SEC Chair Atkins Charts New Course Away from 'Regulation by Enforcement'

SEC Chair Atkins Charts New Course Away from 'Regulation by Enforcement'

Introduction

In a statement that’s reverberating across Wall Street and the broader financial services industry, SEC Chair Paul Atkins has voiced strong criticism of what he describes as “regulation by enforcement” — a long-standing approach by the U.S. Securities and Exchange Commission (SEC) that many argue has created uncertainty and confusion in the compliance landscape. His comments signal a potential paradigm shift in how financial regulation may be enforced, particularly under an administration that favors innovation and regulatory clarity, such as the one led by President Trump.

What Is ‘Regulation by Enforcement’?

“Regulation by enforcement” refers to a practice where regulators, rather than issuing clear guidance or rulemaking through formal processes, rely on enforcement actions to establish new standards. Critics argue this creates unpredictability, where firms only discover regulatory expectations after penalties have been issued.

Chair Atkins’ Position

Chair Atkins, a seasoned voice in regulatory reform, expressed concerns that this strategy:

• Undermines due process by punishing conduct before rules are clearly articulated;

• Deters innovation by keeping firms in a constant state of regulatory uncertainty;

• Erodes public trust in the SEC’s mission to act as a fair and neutral watchdog.

In his comments, Atkins stated: "We must move away from the practice of surprising market participants with novel interpretations of outdated rules... Regulation should come from rulemaking, not retroactive punishment."

This signals a potential shift toward more proactive rulemaking, industry consultations, and clearer guidance — a move welcomed by many in the advisory and fintech sectors.

Implications for Investment Advisers and Broker-Dealers

If Atkins' approach gains traction, firms could expect:

• More clarity and predictability in how the SEC enforces policies, especially in gray areas.

• Reduced fear of enforcement ambushes for good-faith efforts to comply;

• Greater reliance on formal rule proposals and public comment periods before new expectations take effect.

However, this doesn’t mean enforcement will disappear. Atkins emphasized that fraud, misrepresentation, and blatant noncompliance will still be vigorously pursued — but within a more transparent and consistent regulatory framework.

What This Means for Crypto and Digital Asset Firms

Perhaps the most direct beneficiaries of this policy shift are crypto firms and digital asset innovators, many of whom have been caught in a regulatory limbo. Under previous SEC leadership, companies like Ripple, Coinbase, and others faced enforcement actions without a clear framework on whether their products were securities.

Atkins’ comments align with the broader pro-crypto agenda of the Trump administration, suggesting a more collaborative regulatory environment where digital asset firms can innovate within a known set of boundaries.

Final Thoughts

Chair Atkins's call to end regulation by enforcement is not just a philosophical stance — it’s a signal to the industry that the SEC may become more consistent, transparent, and supportive of responsible innovation. For compliance professionals, now is the time to:

• Stay informed on upcoming rulemakings.

• Engage in public comment opportunities;

• And position your firm as a proactive participant in the regulatory dialogue.

At RIA Compliance Concepts, we’re closely monitoring these developments and are here to help you navigate the shifting regulatory landscape with clarity and confidence.

Need help aligning your compliance program with this new direction? Contact us at info@riacc.io for a strategic review.