A Second Circuit decision earlier this year showed the classic recipe is still on the menu—and then the SEC quietly pulled one dish off it rather than explain the ingredients.
By Nick Morgan, Founder and President, ICAN Law
For most of the last decade, the SEC has had a favorite way of making law: not through rulemaking, where Congress and the public get a vote, but through enforcement actions, where the agency picks the defendant, picks the theory, and picks the forum. Critics called it regulation-by-enforcement. The agency called it a regular Tuesday.
Under former Chair Gary Gensler, the practice reached a fever pitch—novel theories about crypto, custody, dealer registration, and more, all advanced in complaints and administrative orders. Chair Paul Atkins has signaled a different posture: less enthusiasm for expanding the agency’s reach one defendant at a time, more interest in clear rules authorized by Congress.
Reform-minded readers might assume the recipe is being retired. It is not. Investigations opened years ago are still grinding forward. Cases filed under prior leadership continue to be litigated by the same career staff who designed them. Some institutional knowledge is being lost through staff turnover—but the recipe, as it turns out, is mostly intact.
We know this because the Second Circuit walked through it, step by step, earlier this year.
In SEC v. Amah, decided in February 2026, every step of the regulation-by-enforcement recipe held up beautifully. With one notable exception. And then, on remand, the agency did something that tells you just as much about the recipe as the opinion did.
In the spirit of helping the agency preserve its culinary traditions, I modestly offer the recipe below. It is not complicated. Most of the ingredients are already in the pantry.
Step 1: Choose your issue carefully
You want a question that, if the agency wins, expands its reach across thousands of cases. You want it to sound technical enough that no one outside the securities bar will pay attention.
Make sure to pick an issue with broad applicability where the SEC’s authority is unclear.
In Amah, the question was this: Are you an “investment adviser” subject to the Investment Advisers Act if you provide advice with the expectation of receiving compensation, but you do not actually receive compensation?
In plain terms: get one court to rule that a person is an “investment adviser” even where no compensation changed hands, and the SEC has a decision it can wave at the next defendant, and the one after that—extending the reach of a reading the agency wrote for itself, without ever having to defend that reading through the public process Congress designed.
That is exactly the kind of issue you want. Win it once, and you’ve quietly expanded jurisdiction over an unknown number of people who never knew they were “investment advisers” in the first place.
Step 2: Choose your defendant even more carefully
This step is essential. The novel theory needs to survive appellate scrutiny, and the surest way to make that happen is to argue it against someone who has no lawyer.
Evarist Amah litigated his appeal pro se. The Second Circuit, to its credit, acknowledged the obvious problem: it noted that “the complexity of the legal issues” in the case weighed in favor of appointed counsel and suggested the district court consider appointing one on remand. But by then, the appeal had already been argued. The novel statutory question had been “briefed and argued only cursorily,” in the court’s words, by a man representing himself against the Securities and Exchange Commission.
This is a feature of the recipe, not a bug. A represented defendant might cite the right cases. A represented defendant might force the agency to defend its interpretation on the merits. A pro se defendant is fighting a different fight against opposing counsel that has endless resources funded by the United States Government.
Step 3: Bury the novel theory in a casserole of traditional claims, bad facts, and fraud
Never serve the novel theory on its own. Always wrap it inside conduct that makes the defendant unsympathetic.
In Amah, the SEC’s Investment Advisers Act theory rode in alongside more traditional legal theories under the Securities Exchange Act and the Securities Act, a generous helping of bad facts, and straightforward fraud. The defendant had distributed a performance report claiming a 5.96% year-to-date return when the underlying account had actually lost 78% and held just over $10,000 of an original $415,000. He distributed a later report claiming a negative 36.74% return when the actual loss was negative 99.66%. He kept projecting positive returns long after he knew the fund had collapsed.
The traditional claims were strong. The court affirmed liability under the Exchange Act and the Securities Act without breaking a sweat. And then, riding in the same procedural vehicle, came the Advisers Act question—a novel issue of statutory construction that, as the Second Circuit acknowledged, no Second Circuit or Supreme Court decision had squarely addressed.
The presentation matters. A reader scanning the decision sees what seems to be a standard fraud case. The novel jurisdictional question is just a garnish. That is the design.
Step 4: Ask the court to trust the chef that everything is cooked to perfection
Here is the step where the recipe now breaks down.
For decades, the move was simple: when a statute was unclear, the agency would point to its own interpretation and tell the court to defer to it. Federal judges who had never read an Advisers Act release in their lives would go along, because that was the rule. The SEC, in effect, got to be both chef and food critic.
