A “respected leader in the securities industry”. An “interesting thinker”. A “zealot of disorder and industry cheerleader”.
These are some descriptions from industry participants (ranging from compliance professionals to consumer advocates) of Paul Atkins, President-elect Donald Trump's nominee to head the Securities and Exchange Commission.
Trump named Atkins as his pick on Dec. 4, a few weeks after incumbent Gary Gensler DESIGNATED he would resign his post on inauguration day. In a statement, Trump called Atkins “a proven leader for common sense regulation” who “recognizes that digital assets and other innovations are essential 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, an advisory firm for financial industry players. During his years in the private sector, he was an outstanding figure in conservative economic and legal circles, speaking out against what he perceives as onerous disclosure requirements and costly fines placed on companies.
While much of the coverage for Atkins since the announcement has focused on its support for digital assets, Michael Durette, chief revenue officer for Compliance Risk Concepts, emphasized that Atkins would enter the commission with a broader responsibility. for the reform. In particular, Durette pointed to Atkins' previous comments about prosecuting individuals guilty of securities law violations rather than fining firms for oversight lapses.
“There will always be nefarious actors within financial services,” Durette said. “But I think the attitude would be to take a holistic view from the angle of being less about enforcement and more about opportunities and opening up the ability to have this robust and innovative capital market situation.”
According to Carlo di Florio, president of compliance consulting firm ACA Group, much of Atkins' concern about strong penalties stems from the notion that shareholders are “penalized or punished” for individual misconduct. Di Florio also said Atkins may feel heavy 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 may be easier to get the settlement rather than actually having to pursue the case against the individual who was involved in the wrongdoing,” he said.
With that in mind, the kinds of cases the SEC may (and may not) bring under the Atkins mandate include cases like cherry-picking schemes, in which an adviser places profitable trades in his personal accounts (or accounts he favors). at the expense of other customers. An Atkins regime may pursue that disobedient representative but not fine the firm for failing to supervise the adviser's actions.
“And what's really interesting about that change is that Gensler was willing to go after firms for negligence. That's another thing I think Atkins is worried about,” di Florio said. “He thinks there has to be deliberate intent and you have to go after serious cases where there is fraud or harm to investors, and not some kind of mistake or negligence on the part of a firm that doesn't follow a political procedure.”
Vigilant Compliance President and CEO Salvatore Faia said there had been “tremendous rulemaking activity” and warned that the cumulative effect could lead to compliance issues.
“We think that Mr. Atkins will continue to focus on individuals who violate securities laws, but that he will also focus on reducing some of the regulatory burden on the financial industry,” Faia said.
Industry participants, digital asset advocates and conservatives appeared to welcome Atkins' nomination, but consumer advocates such as the group Better Markets warned that the pedigree poses a risk to Americans' wallets.
Better Markets CEO Dennis Kelleher warned that during Atkins' tenure as SEC commissioner, he supported the deregulation that led to the crash and recession of 2008. If Atkins were to bring his former approach to the role of commissioner (coupled with actions others proposed by Trump), Kelleher believed there would “almost certainly be another financial crash.”
“Investor trust is hard to win but easy to lose, and once lost, it's incredibly hard to regain.” That — and America's prosperity — is what's at stake if the SEC fails to do its job, if deregulation is always the answer, and if policing the markets is nothing more than coddling lawbreakers,” he said. “U.S. markets— they are the envy of the world, but they are not destined to remain so.”
Jason Britton, president and CIO of Reflection Asset Management, was also concerned that the SEC under Atkins would favor a “light-touch regulatory environment.” Britton expected many of Atkins' initial moves to be in crypto and digital assets to assert that they are not within the commission's purview while pursuing an “attractive” tax treatment in cooperation with the IRS and Treasury.
Britton also said Atkins would push for an unwritten enforcement directive for the division to no longer worry about green cleaning or broader ESG implementation.
“All support for the broad application of the fiduciary standard is likely to diminish, and the Best Interest Regulation will also diminish,” Britton speculated.
However, Durette said broader industry changes on damaging issues like digital assets would take more than a single Atkins term to bring about wholesale reform.
“It's going to take a while, and by the time they probably get around to it, it will be another election cycle in 2028,” he said. “So, these are small steps. And that's the way we look at it, it's really, 'What are the small steps that start to add up to a big sea change in the industry?'
During a talk 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 chairman last month) echoed that change may be hard to predict in Washington.
Gallagher advised firms to take the next four years to “make the change that's good for the industry,” saying that while Atkins could commit to broad reforms and rule adjustments, those changes made in the coming years should not to be considered established.
“If you live three cycles of it, it is in place; they are more permanent,” he said. “And if the people subject to the rule haven't lived through them for a few cycles, they're much easier to get rid of.”