Sec Chair Atkins Leads the Way in SEC Enforcement

Sec Chair Atkins is making waves in the world of SEC enforcement, and it's all thanks to her leadership. She's been at the helm of the SEC since 2018, and in that time, she's overseen some major changes.

One of the key areas she's focused on is corporate accountability. In a recent speech, she emphasized the importance of holding companies accountable for their actions, stating that "corporate accountability is essential for maintaining public trust in our markets."

Under her leadership, the SEC has taken a more aggressive approach to enforcement, with a focus on cases involving corporate wrongdoing. This is evident in the number of cases brought against companies and individuals, which has increased significantly since she took office.

Sec Chair Atkins has also prioritized whistleblower protection, recognizing the crucial role that whistleblowers play in uncovering corporate misconduct.

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The SEC Enforcement division has shifted its focus under the new administration. Acting Enforcement Director Sam Waldon has stated that the agency will prioritize traditional enforcement areas, such as insider trading and accounting and disclosure fraud.

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The agency has dismissed a litigated case brought against an investment adviser for allegedly failing to draft rules expressly prohibiting an attorney from sharing material non-public information. This suggests that the SEC is no longer pursuing novel legal theories like "shadow trading".

The Enforcement staff will also focus on cases aimed at individual accountability, as they are more likely to be well-received by the Commission. This is evident in the recent charges brought against a real estate investment firm and its owner for defrauding over 700 investors out of more than $52 million.

The SEC has introduced a new formal order review process, which requires a majority of the SEC Commissioners to approve formal orders of investigation before a subpoena for documents or testimony can be issued.

This change is a significant shift from the previous system, where the Director of Enforcement had the authority to approve formal orders since 2009. The Commissioners will now have the opportunity to weigh in on enforcement investigations at an earlier stage.

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The practical impact of this change is expected to be minimal, as Enforcement staff can still use voluntary requests in the first instance and implement an efficient process for requesting formal order authority from the Commission.

However, this change may prove important in cases where Enforcement staff is employing "creative" legal theories that may not be embraced by the Commission. In such cases, the Commission will be able to make determinations earlier in an investigation and may use the formal order review process to narrow or even close investigations.

The SEC has also denied a motion by several firms to modify their settlement agreements to bring them in line with more favorable settlements reached in January 2025. The Commission found that the firms' "settlor's remorse" did not justify upsetting a final, agreed-upon settlement.

The SEC Enforcement Division is refocusing its efforts on more traditional enforcement areas, such as insider trading and accounting and disclosure fraud. This shift is a result of the new administration's agenda, which prioritizes individual accountability.

Acting Enforcement Director Sam Waldon has noted that the agency will pursue cases that are more likely to be well-received by the Commission. In fact, the SEC recently charged a real estate investment firm and its owner with defrauding over 700 investors of more than $52 million.

The Commission will also have more oversight over enforcement investigations, as formal orders of investigation must now be approved by a majority of the Commissioners. This change is likely to have a minimal impact on Enforcement's operations, but may help to prevent "creative" legal theories from being pursued.

The SEC is also reining in its crypto enforcement program, which has been significantly downsized and rebranded as the Cyber and Emerging Technologies Unit. This unit will focus on misconduct in the cyber and AI space targeted at retail investors, rather than high-profile registration-focused cases.

Under the new leadership at the SEC, enforcement efforts in the private funds area are likely to shift. Chairman Atkins emphasized the sophistication of private funds investors, implying that they have the means to conduct their own investigations.

The previous chair, Gensler, had been focusing on private funds' disclosures and potential conflicts of interest. This shift in focus suggests a change in priorities for the SEC.

Private funds investors are expected to take on more responsibility for their own due diligence. This could lead to a decrease in SEC enforcement resources in this area.

Gary Gensler, the Securities and Exchange Commission Chair, is stepping down from his post on January 20.

He led the US crackdown on cryptocurrencies and was known for his aggressive oversight of the industry. Gensler described the world of crypto as “the Wild West” in a 2021 speech.

The crypto industry and many Republicans bristled at Gensler's approach, seeing it as overreach. President-elect Donald Trump had promised to remove Gensler during his campaign.

Gensler brought actions against players in the crypto industry for fraud, wash trading, and other violations. The SEC brought fraud charges last month against three companies and nine individuals for trying to manipulate crypto markets.

Gensler has a long history of public service, previously serving as Chair of the U.S. Commodity Futures Trading Commission and leading the Obama Administration's reform of the swaps market.

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The SEC is on a path of deregulation under Acting Chair Mark Uyeda, who has signaled that the agency will step back from defending the climate disclosure rule in the Eighth Circuit Court of Appeals.

This shift in approach is a significant departure from the more regulatory stance of Gensler's tenure at the SEC. Acting Chair Uyeda's decision to scale back enforcement is likely to favor market efficiency and innovation.

Atkins' leadership at the SEC is expected to continue this trend, with a focus on crypto and a more laissez-faire approach. This could have significant implications for investors and the market.

The SEC is also subject to a "regulatory freeze" under President Trump's Executive Order, which will limit its ability to make new rules. The APA requires a similar process to change or rescind a rule as to create a rule.

SEC Chair Gary Gensler believed most digital assets are securities under the Howey Test, with only Bitcoin and Ethereum as exceptions.

The current SEC Chair, Atkins, has a different view, suggesting that there are very few tokens that are securities, depending on the conditions of their offering and sale.

Atkins' statement is in line with the Project Crypto initiative, which aims to modernize securities laws and integrate American financial markets into blockchain.

This initiative is a step towards creating a regulatory framework that will protect the crypto market from regulatory arbitrariness.

The SEC's Crypto Task Force, led by Commissioner Peirce, is working to develop a comprehensive regulatory framework for crypto, which will dictate the SEC's enforcement jurisdiction over the industry.

The task force has held private meetings with industry players and public roundtables to discuss legal and regulatory issues posed by crypto and blockchain technologies.

Chairman Atkins has testified that ambiguous and non-existent regulations for digital assets have created uncertainty in the market and inhibited innovation, and that a top priority of his chairmanship will be to provide a firm regulatory foundation for digital assets.

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