▶ 0:18:41Chair Scott: Good morning. We will call this hearing to order. What a difference a new administration makes. Not just the time, the year, but the difference leadership makes. So thankful we have new leadership at the s.e.c., so welcome, Mr. atkins.
▶ 0:19:02Chair Scott: Just over a year ago in the biden administration, americans were dealing with an economy marked by instability, fueled by an unaccountable federal government. Families in south carolina felt it every time they filled up their tanks, went to the grocery stores, tried to plan for the future. Small businesses felt it when washington made it harder to grow. And invest and hire. Today, we are on a different track.
▶ 0:19:33Chair Scott: Under president trump, we are refocusing on growth, opportunity, and common sense. This means clarity instead of chaos, accountability instead of bureaucracy, and a government that serves the american people, not gets in the way. The s.e.c. Under your leadership reflects that approach. This can be seen now as your s.e.c. Is addressing digital assets.
▶ 0:20:01Chair Scott: For years under the biden administration, regulation of digital s markets took the form of regulation by enforcement. Instead of clear rules, businesses, builders, and investors were left with confusion, subpoenas, and lawsuits. Instead of innovation brewing here at home, much of it was pushed overseas. It failed investors who deserve transparency and protection.
▶ 0:20:32Chair Scott: It failed entrepreneurs trying to build the next generation of american companies. And it failed our country at a time when global competitors are racing to lead in financial innovation. Congress is now doing his job, working in partnership with the s.e.c. The senate version of the clarity act is about establishing clear rules of the road.
▶ 0:20:57Chair Scott: It defines responsibilities for regulators, protects investors, and gives businesses the certainty they need to innovate in the united states while keeping consumer protection paramount. Make no mistake -- digital asked innovation will happen here at home in places like greenville, south carolina, atlanta, georgia, or in north carolina. Mr. atkins, your leadership at the s.e.c.
▶ 0:21:26Chair Scott: Is also bringing clarity and common sense back to how it regulates our capital markets, which of course is incredibly important. You pledged to make ipo's great again, and I really like that aspirational approach with optimism, helping more companies go public so more american families can invest in the next generation of companies from the very beginning.
▶ 0:21:51Chair Scott: You also committed to fixing our broken public company disclosure regime, which drives up costs and pushes firms away from markets instead of inviting them into our markets. Under your leadership, the s.e.c.
▶ 0:22:05Chair Scott: Has changed compliance rates for several costly rules finalized by cheer gensler, and withdrawn those rules that would have damaged our capital markets if finalized, including rules that would have imposed requirements on registered funds and investment advisors. You've done important work, hard work -- a lot of work. But that work is still in its infancy.
▶ 0:22:36Chair Scott: After four years of dysfunction, the s.e.c. Is once again a partner in growth, returning to its core mission, maintaining fair and orderly markets and facilitating capital formation every day. By getting the s.e.c. Back to the basics, you are helping our capital markets work better for investors, entrepreneurs, and innovators. Now, congress must do our part as well.
▶ 0:23:04Chair Scott: That is why I will work to advance capital -- the capital formation package known as the empowering main street in america act to help small businesses grow and expand investment opportunities for everyday americans. In the greatest country on the planet, it should not take wealth to create wealth. If we get this right, we can improve confidence in our capital markets, keep innovation in america, and make sure the next generation has more opportunity than the last.
▶ 0:23:36Chair Scott: Once again, thank you, chair, for being with us. I look forward to your testimony.
▶ 0:23:41Sen. Warren: Our markets are the envy of the world, and they deliver enormous opportunity. We want american businesses to thrive. But markets do not mean that the wealthy and the powerful take all the gains while small businesses and consumers get cheated.
▶ 0:24:03Sen. Warren: The s.e.c.'s job is to make sure that our markets are fair and honest, but nearly a year into running the agency, chair atkins is unleashing a golden age of fraud. The billionaires will cash in while millions of american businesses and families will end up paying the price.
▶ 0:24:23Sen. Warren: As soon is he was confirmed, chair atkins set to work letting scammers off the hook and unraveling investor protection rules that keep every day investors from getting cheated. At every fork in the road, he has turned toward wall street over main street. Here are just a few examples. For decades, the s.e.c. Has monitored corporations and refused to let them go public if they are scams.
▶ 0:24:51Sen. Warren: Now, thanks to chair atkins, that oversight has nearly disappeared. Investors have said over and over they want more information so they can make better decisions, but chair atkins is working two/ -- to slash disclosures so companies can hide how risky they have become. The s.e.c. Has also made it easier for companies to prevent investors from going to court when those investors have been cheated.
▶ 0:25:21Sen. Warren: Chair atkins seems to think that if investors get cheated, they should just suck it up. The trump s.e.c. Has made it easy for executives to silence shareholders and to ignore suggestions for improving corporate governance. And perhaps most dangerous of all, the trump s.e.c. Has gutted oversight and enforcement tools, even proposing to dismantle the database that helps the s.e.c.
