AP file photo
This week, the Securities and Exchange Commission (SEC)—the federal agency that oversees Wall Street—announced that it has brought almost 30 percent fewer new enforcement actions against companies in the first year of the Trump administration.
In practice, this means that the SEC is bringing fewer cases against bad actors in the financial markets for crimes like insider trading or fraud. That contradicts statements that the SEC’s head, Paul Atkins, made to Congress in February, disputing reports that suggested his agency was prosecuting fewer crimes, and assuring lawmakers that SEC enforcement work had not seen a steep decline.
In its release of case numbers this week, the agency framed its enforcement drop as an effort to focus more on cases where investors saw direct harm and to better use agency resources.
“Regrettably, such resources have been misapplied in prior years to pursue media headlines and run up numbers, and in turn, led to misguided expectations on what constitutes effective enforcement,” the SEC wrote in its statement.
The agency’s report of its enforcement numbers got minimal attention this week, likely because it was issued just hours after President Trump issued a threat to annihilate the people of Iran that raised mass alarm of war crimes or potential nuclear warfare. (The president later walked back his threats.)
The SEC’s data release comes after months of signs that have pointed to unprecedented lenience by the agency toward financial crimes. In the last year, the SEC suddenly shut down many of the cases against cryptocurrency firms initiated under Biden-era leadership: It dismissed a case against Coinbase one month after Trump’s second inauguration, then halted a prosecution against a Chinese crypto entrepreneur who bought millions in tokens from a Trump family crypto venture, and a few months later threw out a case against crypto giant Binance. (The White House also pardoned both the firm itself and ex-CEO Changpeng Zhao.)
A private sector analysis from an economic consulting firm that partnered with NYU to scour court records for SEC actions raised the possibility of a 30 percent drop in prosecutions in November. It also noted that financial fines obtained by the SEC had dropped to their lowest level in more than a decade.
This March, Sen. Jack Reed (D-R.I.) sent a letter to the SEC expressing his own concerns about the agency’s falling enforcement efforts. He noted that staffing at the corporate watchdog has dropped by 17 percent, with many of those cuts specifically in the enforcement division. Financial fines collected by the SEC, he wrote, had dropped by 45 percent, while “disgorgement,” a process where the SEC requires companies to return profits that were obtained through ill-gotten means, had fallen by a staggering 98 percent. Sen. Elizabeth Warren (D-Mass.) sent the agency two letters last month expressing similar concerns.
That same month, the SEC’s enforcement chief—the top lawyer in charge of bringing cases against companies—abruptly resigned after just six months on the job because she clashed with some of the agency’s Republican political appointees in trying to more aggressively pursue financial fraud charges, “including in cases that touched the president’s circle,” according to Reuters.
The day after it released its decreased enforcement numbers, the SEC finally announced Ryan’s replacement. The new enforcement chief will be David Woodcock, an attorney who previously led the SEC’s regional office in Fort Worth, Texas. Following that job, he went into private practice at Gibson Dunn, helping to defend companies facing SEC enforcement actions.