[BUG] Enterprise managed settings (HKLM) are not applying

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Environment:
Claude Code Version: 2.1.118
Windows 11 24H2

Claude code won't pickup settings from HKLM\SOFTWARE\Policies\ClaudeCode\Settings

Verified JSON was valid with (Get-ItemProperty 'HKLM:\SOFTWARE\Policies\ClaudeCode' -Name Settings).Settings | ConvertFrom-Json

Same JSON will apply settings when placed in C:\Program Files\ClaudeCode\managed-settings.json

/status shows only user settings being applied.
/doctor doesn't display any errors.

What Should Happen?

According to https://code.claude.com/docs/en/settings Claude Code should pick up JSON in REG_SZ value registry key and apply settings into the managed settings scope.

Error Messages/Logs

Steps to Reproduce

1. Create HKLM\SOFTWARE\Policies\ClaudeCode\Settings registry key of type REG_SZ or REG_EXPAND_SZ.
2. Add JSON containing managed settings to registry key.
3. Managed settings will not apply.

Claude Model

Not sure / Multiple models

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.118

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Windows Terminal

Additional Information

_No response_