▶ 0:25:51Sen. Warren: Catch insider trading, market manipulation, and other corporate crime. And the proof that the s.e.c. Has largely quit enforcing the law is right there in the numbers. Over the past year, the s.e.c. Collected less in monetary penalties against bad actors than it has in over a decade. And I don't think anyone can say with a straight face that is because corporate ceo's are suddenly behaving better.
▶ 0:26:20Sen. Warren: For crooked ceo's and companies built on fraud, trump's s.e.c. Is a dream come true. Atkins has taken the s.e.c. Cops off the beat. Under his watch, the s.e.c. Has cut way back on investing -- on investigating companies that break the law and hurt investors. So who benefits from the trump administration's sidelining of cops at the s.e.c.?
▶ 0:26:50Sen. Warren: President trump and his billionaire buddies. Rich ceo's like trevor milton, and companies like crack, coin base, and gemini, -- kracken, coin base, and gemini, who donated to trump, and the s.e.c. Cases against them suddenly disappeared. While the se's -- s.e.c. Spends its time handing out special favors, risk is building up in our financial system. We have seen this before.
▶ 0:27:20Sen. Warren: In fact, the s.e.c. Chair who sits here today played a starring role in an earlier financial crash. In the years leading up to the 2008 crash, chair atkins, who was then a commissioner on the s.e.c., along with other regulators, led companies to flood the market with complex risky financial products.
▶ 0:27:44Sen. Warren: Taxpayers ended up bailing out wall street while millions of on main street lost their jobs, their homes, and their pensions. Here we are, 20 years after the crash, and the lesson from republicans seems to be that so long as you take care of the big boys, donald trump and his friends are happy that no further investigation is needed.
▶ 0:28:08Sen. Warren: Once again, american families are being put at risk of losing their shirts because trump's s.e.c. Refuses to do its job and enforce our laws. Thank you, Mr. chairman.
▶ 0:28:19Chair Scott: Thank you, senator warren. We will hear from the securities and exchange commission chairman, paul atkins. I look forward to your testimony.
▶ 0:28:29Mr. Atkins: Thank you, chairman scott, ranking member warren, and members of the committee. It is a great honor to testify before you today. Thank you for this opportunity to discuss the work of the securities and exchange commission. Nine months ago, I returned to the s.e.c. With a clear mandate to recommit the agency to our core mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.
▶ 0:28:59Mr. Atkins: I'm grateful to work alongside dedicated public servants who have hit the ground running. America's $124 trillion capital markets are the deepest and the most liquid in the world. They are a marvel of human ingenuity. Get over the years, rules have multiplied faster than the problems they were intended to solve. This congress and the trump administration are focused to bringing down the cost of living for the american people, and the s.e.c. Has a vital role to play.
▶ 0:29:31Mr. Atkins: For example, public companies spend $2.7 billion a year to file their annual reports. This is 2.7 billion dollars that companies are not reinvesting in their businesses to create jobs. It is $2.7 billion that our disclosure regime is diverting from our constituents to corporate lawyers, accountants, and consultants. This is not to say that we want to gut corporate disclosure, which is vital.
▶ 0:30:01Mr. Atkins: But we must modernize, rationalize, and streamline reports so that they are meaningful, understandable, and not repellent to investors. How many of you would read through an annual filing like this one right here, of more than two reams of paper? That rivals war and peace. Disclosure documents of that length can do more to obscure than to illuminate. For context, shortly after I left the s.e.c.
▶ 0:30:30Mr. Atkins: In the mid-1990's, there were more than 478 companies listed on U.S. exchanges. By the time I returned, that figure had fallen by roughly 40 percent. This trajectory tells a cautionary tale the s.e.c. Is working to rectify through the three pillars of my plan to make ipo's great again. First, re-anchoring disclosures in materiality.
▶ 0:30:56Mr. Atkins: Second, decreasing the size of shareholder meetings, and third, allowing litigation alternatives so that we shield innovators from the frivolous and investors from the fraudulent. I also applaud the bipartisan mission of congress, including those -- including those in the senate, the empowering main street act and the house's invest act, to help keep america's capital markets open, dynamic, and worthy of investor trust.
▶ 0:31:25Mr. Atkins: I also support congressional efforts to enact the clarity act. Upon its passage, the commission stands ready to implement this landmark legislation. The federal framework for the crypto markets is long overdue, and under the leadership of the crypto task force, s.e.c. Staff has provided more clarity in the past year than in the prior decade. But there is no action we can take that future proofs our rulebook more than nonpartisan market structure.
▶ 0:31:58Mr. Atkins: As congress completes its final work, the s.e.c. Chairman and I intend to provide a bridge to our now joint project crypto. We will consider a token taxonomy to allow investors and innovators a clear understanding of their regulatory obligations. We will also look to consider exceptions that allow market participants to move and transact on a chain.
