SEC’s future is secure with nominee Atkins, independence question remains

Paul Atkins, President Donald Trump’s nominee to head the Securities Exchange Commission (SEC), has had such high-profile roles, in both the public and private sectors, that his conservative positions on securities regulation are well known. Less well-known, however, is how he might handle what could prove a crucial issue: the independence of his agency.

Atkins — who spent four years as an SEC staffer and six as a commissioner — arrives with a resumé stuffed with credentials as good or better than most of his predecessors. Former staffers and regulatory experts interviewed by Compliance Corylated gave him high marks for his knowledge of securities law and his willingness to hear differing points of view.

But Atkins, who is also a securities lawyer and entrepreneur, will face a challenge to SEC authority that will test him in a way no past agency chief has been tested.

The administration has ordered the SEC to clear all “significant” actions with the White House for approval, asserting it will not allow “the issuance of regulations, guidance, and positions advanced in litigation, unless authorised to do so by the president or in writing by the attorney general”.

The question of the SEC’s independence is more than hypothetical. The agency has already dropped a slew of cases against crypto asset exchanges — a move that current commissioner Caroline Crenshaw has said undermines its credibility.

Furthermore, both Trump and his lieutenant, Department of Government Efficiency chief Elon Musk, have been in the SEC’s sights in enforcement actions in the past: for example, it announced an action against Musk related to his dealing in Twitter shares shortly before Trump took office. LINK

Legal challenges ahead

The “novel and untested” executive order that Trump can take control of the independent agency faces legal challenges, said Scott Abeles, a lawyer at Carlton Fields, in a note to clients. The constitutional scrums could take months or years to play out.

In confirmation hearings in March, Atkins will certainly face questions about whether he will bow to political pressure.

Certainly, there are few issues where he would be expected to disagree with the White House. His well-known pro-industry stance favouring “light-touch” securities regulation makes him one of the most conservative SEC members of the past three decades. His long-running battle to roll back regulations will fit in with the administration’s crusade to reduce the power of US agencies.

A Republican who has often been described as libertarian, Atkins has been critical of many rules passed by the past two SEC chiefs, Gary Gensler, the Democrat and aggressive regulator who just resigned, and Jay Clayton, a moderate Republican appointee who, among other things, pushed through the long-delayed Regulation Best Interest fiduciary-style rule.

Wait and see

Industry speculation on what an Atkins-led SEC could look like is mixed.

A legal forum that included Clayton concluded that “a second Trump SEC will have a limited remit and be more circumspect about whether the authority they wield has been properly delegated to them”, reported law firm Shook, Hardy & Bacon’s government investigations and white collar practice. The SEC has never had to deal with such scrutiny and Atkins might have little latitude to push back, it added.

“We’re just going to have to wait and see,” said Lisa Bragança, a former SEC enforcement official who heads private practice Bragança Law. “Nobody knows what kind of commissioner he will be.”

Joseph Borg, the former Alabama securities commissioner and president of the North American Securities Administrators Association, worked with Atkins on regulatory issues while at NASAA and found him to be a capable commissioner. Borg said he disagreed often with Atkinsʼ conservative positions, but found him courtly and agreeable to work with.

“Paul has a good sharp mind and he is very conservative, but he does listen to what people say. He will speak his mind and do what he thinks is right,” Borg told Compliance Corylated. “But presidential power has a tremendous effect beyond securities, and he has to take that into consideration.”

Trump loyalist fits in

Atkins is a Trump loyalist, supporting and fundraising for his election runs, as well as a key figure in drafting Project 2025, the conservative blueprint for limiting the “administrative state”.  He has opposed virtually every reform since the Dodd-Frank Act, and will probably undo as many regulations as possible.

Project 2025 called for curbs on SEC corporate enforcements, as well as regulatory rollbacks in areas such as climate control, shareholder rights and diversity programmes. If the manifesto is any guide, industry self-regulator the Financial Industry Regulatory Authority could disappear and be folded into the SEC.

The latter does not appear to be on DOGEʼs list of targets, however, although it began a revamp even before Musk’s team arrived by eliminating regional directors. Unlike other regulatory agencies such as the Consumer Financial Protection Bureau, an SEC headed by Atkins would probably be safe from a total shutdown but would focus on individual investor fraud rather than scrutinising firms and corporations. 

Previously an advisor to crypto and digital assets industry body The Digital Chamber, Atkins has said he will work “to bring about smart regulatory policy for the digital asset and blockchain space”. Indeed, digital currency advocates — many of them Republicans — are looking for the SEC to become the vehicle to bring “regulatory clarity” for crypto. Atkins has long argued that the agency’s role should be to guarantee clarity in disclosures in any market.

“We should expect an Atkins-led SEC to favour smaller corporate penalties and to focus more on punishing individual bad actors with stricter penalties and fines,” law firm Cooley said in a commentary. 

Undoing the rules

The Trump administration’s controversial call to pause enforcing the Foreign Corrupt Practices Act puts Atkins in the middle of an expected retreat from FCPA civil actions at the SEC, which is the civil authority for the anti-corruption statute. Critics who question his ability to remain neutral have cited his record, as head of his Patomak Global Partners advisory, of working as an adviser and expert witness for firms charged with wrongdoing.

The Democratic National Committee has accused him of having “a long history of helping companies sidestep the law and influence regulators while ignoring conflicts of interest”, while Democratic National Committee rapid response director Alex Floyd said: “Donald Trump chose Project 2025 contributor Paul Atkins for his track record of siding with Wall Street over Main Street — making him the perfect ally.”

Regulatory experts foresee Atkins upholding a commitment to the basic investor protections the agency enforces. There will be no surprise, however, if he moves to curb both corporate penalties and the social concerns that occupied Gensler’s SEC.

He has publicly called for the agency to be “radically changed back” and previewed his expectation “that a change in administration would likely also mean a move to undo some of the rules enacted under Gensler”.