A “well-respected leader in the securities industry.” An “interesting thinker.” A “deregulation zealot and industry cheerleader.”
These are several descriptions from industry participants (ranging from compliance professionals to consumer advocates) of Paul Atkins, President-elect Donald Trump’s nominee for chair of the Securities and Exchange Commission.
Trump named Atkins as his choice on Dec. 4, several weeks after current Chair Gary Gensler announced he would resign from his post on Inauguration Day. In a statement, Trump called Atkins “a proven leader for common sense regulations” who “recognizes that digital assets and other innovations are crucial to Making America Greater than Ever before.”
Atkins was an SEC commissioner during the George W. Bush administration and left in 2008 to found Patomak Global Partners, a consulting firm for financial industry players. During his years in the private sector, he’s been a prominent figure in conservative economic and legal spheres, speaking out against what he perceives as onerous disclosure requirements and costly penalties levied on companies.
While much of the coverage on Atkins since the announcement has centered on his support for digital assets, Michael Durette, the chief revenue officer for Compliance Risk Concepts, stressed that Atkins would be entering the commission with a broader remit for reform. Particularly, Durette pointed out Atkins’ prior comments on pursuing individuals at fault for securities law violations instead of fining firms for lapses in supervision.
“There’s always going to be nefarious actors within financial services,” Durette said. “But I think the stance would be taking a holistic look from the angle of being less about enforcement and more about opportunity and opening up the ability to have this robust, innovative capital market situation.”
According to Carlo di Florio, the president of the compliance consulting firm ACA Group, many of Atkins’ concerns about firm penalties stem from the notion that shareholders are “penalized or punished” for individual misconduct. Di Florio also said Atkins may feel like hefty penalties against public companies (and the resulting media attention) could lead the commission to misallocate its resources.
“Because they’re going after the headlines, they’re going after the big settlements, and it might be easier to get the settlement instead of having to really pursue the case against the individual who was involved in the wrongdoing,” he said.
With this outlook, the kinds of cases the SEC might (and might not) bring under Atkins’ tenure include instances like cherry-picking schemes, in which an advisor is placing profitable trades in his personal accounts (or accounts he favors) at the expense of other clients. An Atkins regime could conceivably pursue that wayward rep but not fine the firm for failing to supervise the advisor’s actions.
“And what’s really interesting with that shift is that Gensler was willing to go after firms for negligence. That’s another thing that I think Atkins has been concerned about,” di Florio said. “He thinks there should be willful intent, and you should go after serious cases where there’s fraud or harm to investors, and not sort of a fault or negligence on the part of a firm not following a policy procedure.”
Vigilant Compliance President and CEO Salvatore Faia said there had been “tremendous rulemaking activity,” and warned that the cumulative effect can lead to compliance issues.
“We think Mr. Atkins will continue to focus on individuals violating securities laws, but that he will also focus on reducing some of the regulatory burden on the financial industry,” Faia said.
Industry participants, digital assets advocates and conservatives seemed to welcome Atkins’ nomination, but consumer advocates, like the group Better Markets, warned that this pedigree spelled danger for Americans’ wallets.
Better Markets CEO Dennis Kelleher cautioned that during Atkins’ tenure as SEC commissioner, he’d supported deregulation that led to the 2008 crash and recession. If Atkins brought his prior approach to the role of commissioner (coupled with other proposed actions by Trump), Kelleher believed “there would almost certainly be another financial crash.”
“Investor trust is hard to gain, but easy to lose, and once lost, incredibly difficult to regain. That—and America’s prosperity—is what is at stake if the SEC fails to do its job, if deregulation is always the answer, and if policing the markets is no more than coddling lawbreakers,” he said. “The U.S. markets are the envy of the world but are not preordained to remain so.”
Jason Britton, the president and CIO of Reflection Asset Management, was also concerned the SEC under Atkins would favor a “light-touch regulatory environment.” Britton expected much of Atkins’ initial moves to be on crypto and digital assets to affirm they’re not within the commission’s purview while pursuing “attractive” tax treatment in concert with the IRS and Treasury.
Britton also said Atkins would push for an unwritten enforcement directive that the division no longer be concerned with greenwashing or broader ESG enforcement.
“All support for broad application of the fiduciary standard will likely recede, and Regulation Best Interest will also dwindle,” Britton speculated.
However, Durette said broader industry shifts on pernicious issues like digital assets would require more than a single Atkins term to bring wholesale reform.
“It’s going to take a while, and by the time they’re probably getting close to it, it’ll be a new election cycle in 2028,” he said. “So it’s little steps. And that’s how we look at it, is really, ‘What are the little steps that begin to add up to a big sea change in the industry?’”
During a conversation at this year’s MarketCounsel conference in Las Vegas, Robinhood Chief Legal Officer Dan Gallagher (who took himself out of the running for Trump’s SEC Chair last month) echoed that change can be hard to predict in Washington.
Gallagher advised firms to take the next four years to “make change that’s good for the industry,” saying while Atkins may commit to broad reforms and rule adjustments, those changes made in the next few years shouldn’t be considered set in stone.
“If you live three cycles of it, it’s in place; they’re more permanent,” he said. “And if folks subject to the rule haven’t lived through them for several cycles, they’re much easier to get rid of.”
