The election of President Trump means a changing of the guard at the US Securities and Exchange Commission. President Trump has nominated Paul S. Atkins, a former SEC commissioner, as chairman of the agency, and he is currently working through the Senate confirmation process. Once confirmed, we anticipate a shift in SEC policy on a number of key areas during Chairman Atkins’s term.

A New Majority Takes Control

With the recent resignations of two Democratic commissioners in January, Republicans now hold a 2-1 majority at the SEC. The two Republican commissioners—Mark Uyeda (the current acting SEC chairman) and Hester Peirce—both previously served on then-Commissioner Atkins’s personal staff at the SEC as his counsel and have long-standing relationships with him. Both Acting Chairman Uyeda and Commissioner Peirce often viewed policy and enforcement issues differently than former SEC chair Gary Gensler and frequently dissented from key rulemakings and enforcement cases during Gensler’s term.

Uyeda and Peirce’s many dissenting statements from actions taken under the Gensler SEC likely preview a shift in public policy preferences for the SEC over the next four years, and Acting Chairman Uyeda has already put in place key senior personnel and set in motion a process to unwind several initiatives undertaken during Chair Gensler’s term. President Trump’s many recent executive orders seeking to reorient the executive branch also help to set the tone for the new Republican SEC majority. Mr. Atkins’s own public statements and professional activities over the years further suggest that he will approach many issues differently than his predecessor.

The SEC’s remit is large, and Chairman Atkins will no doubt focus on a range of reforms to the SEC’s processes for rulemaking and enforcement, as well as a potential redesign of the agency’s overall organization. By providing a sampling of various topics, we hope to illustrate the broader approach the SEC is likely to take over the next four years. Below we discuss several representative areas where we expect a change in the reconstituted SEC.

A Survey of Select Priorities

Climate Reporting Rule

In March 2024, the SEC adopted sweeping and controversial climate disclosure rules for public companies. A series of petitioners brought judicial challenges around the country to the SEC’s climate rules, and the cases were consolidated before the federal Eighth Circuit Court of Appeals. The SEC has voluntarily stayed compliance with the rules while the litigation remains pending.

The ascendant SEC majority does not support the current climate rule. The two sitting Republican commissioners each dissented when the SEC adopted the rules, and they have called for the SEC to return to traditional notions of financial materiality when undertaking future rulemaking. Paul Atkins has in the past also been skeptical of the SEC’s efforts in the climate area.

The case challenging the climate rule is now fully briefed, but the Eighth Circuit has not yet scheduled oral argument. Acting Chairman Uyeda in early February instructed the SEC staff to petition the court to delay scheduling oral argument in light of the change in administrations. The SEC could eventually abandon defense of the rule, but a group of Democratic state attorneys general has intervened in the case and would likely seek to continue to defend the current rule.

Because of the uncertainty surrounding the ultimate outcome of the litigation process, the SEC is instead likely to commence a process to repeal the rule through notice-and-comment rulemaking. Prior judicial precedent makes clear that an agency may repeal a rule in this manner, and lays out the procedure to do so. Ironically, a Fifth Circuit case decided during Chair Gensler’s term concerning a challenge to his efforts to repeal several rules governing proxy advisors provides a roadmap to proceed. Under the caselaw, the SEC may change course with a new administration, but if the new policy is based on facts different from those underlying the prior policy, a more detailed explanation of that rationale is required in the SEC adopting release.

Cryptocurrency and Digital Assets

President Trump campaigned heavily on the promise that he would reform the federal government’s restrictive view on cryptocurrency and digital assets, and he issued an executive order overhauling the federal approach to the digital asset sector. Immediately after President Trump’s inauguration, and even before the President’s executive order, the SEC announced the formation of a new Crypto Task Force. The task force is led by Commissioner Hester Peirce and draws on staff from around the agency. Its mission is to “collaborate with Commission staff and the public to set the SEC on a sensible regulatory path that respects the bounds of the law.” It will also coordinate with other state and federal agencies, including the Commodity Futures Trading Commission.

The SEC press release announcing the task force’s creation is somewhat critical of the agency’s prior approach to regulating digital assets, noting that the agency “relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way.” The press release observed, “Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive.” The announcement concludes, “The SEC can do better.” This sort of self-criticism at the SEC, even on a change in administrations, is atypical.