▶ 0:32:26Mr. Atkins: Finally and most fundamentally, capital markets thrive on many factors, but they endure on trust. The s.e.c. Is returning its enforcement program to first principles and rooting out fraud and remedy an investor harm. Since I joined the commission, we have brought enforcement actions to address offering frauds, insider trading, accounting and financial frauds, and breaches of fiduciary duty.
▶ 0:32:52Mr. Atkins: Since the formation of our cross-border task force in the fall, we have suspended trading of stocks of 14 asia-based issuers upon evidence of potential market manipulation. I am working within the securities laws to protect investors from those who seek to use international borders to evade and undermine U.S. investor protections. Markets are global. Investor protections must be as well. The s.e.c.
▶ 0:33:21Mr. Atkins: Is returning to its core mission that remains as vital today as it was when congress set it out for us over 90 years ago. So I want to thank you and think this committee once again for this hearing. I look forward to answering questions. And will show the work ahead.
▶ 0:33:39Chair Scott: Each member will have five minutes to ask questions. I will start. I believe that blockchain technology and digital assets are the future of finance around the world, frankly. If we can set up clear rules of the road, we can drive innovation here at home and make america the crypto capital of the world. As chair of this committee, we have worked diligently together on market structure legislation the last six months plus.
▶ 0:34:07Chair Scott: Democrats, republicans, putting thousands of hours at this point, trying to figure out the path forward. I think it is important for us to do so. It is helpful for us to rules of the road that are already in place. Can you speak to why providing legislative clarity for digital assets is critical for american competitiveness and protecting investors at the same time?
▶ 0:34:31Mr. Atkins: Thank you, chairman scott. I support your efforts and I agree with you that you here in the senate, and your staff, and those in the house, have really spent a lot of time and energy to come up with what will be, I think, a very good bill once you iron out the details.
▶ 0:34:55Mr. Atkins: We have been providing technical assistance to both houses, on both sides of the aisle as well, and I have spent a lot of time ourselves. Thanks for your efforts and help on that, in the right place.
▶ 0:35:13Mr. Atkins: The real issue that is so important about this legislation is to future proof things so that there is clarity to innovators, between the s.e.c., the cftc -- I would like to compare the last 40 some years as to forces on either side of the no man's land, where we have innovators and other would be new products getting bogged down in that no man's land with the
▶ 0:35:43Mr. Atkins: Crossfire and never really coming to market. So we need to give people clarity as to what they need to do. In the past, which has been the problem with the s.e.c. The past few years, the s.e.c. Stayed mom -- mum. It did not try to accommodate its filings and its forums and rules to accommodate this new innovative technology.
▶ 0:36:11Mr. Atkins: So we need a firm grounding in statute so we can do that in the future.
▶ 0:36:17Chair Scott: Thank you. I will turn my attention to my opening comments about not having a prerequisite of wealth to make wealth. That is an important part in achieving the american dream. Owning a home is the first component of that. The foundation of most of us for the american dream is homeownership. For myself, that certainly was real.
▶ 0:36:41Chair Scott: Then I started a small business and realize there is a big step forward if you are able to get yourself into an equity position beyond your house. It is critically important. Americans work hard, by the rules, and do well for themselves, but are locked out of investment opportunities, because in america today, it still takes wealth to build wealth. We are trying to find a way to look at the investor definition and make it more flexible for people who have the knowledge but not simply the money.
▶ 0:37:11Chair Scott: That is an important part of what is broken about the current definition. My act does put us in the position to expand the definition of accredited investor, opening the door to americans based on knowledge and qualifications. What is the s.e.c. Doing to expand the accredited investor definition, and more broadly assure it does not take wealth to build wealth?
▶ 0:37:40Mr. Atkins: Thank you, senator. I really agree with your point. I've been part of the s.e.c. Three times over the last 30 years. Each time, it has been an issue that has been debated. I think it is time.
▶ 0:37:56Mr. Atkins: As you have put it in your bill, to consider other alternatives, why should a professor making $100,000 a year, an economist or finance professor, not be an accredited investor, but somebody who just inherited $3 million is an accredited investor? That is not the way that things should be.
▶ 0:38:20Mr. Atkins: We should have ways for people who are willing to take risks and demonstrate the knowledge that would be prerequisite to do this, by testing or something. We would be open.
▶ 0:38:33Chair Scott: I think you just put your finger on the pulse. Hopefully, we will see the next iteration of that definition sometime soon. Ranking member warren?
▶ 0:38:46Sen. Warren: The s.e.c. Is supposed to be the cop on the beat, enforcing securities laws. Chair atkins, you have been rolling back protections at a record clip. Meanwhile, there are just as many corporate crooks as ever come up more. The crooks who are cooking the books, defrauding investors, engaging in insider trading. Under your watch, the s.e.c. Does not seem interested in enforcing our laws against corporate crime.
