President-elect Donald Trump’s nominee to replace Gary Gensler at the helm of the SEC is a balanced and practical choice for the securities regulator, according to sources. Atkins, a longtime advocate of deregulation, is on the opposite end of the spectrum from Gensler.
Former Commissioner Paul Atkins has been put forward to run the agency and be sworn in following a hearing and expected confirmation by Congress. Atkins served at the agency for six years during George W. Bush’s administration.
An advocate for balanced and practical regulation, Atkins is expected to bring sweeping changes to how the agency handles enforcement and oversight of the securities industry and is likely to be a relief for asset managers following the tumultuous Gensler era.
“Paul Atkins is an excellent choice to lead the SEC, he is a proven and smart leader and is well suited to make lasting reforms,” said Brad Bondi, global co-chair of the investigations and white-collar defense practice at Paul Hastings, who served as counsel to Atkins during his time at the SEC. “He has been a strong supporter of the asset management industry and sympathizes with the challenges faced by the industry trying to comply with often-ambiguous SEC rules.”
Widely touted as a potential candidate for the role in the weeks following the election, Bondi said that Atkins has long been a vocal advocate for reforming the SEC’s division of enforcement, suggesting the pair’s shared 2008 paper on the matter may act as a roadmap for his tenure as chair.
Although closing in on two decades old, the recommendations found in the paper hold credence today and are likely indicative of the initial direction of travel over the next four years of securities regulation.
“The enforcement decisions of the SEC must be guided by the multidimensional nature of the SEC’s mission of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation,” wrote Atkins and Bondi. “The difficult choices of balancing conflicting interests must be guided by the transcendent principles of predictability, fairness, and transparency, culminating in the rule of law. These principles are the defining characteristics of the U.S. markets.”
The article emphasized transparency, predictability, and fairness at the commission, often decried characteristics of the Gensler approach.
Gensler’s four-year term was broadly criticized by asset managers, banks, and other financial firms. He introduced what critics called a staggering amount of new regulations and undertook almost three thousand enforcement cases, bringing in billions of dollars for victims and tipsters. He was perhaps best known for his aggressive stance towards the crypto industry.
Atkins, in contrast, is more likely to prioritize unambiguous cases and clear breaches of existing laws, and is heavily behind innovation in the crypto space, say sources.
Not Surprisingly, Asset Managers Are Eager for Change
Gensler’s enforcement-heavy approach has had a big impact on the asset management sector in particular.
BakerHostetler's Teresa Goody Guillén was also considered a dark horse for the chair position, but ultimately threw her support behind Atkins. “He is going to successfully guide the SEC to become the effective and trusted agency it's supposed to be,” she told II. “I have tremendous respect for Paul. He is very smart, thoughtful, practical, and highly principled.”
Atkins is generally pro-competition, pro-free market and supports innovation and capital formation, all “common sense measures” according to Goody Guillén. He does not take a heavy-handed regulatory approach but is likely to lighten the burden and provide clarity.
This does not mean he is likely to restrict enforcement altogether, simply reexamine how it is managed.
“It's not really about having less enforcement; it's about enforcing clear violations of the federal securities laws that cause investor harm and compromise market integrity,” she said. “We are likely going to see less novel cases where the SEC doesn't have clear jurisdiction, and more of the ‘bread and butter’ of what the SEC does and a focus on fraudulent conduct.”
The Atkins-era is expected to facilitate innovation and capital raising across multiple asset classes.
One high-profile example of how asset managers have been perturbed by the SEC’s lack of clarity is in proxy voting. The commission rolled back rules regarding external proxy advisors in 2022, with the final amendments intended to increase confidence in these businesses by lifting limits that could impair the independence of their advice. This undid two sections of the rules governing proxy voting advice from 2020 during Trump’s first term.
In July 2022, SEC Commissioner Mark Uyeda outlined his objection to the rule, arguing that Gensler’s move did not reflect best practice and suggesting that firms had already taken steps to comply with the rule, which was finalized two years before.
“Asset managers — recognizing proxy voting as a compliance risk — have sought to address these obligations by hiring proxy voting advice businesses to conduct the analysis and provide voting recommendations,” he said in a statement at the time. “Some asset managers have functionally outsourced these responsibilities, as reviewing potentially hundreds or more proxy statements during a compressed timeframe known as ‘proxy season’ is costly and impracticable. Proxy voting advice businesses are designed to provide a solution to this problem at a lower cost.”
In a comment letter following the initial SEC proposal, the lobbyist group Investment Company Institute also wrote that the rule change would significantly inhibit the fund industry.
“We believe that adopting these proposed amendments would increase the quantity of shareholder proposals but not necessarily their overall quality,” wrote ICI general counsel Susan Olson and associate general counsel Matthew Thornton.
“Consequently, any cost increases for shareholders and companies may not be accompanied by improved company performance... The SEC’s own economic analysis expressly avoids opining on whether the proposed changes would be ‘value-enhancing,’ which severely undermines the case for adopting these proposed amendments.”
The rules were adopted, with the SEC essentially proving that clarity and transparency were not at the top of the Gensler agenda. It is unclear if Atkins would look to re-reverse this change, but the industry would likely welcome it if he did.
Atkins is currenty chief executive at financial services consultancy Patomak Global Partners.
