A New SEC Enforcement Standard for Associational Bars?

On September 23, 2025, the SEC dropped its 3-year push to bar hedge fund manager Gregory Lemelson from the securities industry, citing a "split jury verdict" (misrepresentations found, but no fraud scheme), a 5-year injunction expiring in 2027, and court statements deeming a lifetime ban "excessive." The agency exercised rare discretion to dismiss, despite rejecting Lemelson's procedural motion.

Why It Matters

This "hasty retreat" avoids overreach in a case with limited fraud findings, sparing resources for a hearing that courts already signaled was unwarranted. Lemelson hailed it as a win against alleged government persecution.

The Big Picture

Under new Chair Paul Atkins (sworn in April 2025), the SEC is shifting to a "back-to-basics" approach: prioritizing egregious fraud like Ponzi schemes and investor harm, while dialing back non-fraud or technical violations. Q2 2025 saw all district court cases involve fraud, with dismissals in non-fraud crypto matters. Similarly, likely no new off-channel comms actions without harm.

Bottom Line

The courts' no-fraud finding and dicta on excessiveness of a lifetime bar likely influenced this dismissal, signaling a broader SEC pivot to restraint in barring for non-scheme or less severe conduct—focusing enforcement on "lie, cheat, and steal" cases under Atkins.