Atkins takes questions on SEC enforcement; AI 'sandbox'; digital assets regulation; accredited investor definition; consolidated audit trail; proxy advisor 'duopoly'

The Senate Banking Committee on February 12 held a hearing on "Oversight of the U.S. Securities and Exchange Commission." The only witness was SEC Chairman Paul Atkins. Materials from the hearing are posted here. Atkins also testified before the House Financial Services Committee on February 11.

Chairman Scott framed the hearing as a pivot from "regulation by enforcement" toward clear rules that keep innovation in the United States, highlighting the Senate's work on the CLARITY Act (crypto market structure bill) and praising the SEC's stated shift back to its statutory mission of investor protection, fair markets and capital formation. Chairman Atkins echoed those themes, citing disclosure "overload" for public companies, a three-pillar plan to "make IPOs great again," close coordination with the CFTC through Project Crypto, and a focus on fraud-first enforcement. Atkins also pointed to efforts to right-size the Consolidated Audit Trail (CAT) on cost and privacy grounds. Senators pressed Atkins on preserving anti-money-laundering (AML/BSA) controls for digital assets, especially for DeFi (decentralized finance), and ensuring that tokenized securities retain full investor protections, while Sen. McCormick focused on SEC-CFTC harmonization for "super apps."

Democrats challenged the agency's enforcement posture and independence, arguing that the SEC has eased oversight and dropped cases involving executives and crypto firms. Sen. Reed cited staffing and penalty figures to question whether enforcement is being "hollowed out." Republicans focused their questions on market infrastructure and governance, such as the CAT's cost and collection of personal information, and criticized the influence and conflicts of what they called the proxy advisor "duopoly," while Sen. Tillis raised concerns about the government's "golden share" stakes distorting competition. Members also probed China-related risks, including broker-dealer data exposure to VIE structures and changes to the Public Company Accounting Oversight Board (PCAOB), while Democrats flagged the need to restore a bipartisan slate of SEC commissioners.

More information is available in the attached WCEY Alert.