Securities Market Integrity

What Is Securities Market Integrity?

Securities market integrity refers to the fairness, transparency, and honesty of the U.S. financial markets. Following widespread corruption that led to the stock market crash of 1929, Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934 to curb abusive practices and restore investor confidence.

These laws mandate truthful disclosure and prohibit deceptive conduct in connection with the offer, sale, and trading of securities. The U.S. Securities and Exchange Commission (SEC) enforces these statutes to ensure investors can rely on the integrity of the securities markets for the benefit of the public as a whole.

Ongoing Abuses in the Securities Markets

Despite this regulatory framework, abuses continue to occur. A recent and notable example illustrates how the SEC actively enforces market integrity when disclosure obligations are violated.

On January 27, 2026, the SEC settled a significant enforcement action against Archer-Daniels-Midland Company (ADM), the Chicago-based global grain trader, along with certain former executives. The misconduct spanned approximately seven years and involved materially inflating the performance of a key business segment that failed to meet operating profit targets.

In parallel, a class action lawsuit filed on January 24, 2026, seeks to recover approximately $8.8 billion in investor losses, alleging ADM made “false and misleading statements” regarding its financial performance.

SEC Enforcement Perspective

In announcing the settlement, Judge Margaret A. Ryan, Director of the SEC’s Division of Enforcement, emphasized the agency’s role in protecting investors and markets:

“Transparent and honest disclosure are key to maintaining market integrity, so when ADM misled its investors, the SEC stepped in to protect them and the market. The SEC is steadfast in its commitment to rooting out fraud and holding accountable wrongdoers, while also engaging market participants constructively to ensure the right outcomes are achieved in a timely and fair manner.”

Accounting and Disclosure Fraud Allegations

The SEC’s complaint charged ADM executives with Accounting and Disclosure Fraud. According to the SEC, the company employed several improper practices to meet operating profit goals or conceal shortfalls, including:

• Retroactive rebates
• Price changes targeted to specific dollar amounts
• Transactions designed to mask operating profit shortfalls
• One-sided transfers of operating profit not available to third parties

These actions allegedly distorted ADM’s reported financial performance and misled investors.

Settlement and Remedial Measures

The litigation did not proceed to judgment because ADM agreed to cooperate fully with the SEC and implement substantial remedial actions, including:

• Instituting an internal investigation
• Voluntarily reporting findings to SEC staff
• Providing additional analyses from an outside accounting expert
• Implementing new internal accounting controls
• Amending accounting policies and procedures
• Testing the effectiveness of new controls
• Creating a Fair Fund to distribute monetary relief to harmed investors

Penalties Imposed

As part of the settlement:

• ADM agreed to pay a $40 million civil penalty
• One officer agreed to disgorgement and prejudgment interest totaling $404,343, a $125,000 civil penalty, and a three-year officer and director bar
• A second officer agreed to disgorgement and prejudgment interest totaling $575,610 and a $75,000 civil penalty

What This Signals for Future SEC Enforcement

The ADM matter provides insight into how enforcement actions may proceed during the second Trump administration:

• Although the company settled, former and current executives may still face liability
• The SEC included accounting fraud charges, which are more serious than mere disclosure failures
• Despite a more business-friendly enforcement climate, the case was viewed as serious across administrations
• Cooperation with the SEC influenced the outcome, and the $40 million penalty is relatively modest compared to prior enforcement actions

Operational Damage Beyond Financial Penalties

SEC enforcement actions often disrupt company operations well beyond the monetary sanctions imposed. Common consequences include:

• Credit rating downgrades
• Reduced access to credit markets
• Significant diversion of senior management time
• Escalating legal and compliance costs
• Additional resources devoted to strengthening accounting and internal controls

How Companies Can Protect Themselves

The federal securities laws impose strict compliance obligations, and negligence is not a defense to SEC enforcement actions. Companies must proactively ensure accurate disclosures, sound accounting practices, and effective internal controls.

The attorneys at Corporate Securities Legal, LLP specialize in advising clients on securities law compliance, enforcement risk, and disclosure obligations. Our goal is to help clients stay out of trouble with the SEC while preserving investor confidence and the integrity of the securities markets.