Corporate leaders anticipating the imminent Trump administration shake-up at the Securities and Exchange Commission should brace for whiplash.
The exit this month of SEC Chair Gary Gensler and entrance of his likely successor, Paul Atkins, will probably lead to more targeted enforcement and softer, more collaborative rulemaking, according to securities lawyers and former SEC staff.
“They’re at complete opposite ends of the spectrum,” Frontline Compliance President Amy Lynch said in an interview, noting that Gensler, like many other SEC chiefs tied to the Democratic Party, leaned toward robust regulation.
Atkins, a Republican, favored comparatively light rulemaking when he served as an SEC commissioner from 2002 until 2008, according to Lynch, a former SEC examiner and founder of Frontline Compliance, a consultancy to financial firms. As SEC chair, he would answer to President Donald Trump, who swept to victory in November with a promise to scuttle at least 10 existing federal regulations for each new one.
During his first term, Trump “tried to topple the SEC and break it down like he did with the other federal agencies, and he’s going to do that again,” Lynch said.
By slimming the SEC’s budget, headcount and regulatory scope, Atkins would fall in step with a government-wide push for cost-cutting and efficiency led by Tesla CEO Elon Musk.
“This should be a much better environment for a CFO to be able to operate more freely.”
Dave Brown
partner at Alston & Bird
Atkins will likely permanently shelve several of Gensler’s rulemakings, including the mandate for detailed climate risk disclosure, according to securities lawyers and former SEC staff.
“We think their approaches are going to be vastly different,” said David Brown, a partner at Alston & Bird, referring to Atkins and Gensler. “This should be a much better environment for a CFO to be able to operate more freely.”
In enforcement, Atkins will probably not rack up the same amount of fines as his predecessor, Brown said in an interview. Under Gensler, the SEC during fiscal year 2024 imposed a record $8.2 billion in sanctions.
Atkins will probably focus more on defending wronged investors and less on broad, proactive targeting of firms active in securities markets, the securities lawyers and former SEC staff said. They noted Gensler’s wide-ranging offensives against financial institutions that failed to halt employees’ off-channel communications and executives who failed to file timely reports on stock transactions and holdings.
Instead of emphasizing aggressive enforcement “sweeps” focused on groups of firms, SEC investigators under Atkins will probably rely more on individual tips, complaints and referrals from other agencies, Lynch said.
“The pendulum swung so far in one direction under Gensler,” Brown said. Under Atkins, the SEC will likely take “a much more rational, focused approach toward enforcement.”
Crypto relief rally
The jump in the price of bitcoin on Dec. 4 heralded investor expectations of the SEC’s regulatory retreat. That day, soon after Trump announced Atkins as his nominee to lead the agency, the token surged beyond $100,000 for the first time.
Gensler during his tenure said that digital assets are securities and sued many crypto developers for failing to register with the SEC and follow standard rules for investor protection.
Atkins has said that cryptocurrencies should not necessarily be deemed securities, especially those traded over peer-to-peer networks. He is the founder and chief executive of Patomak Global Partners, which advises public companies and digital asset firms. Since 2017, he has served as co-chair of the Token Alliance, a lobbying group for the crypto industry.
Signaling a new approach to crypto regulation, SEC Acting Chair Mark Uyeda on Jan. 21 announced the launch of an agency task force to create a framework for oversight “that respects the bounds of the law.”
“To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way,” according to an agency press release. “Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive.”
Instead of regulating most crypto assets as securities, the Atkins SEC may deem them commodities subject to looser oversight, the securities lawyers and former SEC staff.
Atkins will probably "be at least as aggressive as Chair Gensler in pursuing crypto-fraudsters."
Joshua Hess
partner at Bryan Cave Leighton Paisner
At the same time, Atkins will probably “be at least as aggressive as Chair Gensler in pursuing crypto-fraudsters,” Joshua Hess, a partner at Bryan Cave Leighton Paisner, said in an interview. In such enforcement, the SEC will likely assert that some crypto-asset transactions involve securities, he said.
While withdrawing the climate-risk disclosure mandate, Atkins will probably end other rulemaking related to environmental, social and governance performance, including proposals that would require companies to report on the demographics of their workforces and boards, the securities lawyers and former SEC staff said.
