Experts are mixed on how effective a new Securities and Exchange Commission working group designed to strengthen the SEC's Division of Enforcement's efforts to detect and combat fraud targeting retail investors is likely to be in protecting Mom and Pop muni investors.
The Retail Fraud Working Group will leverage staff and resources across the SEC to detect fraud and other misconduct targeting retail investors including offering frauds, pump-and-dump schemes, market manipulation and breaches of duties to customers by investment advisers and broker-dealers, the agency said in a July 7 press release.
The group, which will be led by the enforcement division's Kate Zoladz, deputy director, West, and Kim Frederick, assistant director, Asset Management Unit, "will serve as a dedicated resource for proactive case generation," and play a key role in coordinating with the commission's regulatory partners and foreign counterparts, the release said. The group will also participate in educational outreach to retail investors in coordination with the SEC's Office of Investor Education and Assistance.
"Nothing motivates enforcement staff more than protecting those who invest their savings in our markets," David Woodcock, director of the SEC's Division of Enforcement, said in the release.
The new working group "will bring focused energy and resources to that mission — generating cases, building partnerships with our regulatory counterparts, and using data and technology to find and stop those who seek to take advantage of retail investors," said Woodcock, a former Gibson, Dunn & Crutcher LLP partner who assumed the role of enforcement division director in May.
But Benjamin Schiffrin, director of securities policy at Better Markets, a non-profit organization founded in the wake of the 2008 financial crisis, said the public shouldn't be duped into thinking that the creation of a working group means the SEC intends to protect investors.
"Fraud harms muni bond investors no less than other investors," Schiffrin said Tuesday, "which is why the creation of the working group is less important than the SEC's willingness to pursue fraud in all of its forms and bring cases that don't just give the appearance of a functional enforcement program but that actually deter fraud and protect investors."
In fiscal year 2025, the SEC brought the fewest number of total enforcement cases in at least 20 years, according to an April 21 analysis by Schiffrin. However, the numbers under SEC Chairman Paul Atkins' tenure are actually even worse than they appear in the SEC's report for fiscal year 2025 because nearly half of the cases the SEC brought in that fiscal year came during the last three months of former SEC Chair Gary Gensler's tenure, the analysis said.
SEC leadership appears to have "an unbelievably narrow view of what types of cases are worthwhile to be brought, and it remains to be seen whether any of the frauds against retail investors that the working group identifies fall into the category of cases that SEC leadership deems within the commission's purview," Schiffrin said.
Peter Chan, a partner at law firm Baker McKenzie who earlier in his career served as assistant regional director in the SEC's Chicago Regional Office, said there's a likelihood that given the new working group and the SEC's focus under Chairman Atkins' leadership that there will be "an expectation that there'll be more cases and more resources applied to enforcement cases dealing with retail fraud in the municipal market but also in other areas."
The Division of Enforcement's Public Finance Abuse Unit under LeeAnn Gaunt, its chief, has already been focusing on protecting retail investors, said Chan, who as an example referenced charges brought in "flipping cases" where the SEC alleged new issue bonds meant for allocation to retail investors were improperly diverted.
"And so to me, I don't know that it changes the direction of the Public Finance Abuse Unit," Chan said regarding the creation of the Retail Fraud Working Group, adding, however, that he thinks there will be "greater support by the leadership" and potentially more resources made available by leadership to be applied to cases where retail investors are a focus.
One of the things that jumped out to Chan in the SEC's press release was its references to case generation.
"They call this a working group," he said, adding that it's not a specialty unit like the Public Finance Abuse Unit or the Asset Management Unit. "This is a working group in part designed to detect and gather intelligence and share intelligence and best practices dealing with … fraud against retail investors."
What makes that "really interesting," according to Chan is that Woodcock earlier in his career had served as chair of SEC's Financial Reporting and Audit Task Force.
The goal with that task force was not just to investigate certain types of cases but also to be the team that generated leads and gathered intelligence, Chan said, adding it's significant that the same person who oversaw that taskforce previously is now saying that the Retail Fraud Working Group is, among other things, going to generate cases through data and information sharing.
"There's a saying in enforcement – you can't investigate unless you first detect," said Chan, who also previously served as head of the SEC Chicago office's Municipal Securities and Public Pensions Unit. "And so I suspect that, yes, we'll see more cases dealing with retail investors in the municipal securities world."
Beyond that, however, Chan also expects to see different parts of the enforcement team and other groups within the SEC sharing intelligence as well as knowledge about the kind of fraudulent practices typically used to trick Main Street investors.
"And so I think there'll be a lot of sharing of data and information but also investigative techniques, including for instance how best to interview a retail investor witness," he said. "But I do think the generation of leads is a big part of it."
Michael Bixby, president of the Public Investors Advocate Bar Association, an investor advocacy association whose members represent claimants in securities and commodities arbitration proceedings and securities litigation, said "American retirees desperately need stronger regulatory enforcement" as well as better resources to combat fraud.
While the SEC's Retail Fraud Working Group is in theory admirable, "given the reduction in SEC staff and steep drop in actual enforcement activity, I am skeptical of how much this will ultimately benefit or protect everyday investors including municipal bond investors," Bixby said.
