Arthur G. Jakoby is Partner and Co-Chair of Herrick’s Securities Litigation and Enforcement Group.
The Securities and Exchange Commission (SEC) was created in 1934 after the devastating Great Depression market collapse to restore investor confidence and regulate the securities markets. Over the years, SEC amendments and rule promulgations have increased regulation under both Democratic and Republican administrations, and so have SEC enforcement actions. With a new administration, business leaders can once again expect changes.
Early Signs Of Reductions And Deregulation
The first Trump administration, under SEC Chairman Jay Clayton, delivered some deregulation and a shift in prosecutions targeting high-profile financial fraud rather than lesser violations, but not a reduction of the number of SEC enforcement actions. Now, under the leadership of returning SEC Commissioner Paul Atkins (an SEC commissioner from 2002-2008), I expect we’ll see an increase in deregulation of the securities markets and a dramatic reduction in SEC enforcement actions of all types with a significantly pared-down SEC staff. Here’s why:
A Reversal On Crypto
Before the March 27 Senate approval of Atkins, acting SEC Chair Mark T. Uyeda formed a task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets and dropped several crypto investigations or enforcement actions. I believe the reduction in crypto enforcement actions is a prelude to an expected radical change in SEC enforcement objectives and an emphasis on restoring the SEC to its prime directive of providing market stability and confidence in the integrity of the markets.
Procedural Changes In Enforcement
In an effort to rein in its enforcement staff and control the opening of investigations—and thus focus the types of cases investigated—the Commission rescinded a 2009 rule that gave the director of the Division of Enforcement the authority to issue formal orders of investigation and, in turn, subpoenas. Absent the ability to issue subpoenas, the SEC enforcement staff must rely on voluntary cooperation, which makes certain investigations nearly impossible. By requiring Commission approval prior to proceeding with investigations, a layer of bureaucracy is added, allowing commissioners direct control over what is and is not investigated. The SEC, in its release, explained that this change was made to “more closely align the Commission’s use of its investigative resources with Commission priorities.”
Renewed Focus On Direct Harm
Under Atkins’ leadership and a scaled-back enforcement staff, the Enforcement Division is expected to shift its priorities away from investigating cryptocurrency platforms, large brokerage firms and public corporations to a focus on traditional “bread-and-butter” securities fraud cases involving individuals, such as market manipulation, boiler rooms, Ponzi schemes and false statements.
In other words, the SEC will focus on cases where the investing public has been directly harmed and where the victims are identifiable. I think we will likely see less of a focus on corporate accountability and complex accounting cases, which often involve technical violations with only indirect harm to investors rather than direct harm with identifiable victims. This is a departure from the corporate penalties and fines imposed under former President Biden, which in 2024 led to a record-breaking year of $8.2 billion in financial remedies.
Trends Leaders Should Watch For
Given Atkins’ past deregulatory stance and approach toward enforcement, the Trump administration’s enunciated priorities and a much smaller SEC enforcement staff, I think we are likely to see the following enforcement trends in 2025:
• A shift away from enforcement actions that seek to break new legal ground or expand the SEC’s traditional jurisdiction.
• A less aggressive approach to insider trading, resulting in the prosecution of only clear-cut, egregious cases and not borderline cases brought to expand the scope of insider trading.
• A cessation of SEC greenwashing cases or any cases involving environmental, social and governance (ESG) or diversity, equity and inclusion (DEI)-related disclosures. This is further supported by recent decisions to end the commission’s defense of climate disclosure rules and remove resources around federal DEI programs from the SEC website.
• A move toward resolving cases via agreements that focus on corporate remedial measures and compliance education rather than imposing fines and penalties.
• An increase in incentives for self-reporting and existing internal compliance procedures.
• An enforcement staff looking for solutions outside of litigation, especially since SEC staffing resources will be limited due to staff reductions.
In closing, I believe both SEC defense lawyers and business CEOs can expect one of the most significant transformations of the SEC’s enforcement division in recent years.
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