Advisors Scramble as SEC Shifts Focus Under Atkins
The Securities and Exchange Commission has undergone a dramatic regulatory transformation under Chair Paul Atkins, creating what compliance experts describe as “regulatory whiplash” for financial advisory firms navigating the policy reversals from his predecessor, Gary Gensler.
Speaking at this week’s Schwab Impact conference, a panel of RIA compliance specialists outlined how the Trump appointee has fundamentally shifted the SEC’s enforcement philosophy away from what securities attorney Michelle Jacko characterized as “tick tack” technical violations toward a framework prioritizing actual investor harm.
The change offers potential relief for compliance officers who struggled to keep pace with nearly 40 rule proposals introduced during Gensler’s tenure. Atkins, appointed by President Donald Trump, withdrew a significant portion of these initiatives in June, including proposed regulations on predictive analytics, technology outsourcing, cybersecurity protocols, ESG disclosures and custody requirements.
However, the regulatory uncertainty—compounded by DOGE-related staffing reductions and the current government shutdown—has left compliance professionals without clear guidance for future planning.
“Our members don’t want regulatory whiplash swinging from one extreme to another,” said Karen Barr, president of the Investment Adviser Association. “They need reasonable, transparent rules and regulatory certainty to effectively plan and operate their businesses.”
New Rulemaking Wave Expected
Despite the current pause in activity due to the government shutdown, panelists anticipate a fresh wave of rulemaking in the coming months, with alternative assets and cryptocurrency taking center stage.
The new administration is “intensely focused on expanding retail investor access to alternatives, private funds and crypto,” Barr said, emphasizing that Atkins has made it clear that he is committed to maintaining appropriate guardrails.
The panel expects increased coordination between the SEC and other federal agencies, particularly the Commodity Futures Trading Commission, which could reshape how investment advisors handle cryptocurrency custody and trading operations.
AI Regulation on the Horizon
Artificial intelligence regulation emerged as another key focus area. While formal SEC guidance on AI remains absent, panelists predict that significant regulatory attention will follow as AI adoption accelerates across advisory practices.
“We face a new cyber threat called artificial intelligence,” Jacko said, questioning whether firms truly understand all AI applications within their operations, including unauthorized employee use of tools like ChatGPT.
The anticipated governance framework will likely build upon existing cybersecurity and data protection principles while addressing AI-specific risks through vendor due diligence, client data protection controls, comprehensive policies and ongoing supervision protocols.
Particular attention centered on AI-powered meeting transcription services, with unclear compliance implications regarding record-keeping requirements and the reliability of AI-generated summaries. “Who ensures summaries accurately reflect transcripts?” Jacko asked, noting that plaintiff attorneys would demand full transcripts to verify that plan implementation matched client discussions.
Regulation S-P Deadline Remains Firm
One unchanged regulation is Regulation S-P, which governs the handling of confidential client data. Firms managing $1.5 billion or more in assets must comply with new client privacy rules by the December deadline, while smaller firms have until June 3, 2026.
Despite hopes for deadline extensions—given previous accommodations for other rule implementations—Barr cautioned against expecting relief, particularly during the ongoing shutdown. “We’ve requested SEC guidance on several Reg S-P areas requiring clarity, but don’t anticipate receiving it before the Dec. 3 deadline, given the shutdown. Firms must simply do their best.”
Shutdown Creates Operational Challenges
The government shutdown has created unprecedented industry disruptions. SEC examinations remain suspended, leaving firms in the midst of audits in limbo. New registrants cannot proceed with advisory firm applications, and merger discussions face postponement.
Under the administration’s efficiency program, the SEC has reduced staff by 15% from 2024 levels, with additional buyout offers pending. These cuts have disproportionately impacted regional offices and examination teams.
While examination frequency has declined, panelists noted an improvement in examination quality, with regulators focusing on fundamental compliance breakdowns rather than the technical violations prevalent under the previous administration.
Enforcement Continues Despite Deregulatory Environment
Despite the deregulatory atmosphere, enforcement actions persist. The SEC has already pursued cases involving insider trading, breaches of fiduciary duty, failures to disclose conflicts of interest and violations of marketing rules under the new administration.
Barr warned against complacency: “A deregulatory environment doesn’t mean enforcement has become inactive or that cases aren’t being brought.”
The evolving enforcement landscape has created opportunities for advocacy in regulatory reform.
“This administration presents opportunities to examine longstanding rules that no longer make sense,” Barr said, citing overly complex digital document delivery requirements as an example of regulations her organization is working with the SEC to modernize.
Jacko advised firm leaders to “designate someone in your organization to monitor new guidance, releases, and rulemaking that might affect your operations,” as the regulatory landscape continues to evolve.