Two years ago, the Supreme Court ended that arrangement. In Loper Bright Enterprises v. Raimondo, the Court ruled that federal judges must interpret statutes on their own—they cannot defer to whatever the agency says the law means.
The SEC’s position in Amah rested entirely on its 2011 rule, which holds that past compensation makes someone an “investment adviser” forever. The agency offered no other defense of why that reading was correct. The Second Circuit refused to rubber-stamp it. The court vacated the Advisers Act portion of the judgment and sent it back to the district court, with instructions to actually analyze the statute—not just trust the agency.
The Second Circuit refused to rubber-stamp it. Judges, the panel wrote, “may not defer to an agency interpretation of the law simply because a statute is ambiguous,” and must instead exercise independent judgment. The court vacated the Advisers Act portion of the judgment and sent it back to the district court, with instructions to actually analyze the statute—not just trust the agency.
That is the one place the recipe stalled. Step 4—the deference step—no longer works as a freebie. The agency now has to defend its position on the merits in front of judges who are required to think for themselves.
What Happened on Remand Is the Real Story
Here is what happened next: the question the Second Circuit sent down was never answered.
On remand, the two Advisers Act counts—Claims Four and Five, brought under Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8—were dismissed. The district court entered a modified final judgment dated July 14, 2026, and the SEC announced it in a litigation release on August 26. The judgment recites only that the claims were “dismissed on remand.” It gives no reasoning, and no opinion analyzing the statute appears on the public docket.
What survives is a fraud judgment and nothing more: permanent injunctions under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, disgorgement of $10,000 plus $1,617.82 in prejudgment interest, and a civil penalty of $446,458—down from $669,667. The Advisers Act injunction is gone.
So consider where that leaves things. A federal appeals court identified a novel and important question of statutory construction. It said no court had ever interpreted the language. It sent the question down to be decided by a judge exercising independent judgment. And the question simply went away.
The SEC’s reading of “investment adviser” is therefore exactly where it was before the appeal: never defended on the merits, never examined by any court, and still sitting in the pantry, available for the next case.
Getting a bad interpretation vacated in one case is not the same as getting it resolved.
The Side Dish Was the Whole Point
Mr. Amah’s underlying conduct—the false performance reports, the misleading projections—was textbook fraud, and the Second Circuit had no trouble saying so. The remarkable part is the Investment Advisers Act question accompanying all of that. Had the SEC won that question against a pro se defendant, the agency would have walked away with a Second Circuit decision appearing to extend the Advisers Act definition.
It is fair to note that Amah was decided by summary order, which in the Second Circuit carries no binding force on later panels. But that is thinner protection than it sounds. Summary orders are citable. District judges read them. SEC briefs quote them. A favorable order here would have become the agency’s opening exhibit in the next Advisers Act fight, and the one after that—each citation making the reading look a little more settled than any court ever actually held it to be.
This is how regulation-by-enforcement actually works. The agency picks a defendant who cannot push back, attaches a novel legal theory to an unsympathetic fraud case, and asks a court to ratify the expanded interpretation—quietly, through litigation, with no notice and no chance for affected parties to weigh in.
And the timing matters. Amah was filed in 2021 over conduct running from 2016 through 2019. SEC investigations regularly run that long. Which means somewhere in the agency’s pipeline right now is a case that fits the Amah template—and that may produce a court of appeals decision in 2030 or 2031 quietly extending the agency’s reach into territory Congress never authorized. Reform-minded Chairs come and go. Cases filed under prior leadership keep grinding forward, and new investigations develop because the people who designed the theories are still there, and the defendants cannot afford to fight.
That is why court-won change matters more than Commission-won change. A new Chair can stop new cases from being filed only when he or she is Chair. A new Chair cannot un-file the cases already in the pipeline or stop investigations that won’t be presented to the Commission for years to come. Only courts can do that—and only if the issues actually reach them, fully briefed and properly defended.
The Second Circuit got it right in Amah, but that happened because the panel chose to take Loper Bright seriously despite a pro se appellant. And because the agency walked away before any court had to answer the question, the question is still open. The next person the SEC calls an “investment adviser” who was never paid will have to litigate it from scratch. Next time, against a different panel, with a defendant who doesn’t have the same willingness to push back, the result might be different.
Author Bio: Nick Morgan is President of the Investor Choice Advocates Network (ICAN), a nonprofit public interest litigation organization advocating for economic liberty, capital formation, and entrepreneurship rights on behalf of small investors and entrepreneurs facing SEC and FINRA overreach.
