An outspoken opponent of what he viewed as an SEC that had overreached beyond its congressional mandate, Paul Atkins was formally sworn in as the SEC’s 34th Chairman on Monday, April 21. Atkins is expected to take a more de-regulatory posture.
During his Senate confirmation hearings, Atkins signaled a shift in enforcement priorities at the SEC, including:
–A shift in enforcement approach: The SEC is expected to move away from aggressive enforcement actions, avoiding regulatory overreach.
–Pro-crypto policies: Atkins is also known for his pro-crypto stance, which suggests a more favorable regulatory environment for digital assets. This could include revisiting or rolling back rules that were seen as restrictive under previous leadership, such as the Biden-era crypto custody rule.
–Focus on clarity and collaboration: The SEC may prioritize providing clearer guidelines, fostering collaboration rather than confrontation.
Atkins, a lawyer, served as SEC Commissioner from 2002 to 2008. Prior to being named SEC Chair, Atkins served as CEO of Patomak Global Partners, a Fintech and risk management consultancy with expertise in crypto assets, which he founded in 2009.
Valuations and Impairments Dominate Lawsuits
The top reason for accounting-related class action lawsuits in 2024 involved allegations of reporting violations related to asset valuation and asset impairment, according to a report by Cornerstone Research. Falling from the top reason were class actions based on revenue recognition, which held the number one spot since 2019.
Many of the cases filed last year targeted smaller issuer defendants, resulting in the median market capitalization of defendant companies dropping to $445.6 million. This marks the fourth consecutive annual decline, according to Cornerstone.
Special Purpose Acquisition Companies continue to be targeted by class action lawsuits, with Cornerstone reporting that half of all SPAC class action lawsuits filed in 2024 were triggered by allegations of accounting violations.
Cornerstone Research is an economic consulting firm that provides expertise in economic and financial analysis, primarily in the context of litigation and regulatory matters.
As part of the new administration’s efforts to trim the federal workforce, the Consumer Financial Protection Bureau (CFPB) has significantly been downsized by 90 percent. While the layoff action is facing judicial hurdles, the Bureau is refocusing its activities.
The CFPB was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Signed into law by President Barack Obama in July 2010, the agency officially began operations on July 21, 2011.
Since its inception, however, critics have alleged that the agency has been overreaching beyond its initial mandate, and that its redundancy and overlapping of functions have created an unnecessary and expensive bureaucracy.
The CFPB’s regulatory umbrella covered banks, thrifts, and large credit unions. It also had oversight and enforcement capabilities over non-bank financial institutions, including mortgage lenders and servicers, payday lenders, private student loan providers, credit bureaus, debt collection companies, international money transfer services and auto financing companies.
With only 10 percent of its workforce left, the CFPB is expected to shift its focus away from enforcement and supervision, relegating that to existing federal agencies, such as The Securities & Exchange Commission, The Federal Reserve, The Federal Trade Commission, as well as existing state-level agencies.
Shortly after the CFPB layoffs were announced, a federal judge issued a pause and scheduled evidentiary hearing in the US District Court for the District of Columbia to determine if the layoffs violated an earlier court order barring the Executive Branch from terminating positions in the federal workforce.
In the meantime, in a memo to CFPB employees, chief legal officer Mark Paoletta told the remaining 200 employees: “To focus on tangible harms to consumers, the Bureau will shift resources away from enforcement and supervision that can be done by the States.” He added that problems with mortgages will be the agency’s top priority.
In its 2024 financial report, the CFPB noted a 1,758-person workforce and a budget of over $750 million, the latter an 8% increase over 2023. It also noted collecting $170.0 million in civil penalties from financial institutions, businesses, and individuals for various violations of consumer financial protection laws ordered in fiscal year 2024.”
The National Federation of Independent Businesses (NFIB) is urging the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to permanently eliminate the Beneficial Ownership Information (BOI) reporting requirement for domestic businesses and destroy previously collected data to prevent misuse.
“Congress should take immediate action to make this relief permanent and prevent small businesses from being subjected in the future to these burdensome and invasive reporting requirements. Furthermore, we ask Treasury to destroy the personal and private information that many small businesses had already provided, to ensure it does not fall into the wrong hands for nefarious use,” said the NFIB’s Jeff Brabant in a news release.
The BOI reporting rule, issued by FinCEN under the Corporate Transparency Act, initially required both U.S. and foreign companies to report details about their beneficial owners. Following legal challenges and a leadership change in both Treasury and the White House, FinCEN on March 21 removed the requirement for U.S. companies and persons to report BOI, limiting the rule to foreign entities registered to do business in the United States.
Before the reporting requirement for domestic companies was lifted, FinCEN had estimated that around 6.5 million BOI reports had already been filed by US businesses. It is this data that NFIB is urging FinCEN to destroy.
In its April 12 letter to Treasury/FinCEN, the NFIB argued that requiring small businesses to report personal details of beneficial owners without a warrant or demonstrated need is an overreach, criticizing the rule as overly invasive and burdensome for small businesses, arguing that it creates an unnecessary compliance burden without clear benefits.
FinCEN’s amended rule still requires only foreign entities registered to do business in the US to submit BOI reports, with the division estimating that fewer than 12,000 foreign entities will be affected.
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