In recent months, the U.S. Securities and Exchange Commission has signaled a shift in its approach to applications to lift administrative bars that restrict participation in the securities industry. This suggests there is presently a window of opportunity for individuals subject to temporary or permanent bars to seek relief from the Commission. Along the same lines, we expect the Commission to be more open to applications for waivers from statutory disqualifications triggered by many SEC orders.
Background
Many SEC settlements include administrative bars that prohibit the settling party from certain activities. A common bar is an “industry bar” that prohibits association with a securities firm (like a broker-dealer or investment adviser). Other bars include “officer and director bars” that prohibit service as an officer or director of a public company and “penny stock bars” that prohibit participation in penny stock offerings. Some bars are unqualified, meaning the barred party does not have a right to apply for reentry; these are often referred to as “permanent” bars. Others are qualified bars allowing the barred party to seek the SEC’s approval to lift the bar after a specific period of time, often referred to as “temporary” bars. In reality, however, applications for reentry from so-called temporary bars can sit with the Commission for many months, or even years, thus leading to criticism that temporary bars are effectively permanent. And the ramifications of an administrative bar go far beyond the specific prohibition the bar imposes; bars can trigger a slew of statutory disqualifications that can impact the barred party’s ability to raise funds or engage in other activities in the securities industry.
Generally, an applicant seeking reentry must demonstrate that the reentry is consistent with the public interest. Historically, however, the Commission has required applicants with permanent bars to demonstrate “extraordinary circumstances” to meet the public interest standard.1 This requirement has, in the words of the SEC in a recent order lifting a permanent industry bar, “create[d] an insurmountable hurdle to those applicants who can demonstrate, among other things, that it is otherwise in the public interest that they be able to reenter the industry with robust investor-protection conditions and supervision that addresses the risks presented by their prior conduct.”2
This high hurdle to reentry now appears to have been lifted by the SEC. As discussed below, the “extraordinary circumstances” standard will no longer be applied to applications seeking reentry from permanent industry bars—and we would expect the Commission to decline to apply this high hurdle to other types of reentry applications as well. This means individuals who have agreed to permanent bars now have a real opportunity to convince the SEC that their bars should be lifted. In addition, the SEC has signaled a significant shift in its approach to temporary bars—acting on a number of reentry applications in recent months.
Even where the SEC does not impose a bar, SEC orders in both settled and litigated matters typically include permanent injunctions against violating the securities laws that can trigger serious statutory disqualifications. In this new environment, we expect there to be more openings to seek waivers from such statutory disqualifications as well.
Recent Grants of Relief from Bars
Permanent Bar Removed
In April, the Commission granted the reentry application of an individual subject to a permanent industry bar, allowing the individual to associate with a registered investment adviser.3 In 2018, the Commission had imposed a permanent bar after finding that the individual, then a registered investment adviser, had engaged in fraudulent trade allocation by purchasing securities in an omnibus account and waiting to allocate trades between himself and his clients until he determined whether the securities had increased in value.
In October 2022, the individual filed an application seeking the Commission’s approval to associate with a registered investment adviser. The application indicated that he would be subjected to enhanced supervision, including daily reviews of transactions and positions, by the investment adviser’s chief compliance officer and a third-party compliance firm.
The Commission granted the application last month—2.5 years after it was first filed. In making its findings, the Commission focused on the factors set forth in Commission Rule of Practice 193—the egregiousness and scope of the underlying violation and whether the application is in the public interest. The Commission expressly stated that it “no longer intend[s] to use the ‘extraordinary circumstances’ test in evaluating applications” for reentry from permanent bars. The Commission concluded that the applicant had demonstrated his reentry was in the public interest because six years had elapsed since the bar was imposed, he had timely paid the penalty imposed by the SEC and had complied with the bar since its imposition. The Commission also noted the applicant had actively performed charitable works and demonstrated meaningful remorse for his prior conduct. These factors, in conjunction with the capacity the applicant proposed to be associated and the manner and extent of the supervision to be exercised over him, were sufficient to show that the proposed association was consistent with the public interest.
Penny Stock Bar Lifted
In April, the SEC lifted a five-year penny stock bar that had been imposed in 2017 as part of a stock-touting settlement.4 According to the SEC, the individual, then the CEO of two public companies, was paid for a wide array of publications that promoted various stocks, many of which allegedly failed to properly disclose the receipt of compensation for the publication or affirmatively misrepresented that the authors had not received compensation.
In his reentry application, the individual indicated that he planned to seek investments through Regulation D private placements but that the Securities Exchange Act prevents individuals subject to penny stock bars from doing so. He indicated that he would engage reputable and experienced financial, accounting, and legal personnel to review the offerings, and retain an independent compliance consultant to conduct additional review. He further affirmed he had complied with the bar that resulted from the order, and had not been subject to any civil litigation, criminal investigation, or disciplinary action in connection with the issuance, sale, or promotion of securities since the 2017 order. Finally, he indicated he would continue to forgo directly or indirectly participating in any paid promotional campaigns.
Based on these representations, the Commission concluded that the applicant made a satisfactory showing that the proposed consent for his participation in penny stock offerings was appropriate and not adverse to the public interest.
Suspension Orders Lifted
Two other recent reprieves concerned accountants who had been suspended from appearing or practicing before the SEC pursuant to Commission Rule of Practice 102(e). Rule 102(e) reinstatement applications are not subject to the “public interest” standard discussed above but are instead evaluated under a lower “good cause” standard, i.e., that the applicant has shown good cause why he or she should be reinstated.
