The Paul Atkins Diet: Trump SEC Nominee Likely to Get Back to Basics, Trim Enforcement and Embrace Crypto
Members of Shook, Hardy & Bacon LLP’s Government Investigations and White Collar Practice attended a Cornerstone Research event on December 11, 2024, about the outlook for the U.S. Securities and Exchange Commission (SEC) in the second administration of President Donald J. Trump, featuring former SEC Chairs Jay Clayton, who served as chair in first Trump administration and is now a nominee to be the U.S. Attorney of the Southern District of New York, and Joe Grundfest, who served as chair in administrations of Presidents Ronald Reagan and George H.W. Bush). A week earlier, on December 4, Trump had announced that he intends to nominate Paul Atkins for SEC Chair. Atkins was an SEC commissioner during the George W. Bush administration, and if confirmed by the Senate will replace outgoing Chair Gary Gensler, who is stepping down in January, prior to the end of his five-year term in 2026. This news gave Clayton and Grundfest ample fodder for their discussion of potential SEC priorities. This client alert is drafted in accordance with the Chatham House Rule to which the event was subject, meaning, participants are permitted to share information without revealing the identity of the speaker.
Back to Basics
Unsurprisingly, the panelists predicted 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—as will likely be the case with federal agencies across the board in the upcoming administration. Post-Loper Bright Enterprises et al. v. Raimondo, the 2024 landmark Supreme Court decision overturning Chevron, agency rulemaking may be subject to already heightened scrutiny. In the second Trump administration, the panelists expected a reined-in SEC to focus less on climate and diversity, equity and inclusion (DEI) initiatives, and more on policing actual fraud and other wrongdoing in public companies and other issuers. The panelists pointed out that some of the rules that arguably go beyond the core functions of SEC have not fared well in courts even during the Biden administration. As an example, they pointed to the U.S. Court of Appeals for the Fifth Circuit’s December 2024 decision in Alliance for Fair Board Recruitment v. SEC invalidating a proposed NASDAQ rule approved by SEC that would have required disclosure of directors’ personal characteristics like race, gender and sexual orientation.
Within the same vein, the panel discussed how the Atkins SEC is likely to tame expansive readings of SEC rules that have garnered scrutiny from courts and the investment community alike. For example, with respect to required disclosures by publicly traded companies, it is expected that the Atkins SEC will focus more on core financial materiality, meaning, whether a reasonable shareholder and/or investor would consider a given disclosure important in deciding how to vote and/or invest, rather than upstream considerations like environmental impact. Similarly, the panelists predicted that SEC rules complicating voting processes like SEC Rule 14a-8 (enabling shareholders to raise proposals on a company’s proxy statement) may also be curtailed, if not outright removed via formal SEC rulemaking.
Panelists further suggested that the second Trump administration and SEC might consider limiting the Public Company Accounting Oversight Board’s (PCAOB) and the Financial Industry Regulatory Authority’s (FINRA) functions, potentially even streamlining them into SEC.
Trimming Enforcement
In the panelists’ view, a shift in the enforcement environment in the second Trump SEC is also a good bet. The panelists expected that the agency will have a better relationship with the business community, which could lead to more efficiency in inspections and investigations. Within this more business friendly climate, the Atkins SEC will likely be more focused on punishing individual wrongdoers than corporations.
The Atkins SEC may also be interested in macro issues like clarifying who has the right to police companies, and could even consider eliminating the Rule 10b-5 private right of action—a bold prediction, indeed.
Embracing Cryptocurrency
With Bitcoin prices surging in the wake of the nomination of Atkins, a “crypto advocate” and the current CEO of Patomak Global Partners, the media has already heralded Atkins’s nomination as SEC chair as a win for the cryptocurrency industry. Although it remains to be seen to what extent Atkins will be able to deliver on Trump’s desire to make the United States the “crypto capital of the planet,” Atkins’s leadership is expected to significantly temper SEC’s appetite for over-regulation of the cryptocurrency industry.
As a result, we may see the Gensler SEC’s efforts to bring crypto into the fold of securities regulation cut short, diminished or largely abandoned, with a number of Gensler SEC crypto enforcement actions either being stayed or dismissed.
That does not mean, however, that SEC will abandon its larger pursuit of protecting investors and eliminating fraudulent marketing of investment products. Rather, the Atkins SEC is expected to be focused on curbing fraud through focused enforcement as well as strategic policy implementation without, according to some, smothering the still-developing cryptocurrency industry.
