Experts have begun weighing in on President-elect Trump’s nominee to become the new chair of the Securities and Exchange Commission, WealthManagement reports.
Earlier this month, Trump said he had selected cryptocurrency advocate Paul Atkins, the CEO of Patomak Partners and a former SEC commissioner, to head the commission. He called Atkins a “proven leader for common sense regulations.” In the years since leaving the SEC, Atkins has made the case against too much market regulation.
Current SEC Chair Gary Gensler, nominated by President Joe Biden, said he will step down on Jan. 20 when Trump is inaugurated.
While Gensler led a crackdown on the crypto industry, the president-elect noted Atkins’s support for digital assets. He is also expected to bring other reforms to the SEC, according to Michael Durette, the chief revenue officer for Compliance Risk Concepts.
Durette told WealthManagement that Atkins may shift the focus of enforcement to pursue individuals at fault for securities law violations instead of fining firms for supervisory lapses.
“There’s always going to be nefarious actors within financial services,” Durette was quoted as saying. “But I think the stance would be taking a holistic look from the angle of being less about enforcement and more about opportunity and opening up the ability to have this robust, innovative capital market situation.”
That expectation was echoed by John Reed Stark, president of John Reed Stark Consulting LLC. Financial Advisor reported details of a new blog by Stark, in which he predicted Atkins would oversee a new approach to enforcement at the SEC. “Paul Atkins will catalyze an extraordinary, monumental, and urgently required transformation within the SEC, especially within the SEC Division of Enforcement,” Stark wrote, saying he expected reforms to begin in the first 100 days.
“Changes under Chair Atkins will include doing away with the SEC’s practice of not disclosing findings [staff] discovered at the end of investigations and during settlement negotiations. Expect Chair Atkins to order SEC enforcement staff to fully inform individuals and companies about the allegations and the evidence against them at the time of each Wells call with the firms and executives being investigated,” Stark wrote.
He added that Stark is likely to order enforcement staff “to find ways to minimize costs through the formulation of detailed procedures to address preservation notices and production requests for electronic data, eliminating wide-spanning boiler plate type orders” demanding wide-spanning information and data that is often not relevant.”
Carlo di Florio, the president of the compliance consulting firm ACA Group, noted that Atkins has concern about shareholders being punished for individual misconduct when firms are penalized. Di Florio said Atkins may also be concerned that the SEC could better allocate its resources than imposing stiff penalties against public companies.
“Because they’re going after the headlines, they’re going after the big settlements, and it might be easier to get the settlement instead of having to really pursue the case against the individual who was involved in the wrongdoing,” he said.
Di Florio feels Atkins may decide to focus more on pursuing the misconduct of an individual advisor rather than fining firms for failing to supervise the advisor’s actions.
“And what’s really interesting with that shift is that Gensler was willing to go after firms for negligence. That’s another thing that I think Atkins has been concerned about,” di Florio said. “He thinks there should be willful intent, and you should go after serious cases where there’s fraud or harm to investors, and not sort of a fault or negligence on the part of a firm not following a policy procedure.”
California Democratic Congressman Brad Sherman, a senior member of the House Financial Services Committee, said he worries Atkins would not sufficiently regulate cryptocurrencies as SEC chair.
“He’d probably take the position that no cryptocurrency is a security, and hence no exchange that deals with crypto is a securities exchange,” Sherman told the Associated Press. “The opportunity to defraud investors would be there in a very significant way.”
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