In 2007, the Securities and Exchange Commission (SEC of the Commission) adopted Advisers Act Rule 206(4)-8 prohibiting an investment adviser from making false or misleading statements to, or otherwise defrauding or deceiving, investors or prospective investors in funds or other pooled investment vehicles. The rule clarified the Commission’s ability to bring enforcement actions against investment advisers who defraud fund investors directly (as opposed to defrauding the funds themselves). At the time, then-Commissioner Paul Atkins published a concurrence stating his view that Rule 206(4)-8 should require a finding of scienter, and that negligence-based liability is both legally insufficient and bad enforcement policy.
When Paul Atkins became SEC Chairman in April 2025, there was understandable speculation that Atkins would steer the Commission away from allegations of negligent misconduct in the private fund space. However, the first significant Rule 206(4)-8 enforcement action of his tenure instead hints at a surprising continuity.
On September 9, 2025, the Commission filed a settled complaint in federal district court against Tomislav Vukota and two investment adviser entities he controls, Vukota Capital Management, LLC and VCM Global Asset Management Ltd. The complaint alleges that the defendants engaged in a variety of negligent misconduct — including sending misleading letters to investors in private funds, failing to disclose conflicts of interest, and making material misstatements in marketing and offering materials. Defendants have agreed to consent to injunctions and millions of dollars in disgorgement, prejudgment interest, and penalties.
Enforcement Division recommendations are voted on by the full Commission; it is possible that Atkins aired an objection to the use of a negligence standard in this case. In any case, it’s too early to say whether this matter heralds the continued systematic application of a negligence standard under Rule 206(4)-8. For the time being, investment advisers and fund compliance professionals should continue to operate under the assumption that the Commission will pursue negligent misconduct.
