The head of the top Wall Street watchdog has pledged to give businesses notice of technical violations before “bashing down their door”, as he scraps the aggressive enforcement agenda pursued under former president Joe Biden.
Paul Atkins, who this year was appointed chair of the Securities and Exchange Commission by US President Donald Trump, told the Financial Times in an interview in Paris that the agency was geared to go after “crooks”.
“If you lie, cheat or steal your investors and steal their money like [disgraced former financier] Bernie Madoff, we’ll leave you naked, homeless and without wheels,” Atkins said, quoting a sign posted in the office of his first SEC boss Richard Breeden.
But he added there were “other gradations of that where you have to give people notice”.
“You can’t just suddenly come and bash down their door and say ‘uh-uh we caught you, you’re doing something and it’s a technical violation’,” he said.
Atkins is reshaping the commission, an independent agency tasked with protecting US investors, as Republican regulators adopt a more business-friendly stance, unleashing deregulation drives and rowing back tough enforcement programmes adopted by watchdogs under Biden.
Since January, the SEC has dropped a string of cases and investigations targeting crypto platforms — a number of which donated to the inauguration fund for Trump. The president is a crypto champion who has reported income of almost $60mn from one of his digital ventures and has touted his own $TRUMP memecoin on social media.
Atkins did not comment on the cases.
The contrast with Atkins’ predecessor, Gary Gensler, is stark. The former SEC chair cracked down on misconduct and issued a number of wide-ranging new rules while at the helm.
“I think a lot of people rightly criticised the SEC,” said Atkins. “Especially in more recent years it was not grounded in precedent [or] predictability. It would shoot first and then ask questions later,” he added, repeating a Republican criticism that Gensler regulated through enforcement — accusations the former chair rejects.
“What I am trying to address is a market perception that . . . there was a lack of due process, a lack of notice, a lack of rule of law,” Atkins said.
He condemned the billions of dollars in fines Gensler slapped on banks and brokers for record-keeping violations — a linchpin of his enforcement programme that he argued was aimed at preserving the integrity of, and trust in, the market.
“That’s not how a regulator should have acted” in response to industry-wide behaviour, Atkins said. The approach “devolved . . . to where it became a formula: what’s your revenue, here’s your invoice”.
Atkins argued the process should have resembled “back in school days, the teacher flapping the ruler on the table, saying ‘class, you’re out of order . . . you have six months to clear this up’.”
Record-keeping rules differ among broker dealers, investment advisers and others, he added. “It’s high time that we have this systematised.”
In another sharp departure from his predecessor, the SEC chair is aiming to fulfil Trump’s promise to make the US “the crypto capital of the world”.
Gensler argued that most tokens were securities and launched a series of lawsuits against what he deemed a “wild west” industry rife with fraud. He declined to craft crypto-specific rules, arguing securities law was sufficiently clear.
A crypto advocate, Atkins disagrees. He claims that most tokens are not securities and wants to develop rules that would allow investors to trade tokenised versions of shares and bonds — synthetic versions of securities that have the same legal rights but can trade 24/7 using blockchain technology.
“We want people not to be doing this offshore,” he said, referring to the 2022 collapse of Sam Bankman-Fried’s FTX. Although many who invested in the Bahamas-based crypto exchange lost money, funds in its regulated US derivatives arm were safeguarded and returned to customers.
“It’s a really powerful example of how a good regulatory scheme can help to protect investors while something else offshore is not going to be adequate,” Atkins said.
Crypto sceptics, however, have argued FTX exemplifies the bravado of an industry that offers few investor protections.
Atkins said the SEC needs rules to govern “smart contracts” that promise instant settlement of trades via crypto, but warned companies that are already offering tokenised US stocks trading to be “very careful” as the commission developed rules. “The securities laws do apply if they’re trading securities.”
Read more on Financial Times News
