Abandoning aggressive enforcement, US SEC chairman says: Companies will be notified of technical violations before a "raid"

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The regulatory stance on Wall Street is undergoing a major shift.

According to media reports on September 15, Paul Atkins, the new Chairman of the U.S. Securities and Exchange Commission (SEC) appointed by President Trump, is moving to abolish his predecessor's aggressive enforcement agenda, shifting towards a more business-friendly regulatory approach that emphasizes giving companies the opportunity to correct violations before taking enforcement action.

In an interview, Atkins made it clear that the SEC's future enforcement focus will be on tracking down "fraudsters," but for "technical violations," regulators should not "suddenly break in." He promised that companies would be given notice before action is taken.

This stands in stark contrast to his predecessor Gary Gensler's hardline stance. During Gensler's tenure, he became known for cracking down on misconduct and introducing far-reaching new regulations. His enforcement approach was often criticized by Republicans as "regulation by enforcement." Atkins' new policy aims to address market concerns over "lack of due process and predictability."

Atkins' initiatives are part of a broader move by Republican-led regulatory agencies to ease regulation and roll back strict enforcement plans from the Biden administration era. Since January of this year, the SEC has withdrawn a series of cases and investigations against cryptocurrency platforms, some of which had donated to Trump's inauguration fund.

Farewell to 'Shoot First, Ask Questions Later'

In his interview, Paul Atkins emphasized that the SEC's mission is to protect investors and that fraud will be strictly punished.

He cited a slogan from the office of his first SEC boss, Richard Breeden, saying that for those like Bernie Madoff who "lie, cheat, or steal investors' money," the SEC will leave them "with nothing."

But at the same time, he pointed out that there are different degrees of violations beyond that and parties must be given notice. He criticized the previous SEC for being "not based on precedent, lacking predictability," and often "shooting first and asking questions later." Atkins said he is working to address the market's perception that the SEC "lacks due process, notice, and the rule of law."

Criticizing Massive Fines, Advocating Warning Mechanisms

Atkins explicitly condemned the practice under Gensler of imposing multibillion-dollar fines on banks and brokers for record-keeping violations. Gensler considered it a key to maintaining market integrity and trust.

Atkins believes that for industry-wide conduct, "regulators should not operate this way." He described previous practices as a formulaic operation: "This is your income, here is your bill."

He advocates that the correct process should be like "a teacher in school rapping the desk with a ruler and saying, 'Students, you're in violation... you have six months to fix the problem.'" He also added that it is time to systematize the varying record-keeping rules across different agencies.

Embracing Cryptocurrency, Reshaping Regulatory Rules

Another notable difference from his predecessor Gensler is that Atkins is working to fulfill Trump's pledge to make the U.S. the "world's cryptocurrency capital." Gensler believed most tokens were securities and launched a series of lawsuits against this industry, which he called the fraud-ridden "Wild West."

Atkins holds a different view and believes most tokens are not securities. He hopes to develop rules that allow investors to trade tokenized versions of stocks and bonds.

He used the collapse of FTX as an example, noting that its regulated U.S. derivatives unit's funds were safeguarded and returned to clients, which proves that "a good regulatory system can help protect investors," while also preventing businesses from moving overseas.

Nevertheless, Atkins also cautioned that during the SEC's rulemaking process, companies already offering tokenized U.S. stock trading need to be "very careful," because "if they're trading securities, securities law applies."

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