The first suspension, from 2021, applied to an audit partner who, according to the Commission, had interfered with the request for proposal process at a publicly traded company to select an independent auditor; the auditor was subject to a three-year suspension.5 The second, from 2023, concerned an accountant who served as the engagement partner on the audits of two private funds that allegedly failed to comply with applicable audit standards; the accountant was subject to a one-year suspension.6 In separate orders in April, the Commission reinstated both individuals to appear and practice before the Commission.7 The Commission found good cause had been shown for reinstatement since the individuals had not violated the terms of their suspension orders, the securities laws, or any other rule of professional conduct since the entry of the original orders. These reinstatements followed four similar ones awarded to accountants in 2024, during the final year of Gary Gensler’s tenure as SEC Chair.8
Reading the Tea Leaves on the Commission’s Approach to Bars
Paul Atkins began his tenure as SEC Chairman on April 22—after the Commission orders discussed above, which were entered during Acting Chairman Mark Uyeda’s tenure. As such, we do not know for certain whether the Commission will continue its recent approach to administrative bars. Still, all signs point to the Atkins SEC providing more opportunities for reentry to individuals subject to administrative bars (and for reinstatement of suspended professionals). We expect the SEC to act on applications more quickly and to be more open to granting reentry even from permanent bars. This represents a significant shift in the SEC’s approach and creates credible avenues for individuals subject to administrative bars to pursue reentry with the assistance of knowledgeable counsel.
In addition, the current environment presents openings for companies and individuals to negotiate waivers from statutory disqualifications triggered by many SEC orders. For decades, the SEC has routinely included in its settlement agreements “obey-the-law” injunctions that broadly prohibit violations of the federal securities laws. Being subject to this kind of injunction can trigger an array of statutory disqualifications that prevent the settling party from participating in numerous types of capital-raising or securities market activities. For example, individuals subjected to permanent injunctions can find themselves disqualified from serving as a director, officer, or employee of a registered investment company, suspended or revoked as registered investment advisers or broker-dealers, barred from practicing before the SEC, disqualified from membership or participation in a self-regulatory organization, or barred from associating with certain types of private placements or exempted offerings.
But as the SEC reels from a string of recent court decisions limiting the scope of its authority, it faces risk in continuing to impose broad injunctions that disqualify individuals from activities that might be entirely unconnected to the violative conduct.9 Under these circumstances, those negotiating settlements with the SEC may be able to argue for more limited injunctions or for waiver from certain disqualifications so that the effect of permanent injunctions becomes more limited and less onerous. Likewise, parties subject to permanent injunctions should consider whether they may be able to convince the SEC to waive these disqualifications.
Even with the limited sample of applications that have been granted, it appears the SEC will entertain applications across a broad range of conduct. However, there is no guarantee that these requests for relief will routinely be granted. The process of obtaining relief from bars and statutory disqualifications is nuanced and requires experienced counsel who understands the scope and application of the restriction at issue and the best way to present an application to the SEC. Applicants should retain counsel with knowledge of how the new pattern of applications seeking relief are treated, and what arguments are likely to resonate in discussions amongst Enforcement and other divisions at the SEC as they consider applications. Now is the time for companies and individuals to consult with counsel about whether their specific circumstances put them in a position to make a strong case for relief.
1 See In the Matter of Victor Teicher, Exchange Act Release No. 58789, 2008 WL 4587535, at *2 (Oct. 15, 2008) (Commission Op.); In the Matter of Matthew D. Sample, Exchange Act Release No. 75893, 2015 WL 5305992, at *5-6 (Sept. 10, 2015) (Commission Op.); In the Matter of Daniel Sholom Frishberg, Advisers Act Release No. 5682, 2021 WL 467231, at *3-4 (Feb. 9, 2021) (Commission Op.).
2 In the Matter of Roger T. Denha, Advisers Act Release No. 6872, 2025 WL 1091846, at *4 (Apr. 11, 2025).
3 In the Matter of Roger T. Denha, Advisers Act Release No. 6872, 2025 WL 1091846, at *6 (Apr. 11, 2025).
4 In the Matter of Manish Singh and Lavos, LLC, Exchange Act Release No. 10346, 2017 WL 1315499, at *1 (Apr. 10, 2017).
5 See Sec. Exch. Comm’n, Accounting and Auditing Enforcement Release No. 4239 (Aug. 2, 2021).
6 See Sec. Exch. Comm’n, Accounting and Auditing Enforcement Release No. 4394 (Mar. 29, 2023).
7 In the Matter of James G. Herring, CPA, Exchange Act Release No. 102849, 2025 WL 1091845, at *2 (Apr. 11, 2025); In the Matter of Sean P. Tafaro, CPA, Exchange Act Release No. 102847, 2025 WL 109844, at *2 (Apr. 11, 2025).
8 See In the Matter of Lam D. Ha, CPA, Exchange Act Release No. 101810, 2024 WL 4979326, at *2 (Dec. 4, 2024); In the Matter of Michael Bellach, CPA, Exchange Act Release No. 101731, 2024 WL 4891379, at *2 (Nov. 25, 2024); In the Matter of Matthew Gamsey, CPA, Exchange Act Release No. 100250,2024 WL 2800984, at *2 (May 30, 2024); In the Matter of Nicholas Tornello, CPA, Exchange Act Release No. 10010, 2024 WL 2111448, at *2 (May 10, 2024); In the Matter of Justin Samuel Cary, CPA, Exchange Act Release No. 99492, 2024 WL 492404, at *2 (Feb. 8, 2024)
9 SEC v. Grenda Grp., LLC, 621 F. Supp. 3d 406, 411 (W.D.N.Y. 2022); SEC v. Gentile, 939 F.3d 549, 559 (3d Cir. 2019); SEC v. Am. Bd. of Trade, 751 F.2d 529, 535 (2d Cir. 1984).
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