In a wide-ranging public statement entitled “The Journey Begins,” SEC Commissioner Hester Peirce previewed next steps for the SEC’s Crypto Task Force and provided a 10-point, nonexclusive agenda for the SEC Crypto Task Force:

• providing greater specificity as to which crypto assets are securities;
• identifying areas both within and outside the SEC’s jurisdiction;
• considering temporary regulatory relief for prior coin or token offerings;
• modifying future paths for registering securities token offerings;
• updating policies for special purpose broker-dealers transacting in crypto;
• improving crypto custody options for investment advisers;
• providing clarity around crypto lending and staking programs;
• revisiting SEC policies regarding crypto exchange-traded products;
• engaging with clearing agencies and transfer agents transacting in crypto; and
• considering a cross-border sandbox for limited experimentation.

The SEC’s efforts continue to pick up pace. The SEC withdrew controversial Staff Accounting Bulletin 121 on custody of crypto assets. The news media has widely reported on reassignment of key personnel in the agency’s specialized enforcement unit focusing on Crypto Assets and Cyber, which has formally been renamed the Cyber and Emerging Technology Unit. Further, the SEC has dismissed or delayed prosecution of its enforcement cases against several prominent cryptocurrency businesses. While these developments will be welcomed by the cryptocurrency industry, they will also expect a major SEC rulemaking push on digital assets under Chairman Atkins.

Cybersecurity Reporting on Form 8-K

Cybersecurity is another area where Chair Gensler was active in SEC rulemaking and enforcement, and where Uyeda and Peirce were sometimes critical. In July 2023, for example, the SEC adopted rules requiring public companies to report material cybersecurity incidents on Form 8-K under new Item 1.05. Since reporting became required in December 2023, 26 separate companies have disclosed material cybersecurity incidents under this requirement. Of course, far more than 26 public companies have had to respond to cybersecurity incidents of one kind or another since December 2023. Very few companies are therefore reaching the conclusion that these events were material for SEC reporting purposes.

Unlike climate and crypto where we anticipate further SEC rulemaking, we assign a low probability to any organized effort to repeal the cybersecurity Form 8-K reporting requirement. Though compliance with the rules is moderately burdensome for companies in the midst of a cybersecurity incident, there are far more burdensome reporting rules (compensation disclosure and analysis, for example), and the SEC will likely prioritize other matters on its rulemaking agenda. It is possible that the new chair will instruct the SEC staff to release additional interpretive guidance on cybersecurity reporting under Form 8-K, but the SEC staff has already made an extensive effort to discourage companies from making immaterial Form 8-K filings under Item 1.05, both through comment letters and other staff interpretive guidance. So, Item 1.05 is an artifact of the Gensler era that is likely to survive.

Other Future Rulemaking

As alluded to above, over the next four years we also expect the SEC to change direction on rulemaking. It is doubtful whether many items on the SEC’s Fall 2024 rule list under the Regulatory Flexibility Act involving priorities of former Chair Gensler will see further action. For example, the rule list includes placeholders for proposals on topics such as “Corporate Board Diversity,” “Human Capital Management Disclosure,” and “Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices.” We do not expect the SEC to take further action on these or similar matters. Instead, in addition to the matters discussed above, we expect the SEC to focus its rulemaking resources on other topics that have been priorities of prior Republican administrations. Such topics include facilitating capital raising, expanding the definition of “accredited investor”, reform of the shareholder proposal process under SEC Rule 14a-8, and matters related to capital market structure.

Enforcement

The change in SEC leadership will also lead to a shift in SEC enforcement priorities and an enhanced focus on protecting retail investors. A frequent area where Uyeda and Peirce dissented from enforcement actions under prior Chair Gensler concerned cases where the majority sought to expand existing law or otherwise apply SEC precedent creatively. The SEC under Gensler brought several novel cases alleging failures of disclosure controls and procedures or internal controls over financial reporting in cases involving cybersecurity incidents, for example. Rather than continue to push the envelope, we expect the SEC to return to more traditional areas of enforcement.

To this end, we anticipate that SEC enforcement in the coming years will prioritize cases alleging investor fraud where there are clear misstatements or omissions of material facts. Other core SEC enforcement priorities such as insider trading, accounting fraud, Ponzi schemes, affinity frauds and other scams impacting retail investors will also likely see greater emphasis. Cases alleging only technical rule violations without investor harm or pursuing cutting-edge theories of liability are likely to be less common.

ESG enforcement is a specific area where we expect SEC priorities to shift. Under the prior administration, the SEC brought several greenwashing enforcement cases, for example. Commissioners Uyeda and Peirce were especially critical of greenwashing cases that focused on alleged failures in corporate controls or other technical violations of the law without clear fraud. Over the next four years, we expect the SEC to bring fewer cases of this kind.