Looking Into the SEC Future for Financial Services Companies

As new Chair Paul Atkins begins to make his mark on the Securities and Exchange Commission, the news cycle has been heavily focused on crypto regulation. The SEC, however, is more than just a crypto regulator.

The total market cap of all non-Bitcoin crypto assets is about $1 trillion as of this writing. United States public equities have a total valuation of more than $50 trillion (this does not include the valuation of private company securities, over which the SEC also has jurisdiction.) While it is working hard on crypto projects, the SEC also has the bigger responsibility of facilitating capital formation and protecting investors in traditional markets. A big part of this responsibility is discharged through the SEC’s oversight of investment advisers, investment companies, broker-dealers, and other registered entities.

Whenever there is a transfer of power in Washington, agencies make changes to priorities, personnel, policies, and rules. In the past, these changes have often been relatively incremental. Other times (and increasingly commonly in today’s era of heightened partisanship), agencies make big changes when the partisan tides turn.

Some would characterize the administration of former SEC Chair Gary Gensler as an era of extraordinary change at the SEC (personally, I see it more as an acceleration of previous trends). In the Atkins administration, the pendulum may swing even more dramatically in the opposite direction. As Chair Atkins has said repeatedly since taking the helm: “It is a new day at the SEC.”

As the dust settles on the first several months of 2025, we are beginning to see some clues about the new SEC’s regulatory posture toward financial services companies. In this article, I’ll pull out my crystal ball and try to augur what the future holds for SEC registrants.

Rulemaking

The last SEC administration pursued an aggressive rulemaking agenda on several fronts. For registrants, key changes included the Private Fund Adviser Rules and amendments to Regulation S-P (more on this below). The Private Fund Adviser Rules were passed, despite significant consternation on the part of the asset management industry, before being struck down by the federal courts before they had gone into effect.

This is an admirable goal. In practice, though, it’s pretty tough for government economists to specifically and accurately quantify the speculative future costs and benefits of proposed rules and regulations. I think it is more accurate to view this posture as a general bias—although not a prohibition—against any significant new rulemaking. This would align with the vibes of the January executive order directing federal agencies to suspend new rulemaking activities.

What about existing rules? Will the SEC try to delete some pages from the federal register?

I wouldn’t be surprised. The deregulatory spirits are currently very strong in Washington. Some rules are mandated by statute. Others are not.

EXAMS

Regardless of the rules on—or off—the books, the SEC’s Division of Examinations (EXAMS) has significant discretion to police registrant behavior, including by issuing deficiency letters and enforcement referrals. For example, the Compliance Rule requires registered investment advisers to “[a]dopt and implement written policies and procedures reasonably designed to prevent violation” of the Advisers Act and rules thereunder.

But what does this mean in practice? How can you tell reasonably designed policies from unreasonably designed policies? Unsurprisingly, EXAMS staff and registrants frequently disagree. Will EXAMS staffers—most of whom are longtime government employees, with experience under both Democratic and Republican administrations—take a significantly lighter touch under Chair Atkins?

It's hard to say. There will be clearly be increased pressure on staff to focus on rooting out fraud and other substantive violations with a direct impact on investors. But when critical violations are not to be found—which is true in most exams—staff will still identify technical deficiencies. While EXAMS saw some attrition during early 2025, most of the same people are still in most of the same seats that matter to registrants. Generally speaking, regulators gonna regulate.

In the theme of “regulators gonna regulate,” the Acting Director of EXAMS gave a recent speech encouraging registrants to get ready to comply with the amendments to Regulation S-P. The remarks suggest that, in some respects, the SEC will continue to feel like its former self. But the speech also felt relatively warm and fuzzy. We’ll see if registrants are really feeling the love from staff as the new administration gets underway.

Enforcement

The SEC’s Division of Enforcement gets a lot of mileage out of its expansive authority to regulate investment advisers, broker-dealers, and other registrants. Broad rules like the Compliance Rule (see above) and negligence-based or strict liability standards of conduct give the staff significant direction to pursue aggressive cases against registrants—if they can get three Commissioners to agree. Last year, cases against registrants made up more than 35% of all enforcement actions by the SEC.

To me, enforcement is where the rubber really meets the road on whether or not it is a “new day at the SEC” or just a watered-down flavor of the same old agency. By reconsolidating authority in DC and eliminating regional director positions, the new SEC leadership has demonstrated that they will closely scrutinize the Division of Enforcement’s docket. This does not necessarily mean aggressive investigations will not be opened, but it does mean staffers will have to spend more time and effort to explain and justify the decision to investigate and/or continue investigating.

More significantly, at the recommendation stage, staffers—with the knowledge that they will need the votes of Chair Atkins, Commissioner Peirce, and Commissioner Uyeda—will not want to spend valuable time and resources chasing after aggressive theories that will not get past the Commission. Over time, as the specific likes and dislikes of the Commission majority are disseminated across the agency, enforcement staffers will tailor their activities accordingly. A significant unknown puzzle piece will be the (as of the date of this writing, unnamed) new Enforcement Director. Stay tuned.

Adapting to a Changing Regulatory Landscape

As we progress into the second half of 2025, we will have a close eye on developments at the SEC that impact our investment advisory and broker-dealer clients. While we know it is a new day at the SEC, regulatory risks remain. Uncertainty and change create complexity, even if the end result is a lower regulatory burden. Registrants who remain nimble and responsive to a shifting environment by making informed, risk-adjusted decisions will be ahead of the curve.