Orical Issue in Focus

SEC Agenda Remains Clear Amid Government Shutdown: Enforcement, Clarity, and Crypto Reform

Despite the U.S. government shutdown[i], SEC Chairman Paul Atkins continues to chart a new course focused on protecting investors, providing clear rules of the road to all market participants (including crypto markets), avoiding regulation-by-enforcement, and ensuring fairness, transparency and due process.Of more than 4,000 total SEC employees, approximately 400 are working during the shutdown actively protecting investors, monitoring markets and engaged in enforcement matters.The SEC is unfortunately not able to provide comments to registrants seeking to go public or engage in rulemaking.This is having a negative impact on the IPO market. Mr. Atkins also desires a legal and regulatory environment more conducive to initial public offerings.The current number of publicly traded companies in the U.S. is 4,700, down from 7,800 in 2007.These have been consistent themes in Mr. Atkins speeches and public appearances.[ii]

Protection of Investors

The SEC takes a tough stand against fraudulent or manipulative behavior harmful to investors. Mr. Atkins said that: “Investor protection is vital to our mission—holding accountable those who lie, cheat, and steal.”In the month of September alone the SEC brought dozens of enforcement actions including five against ponzi scheme operators and two for insider trading.

For example, the SEC brought a case against fund manager Paramount Management Group for engaging in a ponzi scheme that resulted in losses of over $400 million to investors. Over a seven-year period, Paramount raised more than $770 million from approximately 2700 retail investors to purchase and operate automated teller machines (“ATMs”).Only a fraction of investor funds were actually used to purchase ATMs.Many ATMs purchased were inoperable, damaged and produced no revenue.Investors were promised returns (including monthly cash payments) approaching 25% but the ATMs generated insufficient funds to make the promised returns.Consequently, the manager borrowed funds at high interest rates and also used new investor funds to pay earlier investors.

Despite requests, the manager did not obtain audited financial statements and those financial records that were produced were allegedly false.[iii]The Department of Justice brought a companion criminal securities and wire fraud case against the manager.

Despite the shutdown, the SEC also continues to monitor markets and trading as part of its ongoing law enforcement obligations.The SEC collaborates closely with self-regulatory organizations and stock exchanges in monitoring markets for indicia of manipulative or insider trading.Trading in the securities of eight Nasdaq listed companies (e.g. NusaTrip Incorporated) has been halted thus far during the government shutdown.

Demise of Mandatory Quarterly Earnings Reports?

For Mr. Atkins the quarterly earnings process is not the cornerstone of public issuers’ disclosure obligations. He continues to advocate for a change to semi-annual financial statement reporting.Until 1955, public companies were required to file financial reports annually. Mandatory quarterly filing began in 1970. The United Kingdom and European Union moved away from quarterly reporting a little over a decade ago to encourage a long-term investment focus.[iv] The SEC will propose a rule and request comments from the market.Many current 10-Q filers will likely continue to file quarterly even if not required to do so.

Encouraging IPOs

Mr. Atkins suggests a three-pronged approach to reversing the trend of fewer IPOs and fewer public companies in the United States: First, the SEC must simplify disclosure requirements both to reduce the cost of compliance and to make disclosures more understandable; second, shareholder meetings must be depoliticized and return to focusing on electing directors and resolving significant corporate matters as opposed to environmental and social issues;[v] and, third, the litigation landscape needs reform to eliminate frivolous complaints.[vi]Mr. Atkins addressed these three issues at length in his recent Keynote Address at the John L. Weinberg Center on October 9. 

SEC’s Project Crypto

Mr. Atkins acknowledged that the shutdown has effected the SEC’s rulemaking efforts;pursuant to the Antideficiency Act, the SEC is not allowed to work on rule proposals for the duration of the shutdown.Once back at work, it does have exemptive authority and other authority Congress has given the agency to permit it to propose and adopt new rules--particularly rules fit for purpose for the new crypto technology. Unfortunately, according to Mr. Atkins, the SEC has in the past engaged in rule-making-through-enforcement, which he eschews. Mr. Atkins wants clarity and to adopt forward-looking rules to accommodate this new technology and to clarify what is and is not a security. It would be beneficial if those rules were undergirded by legislation adopted by Congress.

Crypto Market Structure Bill in Senate

With respect to the current state of crypto market structure legislation in the U.S. Senate, Michael Novogratz, CEO of Galaxy Digital, spoke at a MeetPerry[vii] event in New York City on October 22.Mr. Novogratz and Coinbase CEO, Brian Armstrong (among other crypto CEOs), spoke to a group of Democrat and Republican Senators on the 22nd.The Digital Asset Market Clarity Act passed the House of Representatives by a bipartisan vote of 294-134 on July 17. There seems to be strong bipartisan support for this legislation in the Senate which would clarify what is a security over which the SEC has jurisdiction and what assets will fall under the purview of the Commodity Futures Trading Commission.Mr. Novogratz was optimistic that the legislation would be ready for the President’s signature by year-end if not sooner.Mr. Novogratz’ full remarks are available on the MeetPerry website.

Conclusion

While the government shutdown has stymied SEC rulemaking activity, it continues to surveil and monitor markets for fraudulent, anomalous and suspicious activity. By maintaining vigilant oversight during the shutdown, the SEC reinforces the core principle that investor protection and market integrity remain paramount to the stability, fairness and efficiency of the U.S. capital markets.

[i] The shutdown commenced on October 1, 2025 and is now one of the longest in U.S. history.

[ii] See, for example, Testimony Before the United States House Appropriations Subcommittee on Financial Services and General Government, May 20, 2025 (“House Testimony”); Keynote Address at the 25th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities and Financial Law, October 7, 2025 (“Sommer”); Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25 Anniversary Gala., October 9, 2025 (“Weinberg”). See also, Evaluating the Mission: A critical Review of the History and evolution of the SEC Enforcement Program by Paul Atkins and Bradley Bondi (2008).Mr. Atkins recent interviews on CNBC are of interest: September 19; and October 22.

[iii] Audited financial statements are as a practical matter required of registered investment advisers that manage funds (pursuant to Rule 206(4)-2 (the “Custody Rule”)).Such is not the case for exempt reporting advisers.Several large fund allocators will not allocate or recommend to their investors funds that do not obtain annual audited financial statements from a reputable, independent audit firm.This is an excellent policy for the protection of investors and minimizes the possibility of fraud, particularly with respect to assets that do not exist or are not properly valued.

[iv] For a view of arguments both for and against this proposal see GovFacts.

[v] “If a [Delaware] company . . . [makes an argument that a precatory shareholder proposal is excludable under paragraph (I)(1) of Rule 14a-8] and seeks the SEC staff’s views, and the company obtains an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law, this argument should prevail . . . .”

[vi] The SEC adopted a Policy Statement on the Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory Arbitration Provisions on September 19, 2025. Mr. Atkins, in Weinberg (see note ii), lamented the fact that Delaware Senate Bill 95 (“SB 95”) prohibits Delaware corporations from adopting mandatory arbitration and fee shifting (to the loser in a litigation) with respect to certain claims.

[vii] MeetPerry is an exclusive membership-based family office and alternatives platform that connects a global community of high-net-value individuals around curated investment opportunities, shared experiences, and next-generation thematic investing. Feel free to reach out if you would like an introduction.