SEC’s Going on the Atkins Diet

A blast from the past at the SEC is hinting at the future direction of the agency.

Paul Atkins, who was a commissioner during George W. Bush’s administration, was sworn in last week as SEC chairman. He takes the place of Commissioner Mark Uyeda, who has led the Securities and Exchange Commission as acting chairman in the early days of the second Trump administration. So far, the securities and crypto industries are happy with what they see as a much more business-friendly regulator than the previous one led by Gary Gensler. 

“I don’t expect to see a lot of ‘big picture’ regulatory initiatives against Wall Street’s powerful brokerage firms, banks, and hedge funds. It’s going to be small ball rather than swinging for the fences,” said Bill Singer, a veteran Wall Street regulatory lawyer, pointing to a focus on protecting individual investors. “Frankly, I welcome that, because in recent decades the SEC has devolved into a regulator more interested in generating press releases and marketing the illusion of hands-on oversight.”

Making Privates Public

A few things are evident from what Atkins has stated: He wants the SEC to allow for more innovation, increase retail investors’ access to products typically reserved for the wealthy, and reduce regulatory obstacles, such as those for companies to go public, said Jamie Peterson, managing director at Iron Road Partners. For ETFs, that likely means dual share-class approval and exemptive relief around private market investments, he said. “It could come up in other areas as well, with that theme of innovation. Products that were caught up in a review process for a long time in the prior administration could be viewed more favorably,” Peterson said. And of course, a framework for crypto assets will be front and center, he said.

Even before Atkins was confirmed by the Senate, the new Trump-era SEC has rapidly shifted its direction.Already this year the SEC has:

• Instituted a crypto task force led by Commissioner Hester Pierce, and dropped multiple lawsuits against crypto firms.
• Approved private credit funds and indicated being open to access for retail investors.

Cop on the Beat: A glaring challenge for the SEC is watching out for small investors amid staff reductions pushed through by the Trump administration. Add in the volatile market conditions, and consumer protection becomes a big question, Peterson said. “The loss of institutional knowledge does present a challenge for Atkins and the SEC staff,” he said. “Anytime you have more volatility, you do have the potential for more issues to bubble up in the industry, and historically speaking that has meant more enforcement, not less.”

Atkins, who most recently was chief executive of Patomak Global Partners, may have a style akin to that of former Chairman Jay Clayton, who led the SEC during the first Trump administration, Singer said. “The best that I think those of us in the Wall Street reform movement can and should expect from Atkins is that he takes many pages out of Jay Clayton’s book — the latter who managed to navigate politically fraught waters with incredible grace and wisdom, while finding a way for the SEC to still bring meaningful cases.”