Regulatory agencies used to brag about how much enforcement they did. After all, that is their job. Under Trump 2.0 agencies such as the EPA and the Justice Department’s Criminal Division Fraud Section have continued this practice, even when it meant greatly exaggerating what they had actually accomplished.
Now the Securities and Exchange Commission is taking a very different tack: It just issued a press release boasting about cutting back on its enforcement. The motivation is ideological: the current SEC leadership wants to be less aggressive in its oversight of the financial industry.
In typical Trumpian manner, the release begins with a swipe at the previous Administration, which is accused of having used the SEC “to pursue media headlines and run up numbers,” creating “misguided expectations on what constitutes effective enforcement.”
SEC Chairman Paul S. Atkins is quoted as saying: “Over the past year, the Commission has put a stop to regulation by enforcement and recentered its enforcement program on the Commission’s core mission by prioritizing cases that provide meaningful investor protection and strengthen market integrity.”
The phrase “regulation by enforcement” seems to be meant as a critique of the prior leadership’s attempt to exercise oversight over newer sectors such as cryptocurrency, which is favored under Trump 2.0, due in no small part to the fact that the President’s family business is heavily involved in the business.
Atkins’s claim to be focusing on serious fraud cases has yet to become evident in the SEC’s announcements of case resolutions. According to data collected for Violation Tracker, total penalties collected by the agency during the first 12 months of Trump 2.0 were $298 million, down from $1.6 billion during Biden’s final year. The average penalty sank from $25 million to $5 million.
This year the SEC has announced only half a dozen resolved cases against companies with a penalty of $1 million or more.
A sign of things to come can be seen in the appointment of a new director of the SEC’s Division of Enforcement. David Woodcock had been a partner in the corporate law firm of Gibson, Dunn & Crutcher and before that was a senior staff attorney at Exxon Mobil.
Meanwhile, another easing of financial regulation was announced by the Treasury Department’s Financial Crimes Enforcement Network. FinCEN is proposing a rule that would give banks much more responsibility to assess their own exposure to illicit activity such as money laundering.
This approach is justified in the usual anti-regulatory rhetoric. Treasury Secretary Scott Bessent is quoted as saying: “Our proposal restores common sense with a focus on keeping bad actors out of the financial system, not burying America’s banks in more red tape.” Not surprisingly, banks are thrilled with the proposal.
FinCEN and the SEC are trying to give the impression they are making enforcement more effective by focusing on the more serious cases. What is more likely is that there will be less enforcement of cases of all kinds and financial miscreants will enjoy greater impunity.
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