Fiscal 2025 was an outlier year for SEC enforcement. Activity dropped, according to White & Case, to its lowest levels in a decade, owing to several trends (e.g., staffing, the fall 2025 shutdown, and expanded requirements for Commission approval), some of which are continuing into fiscal 2026. It’s probably also due in part to the SEC’s “back to basics” enforcement approach to pursue “those who lie, cheat, and steal.” While that probably means we won’t see the “gotcha” type enforcement actions that really scare financial reporting professionals (like ones premised on allegedly deficient disclosure controls with no related disclosure violation), that doesn’t mean we won’t see disclosure cases continue to be brought by the current Enforcement Staff or that every accounting case will be based on claims as clear cut as fabricating revenue.

Just last week, the SEC announced settled charges against Archer-Daniels-Midland Company (ADM) and certain former executives for materially inflating the performance of a key business segment. This seems like a classic earnings management case (albeit one involving intersegment adjustments), so no surprise that this would still be in the crosshairs. But there’s more to take away from the settlement. Since it was announced during Northwestern Pritzker School of Law’s Securities Regulation Institute, the enforcement panels had a recent case to discuss, and I benefited from their wisdom.

During the “SEC Enforcement and Investigations” panel, Davis Polk’s Fuad Rana described the charges as involving real accounting issues that require judgment, noting that this was the first time this administration has pursued an accounting theory that wasn’t fabricating revenue or hiding expenses, and it still brought a scienter-based fraud charge. (ADM had restated its financials, and a criminal investigation had been opened, but closed with no charges.) He also said it was unclear what benefits the company derived from cooperation and remediation. It still received the highest charge and a penalty, although its penalty might have been lower than it would have been in the absence of the cooperation and remediation. He acknowledged there was a focus on individual accountability, but said this settlement looked similar to past accounting cases.

As John shared a few years ago, discussions about “meeting analysts’ expectations” and “making our numbers” should raise a big red flag for anyone who hears them. In the moment, they may be mis- (or accurately) interpreted as encouragement to improperly get creative with numbers, and even if they don’t, might at least give that impression if later viewed by a regulator or private litigant.

– Meredith Ervine