Changing Up The Playbook
The SEC Under the Direction of Paul Atkins
As Donald Trump starts his second presidential term and Gary Gensler prepares to step down, Paul Atkins prepares to take the helm of the U.S. Securities and Exchange Commission (SEC). Paul Atkins, known for his market-friendly stance and skepticism of aggressive regulatory enforcement, is expected to bring significant changes to the Securities and Exchange Commission (SEC) during his tenure as Chair. His approach prioritizes fostering innovation, reducing unnecessary regulatory burdens, and ensuring transparency and proportionality while maintaining investor protection and market integrity.
StarCompliance (Star) anticipates that Atkins will take a firm stance against employee misconduct and insider trading violations. Here are a few highlights on what to expect and how Star can partner with your firm to seamlessly adjust the changes ahead.
Key Aspects of Atkins’ Approach
1. Focus on Individual Accountability
- Atkins advocates targeting individuals responsible for securities law violations rather than imposing large corporate penalties that burden shareholders.
- He prioritizes addressing fraud and harm to investors over negligence or procedural lapses.
- Star can help firms monitor their employee’s behavior via Employee Conflicts of Interest (ECOI). For global financial service companies this also ties into Star’s Individual Accountability Regimes (IAR).
In addition to the employee conflicts of interest offerings, Star now has the ability to streamline marketing reviews for external stakeholders to address investor harm due to misleading marketing material and falsehoods.
2. Shift Away from Regulation by Enforcement
- Emphasizes clear statutory authority and collaboration with Congress to address systemic risks, particularly in emerging industries like cryptocurrencies.
- Aims to reduce overbroad document requests, subpoenas, and reliance on corporate settlements in enforcement practices.
- While this shift may relieve some regulatory pressures that firms face, Star provides tools to make sure that all obligations including license & registration and general employee monitoring for conflicts of interests are adhered to.
3. Deregulatory and Market-Friendly Stance
- Promotes principles-based regulation over prescriptive rulemaking to simplify compliance and reduce regulatory overreach.
- Supports revisiting complex regulations, such as Reg NMS, to enhance liquidity and capital formation for small businesses and startups.
- Star’s SaaS-based employee compliance software is award-winning, meeting client needs through its configurable platform that helps firms stay on top of employee conflicts of interest concerns.
4. Cryptocurrency and Digital Assets
- Seeks to establish a more predictable regulatory framework for digital assets, focusing on fraud prevention and investor protection while encouraging innovation.
- Likely to appoint industry-friendly regulators and limit the SEC’s jurisdiction over cryptocurrencies.
- Star’s first-to-market crypto currency and digital assets pre-clearance trading software provides firms with the ability to future-proof their organization’s ability to stay ahead of crypto regulations.
5. ESG Disclosures and Cybersecurity
- Advocates scaling back prescriptive ESG mandates, favoring materiality-based frameworks to reduce compliance costs.
- Plans to focus cybersecurity regulations on intentional misconduct rather than penalizing companies victimized by cyberattacks.
6. Transparency and Procedural Reforms
- Implements policies ensuring defendants have access to all evidence in enforcement cases (“open jacket” approach).
- Prioritizes rigorous cost-benefit analysis before implementing new rules and encourages collaboration with stakeholders.
- Star’s suite of products provides clients with a platform that’s fully integrated allowing for a heightened user experience with the ability to harness insights from data analytics to identify trends and risks in an organization.
7. Examinations and Compliance
- Revives the SEC examination program to emphasize industry education, fostering compliance through non-confrontational dialogue.
8. Oversight of Self-Regulatory Organizations (SROs)
- Encourages greater accountability for SROs like FINRA and PCAOB to improve transparency and procedural rigor.
Likely Outcomes and Challenges
Under Atkins’ leadership, the SEC is expected to adopt a more principles-based regulatory approach, fostering innovation, and reducing regulatory overreach. The cryptocurrency and fintech industries may benefit from a softer, more predictable regulatory environment. Retail investor protection and market integrity remain central, with a focus on deterring egregious misconduct like fraud.
Critics, however, caution that Atkins’ deregulatory stance could increase risks to investors and market stability, reminiscent of policies preceding the 2008 financial crisis. His reforms may face resistance, requiring significant time to implement, and may provoke concerns about reduced enforcement in emerging areas like digital assets.
Conclusion
Paul Atkins’ tenure as SEC Chair represents a pivot toward a lighter regulatory touch, emphasizing individual accountability, transparency, and innovation. While celebrated by industry stakeholders, his approach may face scrutiny from consumer advocates concerned about potential risks to investor protection and systemic stability.
Regardless of what approach Chair Atkins takes, Star is here to help broker-dealers and investment advisors with nimble solutions to address securities and crypto solutions and MNPI controls.
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