bad actors from violating the law” Chair Atkins declared. This will be achieved “through notice and comment rule making, not through regulation-by-enforcement.”

Chair Atkins has made similar statements before. Again he did not articulate what he was referring to as “regulation-by-enforcement. ” Previously the agency focused on existing rules and a key Supreme Court decision from the late 1940s. While the Chair did express confidence in his fellow commissioners, nothing has been defined to date regarding a possible new rule based package that would govern crypto assets.

SEC Regional Offices and Leasing: This final segment focused on the number of offices. The GSA has considered terminating the leases for the LA and Philadelphia offices. The Chair made it clear that he is committed to regional office approach. He did not, however, oppose terminating the two offices mentioned.

Conclusion: Chair Atkins closed as he began – expressing confidence in a new day for the agency. While his goals are clear, and he suggested that it will be the Commissioners writing new rules, what they will look like is at best unclear.

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