SEC Creates Retail Fraud Working Group to Target Scams Against Everyday Investors

by Mark Xiao and Riya Mittle

On July 7, 2026, The U.S. Securities and Exchange Commission (“SEC”) announced in a press release that it would be creating a Retail Fraud Working Group “to strengthen the Division of Enforcement’s efforts to identify and combat fraud targeting everyday investors.”  Since the working group is new, its enforcement results remain to be seen.  However, its creation signals that fraud involving individual investors will remain a central focus of the SEC.

Types of Misconduct to be Targeted by the Retail Fraud Working Group

According to the press release, the Retail Fraud Working Group (“Group”) will leverage staff and resources across the SEC to find types of fraud and misconduct that retail investors may face.  It will also use data and technology to identify suspicious conduct, work on proactive case creation, coordinate among partners, and assist with educational outreach.  Specifically, the Group will target different types of misconduct including:

1. Offering Frauds:  Promotors who make material misrepresentations or omissions made to potential investors to encourage them to invest in dubious investment vehicles.  Examples can include Ponzi schemes and Pyramid schemes.
2. Pump-and-Dump Schemes:  Promoters engaging in misleading tactics to create fake interest in thinly traded companies they control.  Once the price rises, those involved in the scheme sell their holdings and investors face losses once the price falls.
3. Market Manipulation:  A person artificially impacting the supply or demand of a stock.  The SEC announced in the Enforcement Results for Fiscal Year 2025 press release that market manipulation is an enforcement priority.
4. Breaches of Fiduciary Duties:  Investment advisers and broker-dealers, who are legally obligated “put their clients’ interests before their own,” engaging in churning, misrepresentations, or unauthorized trading may result in a breach of fiduciary duty.

The Retail Fraud Working Group Builds on the SEC’s Prior Enforcement Priorities by Concentrating Resources on Fraud Against Everyday Investors

The Retail Fraud Working Group builds on the SEC’s effort to direct enforcement resources towards conduct that causes harm to investors.  In fiscal year 2025, the SEC filed 456 enforcement actions and returned around $262 million to injured investors.  The SEC also received just under 20% more tips, complaints, and referrals (also known as “TCRs”) from the previous fiscal year.

The SEC focuses on cases involving schemes targeting particularly vulnerable populations such as veterans, seniors, retirees, and members of religious communities where trust can be abused.  The Group will enable the agency to concentrate additional resources on recurring fraud patterns that affect retail investors.  However, complex investigations can take years to develop.  Therefore, investors should not assume that any public announcement reading the Group’s priorities will immediately result in public enforcement actions or loss recovery.

Warning Signs of Offering Fraud and Manipulation Retail Investors Should Watch For

The Financial Industry Regulatory Authority (“FINRA”), a self-regulatory organization for member broker-dealers, warns that unsolicited investment offers made through calls, emails, texts, or social media are common methods used to attract potential victims.  Investors should be especially cautious when a recommendation is unsolicited or comes from someone whose identity and credentials cannot be independently verified.  Other warning signs include promises of high or guaranteed returns, claims of investments that involve little to no risk, unclear explanations about how profits will be generated, missing or inconsistent documentations, and instructions to send money to unconventional accounts (like a cryptocurrency wallet).

Potential investors should also be cautious of high-pressure statements such as “act now”, “limited availability”, “once-in-a-lifetime opportunity.”  Every investment carries risk, and fraudsters create a sense of urgency to prevent investors from conducting independent research.  Further, social media promotions deserve particular scrutiny since a variety of scams can occur through these platforms.  Investors should be wary of a potentially hacked profile requesting money, phishing tactics, job scams, and more.  Companies and investment vehicles can be researched through the SEC’s EDGAR database to verify if the seller is properly registered.

What an Investor Should Do if They Suspect They Were Defrauded

If an investor suspects they have been defrauded, they should begin collecting all relevant information including documents, screenshots, reports, and financial account information related to the potentially fraudulent investment.  They should also create a timeline of the events that happened.  Next, the investor should report the fraud to the appropriate regulators and law enforcements, such as the SEC or FBI.  The investor should review their rights, consider their options, and seek support.

A private lawsuit may offer an additional avenue for recovery claims based on federal or state securities law, common-law fraud, breach of fiduciary duty, negligent misrepresentation, breach of contract, or related theories.  A class action may be appropriate when many investors suffered similar losses from the same alleged statements or course of conduct.

The securities litigation team at Miller Shah LLP helps investors who believe they were defrauded to evaluate their circumstances and consider possible options for pursuing losses.