FiSolve Weekly News Digest: July 31, 2026

Here is what we are reading in the news this week...

SEC Settles Charges Over ETF Compliance, Disclosure, and Risk Management Failures

The U.S. Securities and Exchange Commission (SEC) announced a settled enforcement action against a registered investment adviser for causing multiple exchange-traded funds (ETFs) to violate federal securities law requirements designed to protect investors. According to the SEC, the adviser was responsible for prohibited affiliated transactions, failures to comply with leverage-risk reporting and disclosure obligations, inadequate disclosures regarding fund distributions, and deficiencies in compliance policies and procedures. The SEC found that these actions undermined safeguards intended to prevent conflicts of interest, ensure timely reporting of material risks, and provide investors with accurate information. Without admitting or denying the findings, the adviser agreed to cease-and-desist provisions and pay a civil monetary penalty of $400,000. Read more here.

WSJ Report: The ETF Crazy Train is Picking Up Speed

An article in the Wall Street Journal posits the ETF industry has entered a speculative frenzy, with a record pace of new fund launches driven by investors chasing hot themes, leveraged bets, tax advantages, and catchy ticker symbols. Fund sponsors are essentially placing bets on every conceivable trend, knowing most ETFs will fail but hoping a few will become massive successes, as seen with the rapid rise of niche products like the DRAM memory-chip ETF. While traditional low-cost index ETFs continue to dominate assets, the fastest growth is occurring in increasingly exotic products, including single-stock leveraged funds, option-income ETFs, buffered ETFs, and tax-focused structures. The article notes many investors are attracted by marketing rather than fundamentals, often overlooking costs, risks, and tax implications. With regulators taking a permissive stance, ETF providers are launching ever more aggressive offerings, but history shows that many small funds eventually close, potentially creating unexpected tax bills or losses for investors. The article’s central message is that the ETF boom is great business for fund companies, but investors should be cautious because many of these trendy products amount to speculation disguised as innovation. Read more here.

The Hidden Productivity Tax of Hybrid Work

A new study by Robin and The Collab Collective finds workplace friction in hybrid environments, such as coordinating schedules, locating workspace, booking meeting rooms, and managing in-office collaboration, costs the average mid-sized organization approximately $9 million annually. The research estimates that knowledge workers lose up to 10.5% of their workweek to these coordination challenges, with nearly half of employees reporting a meaningful impact on productivity. The study also found that workplace friction is increasing, with 60% of workplace operations professionals reporting worsening conditions over the past year. Notably, there is a significant perception gap between employees and workplace leaders regarding the extent of these challenges, suggesting that many organizations may underestimate the business impact of fragmented workplace systems and hybrid work processes. Read more here.

Multistate Attorneys General Settlement Targets Alleged Consumer Protection and Fraud-Control Deficiencies in Digital Payments Platform

A coalition of 46 state attorneys general reached a $45 million settlement with the operator of a major digital payments platform to resolve allegations that the company misled consumers about the safety of its services and failed to implement adequate safeguards against fraud. According to the states, the platform was marketed as a secure way to store and transfer funds, despite alleged weaknesses in identity verification, fraud detection, and customer support processes that left users vulnerable to scams and account takeovers. The settlement requires the company to enhance its fraud-prevention controls, improve customer assistance and dispute-resolution mechanisms, and adopt additional measures designed to better protect consumers who rely on the platform for financial transactions. State regulators described the action as an effort to ensure that providers of digital financial services maintain consumer protections consistent with their marketing representations. Read more here.

CFTC Proposes New Governance and Conflict-of-Interest Framework for Affiliated Derivatives Market Participants

The CFTC issued a Notice of Proposed Rulemaking that would establish new and enhanced requirements governing affiliations among CFTC-regulated entities, including trading venues, clearing organizations, futures commission merchants, and other market participants. The proposal responds to the increasing prevalence of vertically integrated and affiliated business models in the derivatives industry and seeks to address actual and perceived conflicts of interest that could affect governance, market access, risk management, and market integrity. The CFTC's proposed amendments to Parts 37, 38, and 39 of its regulations, along with Regulations 1.52 and 1.55, would create a principles-based framework requiring firms to identify, manage, and mitigate conflicts arising from ownership interests and affiliated relationships, while preserving flexibility for innovation and evolving market structures. The CFTC stated that the proposal is intended to strengthen confidence in the fairness and resilience of U.S. derivatives markets without imposing unnecessary regulatory burdens and has invited public comment for 60 days following publication in the Federal Register. Read more here.

