Abandoning aggressive enforcement, the chairman of the U.S. SEC stated: companies will be notified of technical violations before "breaking in."

The regulatory winds on Wall Street are undergoing a significant 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 working to abolish the aggressive enforcement agenda of his predecessor and shift towards a more business-friendly regulatory approach, emphasizing the need to give companies a chance 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," the regulatory agency cannot "suddenly burst in." He promised to provide companies with notice before taking action.

This stands in stark contrast to the tough stance of his predecessor, Gary Gensler. Gensler was known for his aggressive crackdown on misconduct and the introduction of far-reaching new regulations during his tenure, and his enforcement approach was criticized by Republicans as "regulating through enforcement." Atkins' new guidelines aim to address market concerns about a "lack of due process and predictability."

Atkins' initiatives are part of a broader effort by Republican regulators to push for deregulation and roll back the stringent enforcement plans of the Biden administration. Since January of this year, the SEC has withdrawn a series of cases and investigations against cryptocurrency platforms, some of which had donated to Trump's inauguration fund.

Saying Goodbye to "Shoot First, Ask Questions Later"

Paul Atkins emphasized in the interview that the SEC's mission is to protect investors and will take a tough stance against fraudulent activities.

He quoted the slogan from the office of the SEC's first chairman, Richard Breeden, stating that for those who "lie, deceive, or steal investors' funds" like Bernie Madoff, the SEC will leave them "with nothing."

However, he also pointed out that there are varying degrees of violations that must be notified to the parties involved. He criticized the previous SEC for being "not based on precedent and lacking predictability," often "shooting first and asking questions later." Atkins stated that he is trying to address the market's perception that the SEC "lacks due process, notice, and the rule of law."

Criticizing Huge Fines, Advocating Warning Mechanisms

Atkins explicitly condemned Gensler's practice of imposing billions of dollars in fines on banks and brokerages for record-keeping violations during his tenure. Gensler believed this was key to maintaining market integrity and trust.

Atkins argued that for industry-wide behavior, "regulators should not act this way." He described the previous approach as a formulaic operation: "What is your revenue? Here is your invoice."

He advocated that the correct process should be like "when a teacher in school taps the desk with a ruler and says, 'Students, you have violated the rules... you have six months to fix this problem.'" He also added that it is time to systematize the different record-keeping rules of various agencies.

Embracing Cryptocurrency, Reshaping Regulatory Rules

Another significant difference from his predecessor Gensler is that Atkins is committed to fulfilling Trump's promise to make the U.S. the "world capital of cryptocurrency." Gensler had considered most tokens to be securities and had filed a series of lawsuits against what he called the fraudulent "Wild West" industry Atkins holds a different view, believing that most tokens are not securities and hopes to establish rules that allow investors to trade tokenized versions of stocks and bonds.

He cited the collapse of FTX as an example, pointing out that the funds in its regulated U.S. derivatives division were safeguarded and returned to customers, which demonstrates that "a good regulatory framework can help protect investors" while preventing business from flowing overseas.

Nevertheless, Atkins also warned that during the period when the SEC is formulating rules, companies that have already offered tokenized U.S. stock trading need to be "very careful," because "if they are trading securities, securities laws apply."