Conclusion
Of course, predictions about an incoming presidential administration’s priorities are just that: predictions—not guarantees. But, the pedigree of former Clayton and Grundfest adds significant weight to their informed speculation—especially since Clayton has been nominated to be the U.S. Attorney of the prestigious Southern District of New York. Shook’s Government Investigations and White Collar Practice is experienced and active in the field of SEC and other adjacent investigations, including U.S. Department of Justice, U.S. Attorneys’ Offices, Commodity Futures Trading Commission, Federal Trade Commission, Consumer Financial Protection Bureau, Inspectors General, and State Attorneys General, among others. As such, the team will continue to monitor and report additional notable developments as they occur.
Back to Basics
Unsurprisingly, the panelists predicted 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—as will likely be the case with federal agencies across the board in the upcoming administration. Post-Loper Bright Enterprises et al. v. Raimondo, the 2024 landmark Supreme Court decision overturning Chevron, agency rulemaking may be subject to already heightened scrutiny. In the second Trump administration, the panelists expected a reined-in SEC to focus less on climate and diversity, equity and inclusion (DEI) initiatives, and more on policing actual fraud and other wrongdoing in public companies and other issuers. The panelists pointed out that some of the rules that arguably go beyond the core functions of SEC have not fared well in courts even during the Biden administration. As an example, they pointed to the U.S. Court of Appeals for the Fifth Circuit’s December 2024 decision in Alliance for Fair Board Recruitment v. SEC invalidating a proposed NASDAQ rule approved by SEC that would have required disclosure of directors’ personal characteristics like race, gender and sexual orientation.
Within the same vein, the panel discussed how the Atkins SEC is likely to tame expansive readings of SEC rules that have garnered scrutiny from courts and the investment community alike. For example, with respect to required disclosures by publicly traded companies, it is expected that the Atkins SEC will focus more on core financial materiality, meaning, whether a reasonable shareholder and/or investor would consider a given disclosure important in deciding how to vote and/or invest, rather than upstream considerations like environmental impact. Similarly, the panelists predicted that SEC rules complicating voting processes like SEC Rule 14a-8 (enabling shareholders to raise proposals on a company’s proxy statement) may also be curtailed, if not outright removed via formal SEC rulemaking.
Panelists further suggested that the second Trump administration and SEC might consider limiting the Public Company Accounting Oversight Board’s (PCAOB) and the Financial Industry Regulatory Authority’s (FINRA) functions, potentially even streamlining them into SEC.
Trimming Enforcement
In the panelists’ view, a shift in the enforcement environment in the second Trump SEC is also a good bet. The panelists expected that the agency will have a better relationship with the business community, which could lead to more efficiency in inspections and investigations. Within this more business friendly climate, the Atkins SEC will likely be more focused on punishing individual wrongdoers than corporations.
The Atkins SEC may also be interested in macro issues like clarifying who has the right to police companies, and could even consider eliminating the Rule 10b-5 private right of action—a bold prediction, indeed.
Embracing Cryptocurrency
With Bitcoin prices surging in the wake of the nomination of Atkins, a “crypto advocate” and the current CEO of Patomak Global Partners, the media has already heralded Atkins’s nomination as SEC chair as a win for the cryptocurrency industry. Although it remains to be seen to what extent Atkins will be able to deliver on Trump’s desire to make the United States the “crypto capital of the planet,” Atkins’s leadership is expected to significantly temper SEC’s appetite for over-regulation of the cryptocurrency industry.
As a result, we may see the Gensler SEC’s efforts to bring crypto into the fold of securities regulation cut short, diminished or largely abandoned, with a number of Gensler SEC crypto enforcement actions either being stayed or dismissed.
That does not mean, however, that SEC will abandon its larger pursuit of protecting investors and eliminating fraudulent marketing of investment products. Rather, the Atkins SEC is expected to be focused on curbing fraud through focused enforcement as well as strategic policy implementation without, according to some, smothering the still-developing cryptocurrency industry.
Conclusion
Of course, predictions about an incoming presidential administration’s priorities are just that: predictions—not guarantees. But, the pedigree of former Clayton and Grundfest adds significant weight to their informed speculation—especially since Clayton has been nominated to be the U.S. Attorney of the prestigious Southern District of New York. Shook’s Government Investigations and White Collar Practice is experienced and active in the field of SEC and other adjacent investigations, including U.S. Department of Justice, U.S. Attorneys’ Offices, Commodity Futures Trading Commission, Federal Trade Commission, Consumer Financial Protection Bureau, Inspectors General, and State Attorneys General, among others. As such, the team will continue to monitor and report additional notable developments as they occur.