SEC Settles Case over Broker-Dealer

Net Capital Deficiencies

The U.S. Securities and Exchange Commission (SEC) announced a settled administrative action against a registered broker-dealer and an affiliated control person arising from repeated violations of federal net capital requirements between 2023 and 2025. According to the SEC, the firm operated while undercapitalized on multiple occasions, including for an extended period after becoming liable for a substantial credit obligation that was not properly incorporated into its net capital calculations. The SEC found that the firm continued conducting securities business despite failing to maintain the required minimum net capital, a rule intended to protect investors by ensuring broker-dealers have sufficient liquid resources to meet their obligations. Without admitting or denying the findings, the respondents agreed to cease-and-desist provisions and the payment of civil penalties totaling $60,000. Read more here.

FINRA Sanctions Firm for Deficient Anti-Money Laundering Surveillance and Suspicious Activity Monitoring Controls

FINRA found that, from February 2016 through September 2023, a member firm failed to maintain an anti-money laundering (AML) program reasonably designed to detect, investigate, and report suspicious transactions. FINRA determined that the firm’s automated surveillance rules for identifying potentially suspicious money movements were improperly configured, resulting in ineffective monitoring, missed red flags, excessive false positives, and inadequate review of whether the controls were functioning as intended. In addition, responsibilities for evaluating and retiring ineffective monitoring rules were divided between different groups without sufficient coordination, allowing the deficiencies to persist for years. As a result, FINRA concluded that the firm violated AML compliance requirements and related standards of commercial honor and equitable principles of trade. The matter was resolved through a Letter of Acceptance, Waiver, and Consent, under which FINRA imposed a censure and a $275,000 fine. Read more here.

Operational Resilience in an Interconnected

Financial Ecosystem

In a recent blog, the Financial Conduct Authority (“FCA”) highlights that operational resilience can no longer be viewed solely through the lens of an individual firm's controls, as financial institutions are becoming increasingly dependent on shared third-party providers, technology platforms, and interconnected service networks. The regulator emphasizes that disruptions affecting a single critical provider can have system-wide consequences, making collaboration, robust third-party risk management, and effective oversight essential. The FCA encourages firms to look beyond compliance-based approaches and focus on identifying vulnerabilities across their broader operational ecosystem, ensuring they can continue delivering important business services even when disruptions occur. The message may be summarized as follows. Resilience in today's financial services industry is a collective challenge that requires firms to understand and manage risks across an increasingly interconnected network of participants and service providers. Read more here.

FiSolve Hosts Webinar on Prediction Markets: Opportunities and Legal Considerations

FiSolve hosted a webinar titled: Prediction Markets: Emerging Opportunities, Emerging Risks, and the New Legal and Compliance Frontier. The webinar discussed business opportunities in this area, and the legal and compliance considerations firms should be contemplating today. Our speakers (Steven Yadegari (Moderator), Steven Felsenthal, David Hauser, Drinan Gorney, and Stephen McShea) highlighted a few key points including: 1) This is not solely a legal/compliance issue. It is important to get key people in your organization involved in the process including, HR, legal, compliance, information security, research and your execs. 2) Where do you start? Talk to people at your firm. Find out how they are using or considering the use of predictive markets. And then conduct education and training around the issues that arise in these markets and your firm's policies towards managing the issue, and 3) an outright prohibition on employee use or trading may seem like an easy solution, but there may be a business cost in doing so. A thoughtful approach can preserve business opportunities, allow appropriate employee participation, and manage the risks, conflicts and compliance considerations inherent in this area. You can view the full webinar here.

💡FiSolve's Negotiation Tip of the Week💡

Recruiting Talent with Difficult Demands

When a candidate's demands seem excessive, avoid focusing on whether the request is "reasonable" and instead evaluate the precedent it may establish. Executive-level candidates often seek accommodations related to reporting structure, title, remote work, governance authority, team composition, severance protections, or decision-making autonomy. The key is to distinguish between a one-time accommodation that supports business objectives and a concession that could undermine culture, create internal equity issues, complicate regulatory expectations, or become a template for future hires. Effective negotiators acknowledge the candidate's interests while remaining disciplined about organizational principles, seeking creative alternatives that address underlying concerns without compromising standards the firm may later regret having set.

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