Securities Regulation Daily Wrap Up, WORTH NOTING—Other litigation, regulatory activity and industry news, (Aug 1, 2025)

By WK Editorial Staff

A weekly roundup of other items of interest to the securities, commodities, and corporate governance communities.

ENFORCEMENT—A New York resident pleaded guilty to engaging in a $30 million investment fraud scheme and selling foreign nationals access to prominent U.S. politicians. According to a DOJ press release, Sherry Xue Li and co-defendant Lianbo Wang orchestrated a nearly decade-long scheme to defraud more than 150 investors in a fictitious development project by falsely promising that their investments would guarantee them lawful permanent resident status in the U.S. via the EB-5 investment visa program administered by the Department of Homeland Security, U.S. Citizenship and Immigration Services (USCIS).Many of the victims were foreign nationals located in the People’s Republic of China (PRC). The defendants used investor funds to perpetuate the scheme and cover personal expenses.

The defendants also acted as “straw donors” for foreign nationals to unlawfully contribute to campaigns supporting U.S. politicians and political committees, promising access in exchange for fees. In some cases, the defendants did use the money to make donations to politicians, including $600,000 for a June 28, 2017 fundraiser for the then-President of the United States.

Li pleaded guilty to money laundering conspiracy and conspiracy to defraud the United States by obstructing the Federal Election Commission’s (FEC’s) administration of campaign finance laws. When sentenced, Li faces up to 20 years in prison.

ENFORCEMENT—A Canadian man was sentenced to a year in prison over a fraud scheme involving crypto non-fungible tokens (NFTs) that stole over $790,000 from more than 200 victims. According to a DOJ press release, Cameron Albert Redman and co-conspirators gained unauthorized access to the X accounts of various digital artists, then directed the artists’ followers to fraudulent websites. Then, as victims sought to claim new NFTs from the artists, the conspirators removed cryptocurrency and NFTs from the victims’ wallets. Redman was sentenced for conspiracy to commit wire fraud, wire fraud, and conspiracy to commit aggravated identity theft.

FINRA NEWS—FINRA adopted amendments, effective July 23, to exempt business development companies (BDCs) from FINRA Rule 5130 and from paragraph (b) of FINRA Rule 5131. Rule 5130 states that a member or a person associated with a member may not sell a new issue to an account in which a restricted person has a beneficial interest; a member or an associated person may not purchase a new issue in any account in which such member or associated person has a beneficial interest; and a member may not continue to hold new issues acquired as an underwriter, selling group member or otherwise. Until now, there was not a general exemption for non-traded or private BDCs. The new exemption will treat non-traded and private BDCs more similarly to registered investment companies and to traded BDCs, for which there are general exemptions. It will enable BDCs to more easily diversify their portfolios with IPOs to the extent that those investments are consistent with all other applicable regulations. The exemption applies to a BDC provided that for purposes of the exemption the BDC is not formed or maintained for the specific purpose of permitting restricted persons to invest in new issues.

ACCOUNTING AND AUDITING—The Financial Accounting Standards Board (FASB) published the proposed “Taxonomy Implementation Guide, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense.” The notice issued by the SEC explained the proposed guide’s scope as follows: “The proposed Guide demonstrates the modeling for the reporting of the disaggregation of income statement expenses under FASB Accounting Standards Codification Subtopic 220-40 through examples and focuses on detail tagging only (Level 4).” Public comments are due by September 19, 2025 and should be submitted directly to the FASB.

FINRA NEWS—The SEC has extended the reporting and dissemination dates for Rule 10c-1a. The rule requires covered persons making a covered securities loan to report specified information to FINRA by the end of the day on which the loan is effected or modified. FINRA must then publish that information, plus daily information pertaining to the aggregate transaction activity and distribution of loan rates for each reportable security, on the morning of the next business day. The order grants temporary exemptive relief from compliance with Rule 10c-1a regarding the reporting date until September 28, 2026 (from January 2, 2026), and from compliance with Rules 10c-1a(g) and (h)(3) regarding the dissemination date until March 29, 2027 (from April 2, 2026). FINRA requested the extension, sharing the concerns of impacted market participants regarding the challenges and risks presented by the original compliance schedule for reporting Rule 10c-1a information.

DERIVATIVES—The CFTC’s Division of Market Oversight (DMO) has extended no-action relief in CFTC Letter 25-21, previously granted under CFTC Letter No. 17-37 and most recently extended in CFTC Letter 22-09, allowing market participants to continue relying on modified compliance procedures related to position aggregation under Commission Regulation 150.4. Requested by industry groups including FIA, SIFMA AMG, and MFA, the extension preserves exemptions from notice filing and aggregation obligations where specified conditions are met, such as filing disaggregation notices only upon request and permitting reliance on certain exemptions without full regulatory classification.

BLOCKCHAIN—The SEC’s Crypto Task Force will host a series of roundtables across the U.S. to provide opportunities for additional stakeholders to meet with task force leader Commissioner Hester Peirce. The task force is particularly interested in hearing from representatives of crypto-related projects that have 10 or fewer employees and are less than two years old. The tentative schedule includes 10 stops from August to December. Interested parties may contact the task force as specified in an SEC press release.

LAW FIRM NEWS—Robert Leonard joined K&L Gates as a partner in the firm’s Asset Management and Investment Funds (AMIF) practice, based in New York. He concentrates his practice on the formation, structuring, and representation of domestic and offshore hedge funds, funds of funds, and other private investment vehicles for emerging and established managers.

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