“They will absolutely put them on ice,” Brown said, referring to such initiatives.
Atkins has gone on the record condemning the push for ESG reporting.
“Mandating politicized corporate disclosures doesn’t align with the SEC’s mission to protect investors and facilitate capital formation,” he said in a 2018 opinion piece in The Wall Street Journal. “Instead, it would divert resources away from business operations and growth.”
PCAOB prospects
Atkins may target the Public Company Accounting Oversight Board for some of his most far-reaching changes in both rule-making and enforcement, the securities lawyers and former SEC staff said.
Gensler shook up the PCAOB after taking the top SEC seat in 2021, replacing its leadership and ordering tougher oversight of the accounting firms that audit publicly traded companies.
Under its current chair, Erica Williams, the PCAOB eliminated a backlog of inspection reports. In its review of 2023 audits, the PCAOB found that audit firms failed in 46% of their engagements to obtain enough evidence to support their opinions on a company’s financial statement or internal control over financial reporting.
Facing sharper scrutiny, the largest firms have improved audit quality, Williams said in a report to the SEC in December.
Created by Congress in 2002 following the Enron accounting scandal, the PCAOB under Williams has either proposed or updated 20 audit standards, including several that were untouched for two decades.
“There were more formal actions on standard setting and rulemaking that occurred in 2024 than in any other years since the PCAOB’s formation,” Lara Long, a managing director at the business advisory firm Riveron, said in an email.
Some proposed rules prompted backlash from the accounting industry.
For example, the PCAOB proposed a standard in 2023 that would require accounting firms to step up efforts at detecting fraud. Rather than merely identify compliance laws and note instances of potential deviation, accounting firms would need to create procedures to ferret out non-compliance and actively evaluate a potential breach.
The rule, recently shelved by the PCAOB, is “extraordinarily aggressive,” Brown said.
“Auditors are CPAs, not legal experts,” Christina Ho, a PCAOB board member, said in a statement when the rule was proposed.
“The new requirements will significantly expand auditors’ need for expertise from lawyers, legal experts and possibly other specialists, resulting in a substantial increase in audit fees,” according to Ho, one of two board members who dissented in a 3-2 vote on the proposal.
Atkins will probably refocus the PCAOB on core audit risks, rolling back some rules and “making sure that the risks we’re actually trying to solve are real,” Brown said.
The Trump administration will likely vet the PCAOB’s effectiveness since its launch and may pull it within the SEC, Long said.
“The idea of folding the PCAOB — or portions of it — into the SEC is gaining renewed attention as policymakers aim to reduce duplication, lower costs and refocus regulatory efforts,” said Jennifer Wood, a partner at the Bonadio Group, an accounting and consulting firm.
Atkins “has long advocated for reducing regulatory overreach and reassessing the board’s independence and budget,” she said in an email. “This could mean fewer enforcement actions, a more restrained rulemaking agenda and potentially narrower mandates for the PCAOB.”
‘Impervious to reform’
The PCAOB for years has been in the crosshairs of conservative think tanks and Republican lawmakers.
The board has “proved to be ineffective, costly, opaque and largely impervious to reform,” according to “Mandate for Leadership,” a key document written by Project 2025, a Heritage Foundation group aimed at influencing the Trump administration.
“To reduce costs and improve transparency, due process, congressional oversight and responsiveness,” the PCAOB should be abolished, with its regulatory role merged into the SEC, Project 2025 said.
Although Atkins will likely usher in softer oversight, CFOs should think twice before trimming their compliance budgets, the securities lawyers and former SEC staff said.
Atkins will likely not stray far from Gensler’s policy approach on key challenges, including cyberrisk, they said.
“The Trump campaign was hacked at least once,” Lynch said. “The administration understands the risk of cybersecurity.”
Also, if Atkins tones down regulation, shareholders will probably intensify corporate scrutiny, the former SEC staff and securities lawyers said.
“Investors are going to want to ensure these companies are held accountable,” Lynch said, noting that “an investor lawsuit can be way more damaging than a regulatory lawsuit.”