▶ 0:39:15Sen. Warren: I'm looking at the data here and over the past year the s.e.c. Has brought fewer new enforcement actions than at any point in the last decade. Do I have that right?
▶ 0:39:26Mr. Atkins: I'm not sure what data you are looking at it because we have not released data yet. But I would disagree with you.
▶ 0:39:36Sen. Warren: I'm looking at public data. Securities offerings down 10.64% in 2025 from 2020 four. Investment advisers enforcements down 23.71%. Issuer reporting on accounting down 32 point 65%. Broker-dealer down 29.51%. These data all come from publicly reported data.
▶ 0:40:01Mr. Atkins: I'm not sure what you are looking at, but we will release our numbers.
▶ 0:40:09Sen. Warren: The s.e.c. Has dropped one case after another even for convicted fraudsters who broke the law. There is devon archer, a guy who sold 60 million dollars in worthless borrowings to pension holders. You turned him loose. Carlos watson, who raked in tens of millions of dollars by lying to investors about his company's financial performance. You turn him loose. Trevor milton drew in hundreds of millions of dollars by defrauding investors with his company.
▶ 0:40:37Sen. Warren: You turn him loose after he donated $1.8 million to a trump campaign fund. Three different ways to cheat investors. But there is one thing that all three have in common. Mr. atkins, did each of these corporate executives who defrauded american investors first get clemency from president trump, and then as the cherry on top with whipped cream, got all the s.e.c. Charges and investigations against them dropped?
▶ 0:41:05Mr. Atkins: Each one of those cases had particular aspects to them.
▶ 0:41:12Sen. Warren: I'm sure they had particular aspects, but the part I raised is did they all get clemency from president trump and then the s.e.c. Backed up -- backed off on all its independent investigations and charges? Is that accurate? Is that accurate?
▶ 0:41:27Mr. Atkins: If the president has pardoned someone or given clemency, it becomes very difficult to push forward.
▶ 0:41:36Sen. Warren: You still have civil actions against them. And you dropped them all. Is that right? I want to make sure.
▶ 0:41:42Mr. Atkins: We withdrew.
▶ 0:41:46Sen. Warren: Yes, you withdrew. These fraudsters stole millions of dollars from investors. They were convicted of fraud. But after trump granted them clemency, the s.e.c. Fell in line and dropped its pending cases. It is part of a broader pattern. Look at the crypto companies that donated a whopping $85 million to president trump's inauguration. They may have scammed investors and consumers, but once trump was sworn in, the s.e.c.
▶ 0:42:13Sen. Warren: Started dropping these cases like hot potatoes. Kracken donated a million dollars. Case dismissed. Coin base, case dismissed. Finance -- binance gave the trunk company stable coin a huge boost in a $2 billion deal. The case dismissed. As an independent investigation found, the s.e.c.
▶ 0:42:43Sen. Warren: No longer actively pursues any cases against firms with known trump ties. The agency backtracked in investigating every firm that has relationships with the trump family crypto business, or has donated to Mr. trump's political causes. Chair atkins, prove the outside investigators wrong. List the cases the s.e.c.
▶ 0:43:07Sen. Warren: Is still actively pursuing against crypto companies that have made big donations to donald trump or trump businesses.
▶ 0:43:14Mr. Atkins: Your premise I think is wrong.
▶ 0:43:19Sen. Warren: Just name the cases you are actively pursuing against people or against these giant crypto companies that made huge contributions to donald trump. Are there any? Can you name one? I will take one.
▶ 0:43:33Mr. Atkins: I don't know. I can't say which ones have cases.
▶ 0:43:37Sen. Warren: One? Just one?
▶ 0:43:41Mr. Atkins: I disagree with your premise.
▶ 0:43:47Sen. Warren: When they crush our economy and pull down retiree pension funds, it is going to be hard-working americans who pay the price. Billionaires over people. That is the trump way.
▶ 0:43:58Sen. Rounds: Mr. atkins, I'm going to give you an opportunity to answer the questions and correct perhaps some of the accusations that have been made here, particularly with regard to the president. Let me start with something, just looking back over your work here.
▶ 0:44:19Sen. Rounds: You made very clear that what you wanted to do in coming back in was to reverse the trend of the number of companies that were available for small investors to be able to get in and invest him with. In fact, you indicated that there were more than 7000 companies listed on the U.S.
▶ 0:44:37Sen. Rounds: Stock exchange back in the 1990's, from small-cap innovators to giants of the industry, and yet by the time you returned as chairman, the number had fallen by roughly 40%, meaning that small investors have fewer places to go to actually enjoy and create their own american dream.
▶ 0:44:57Sen. Rounds: So I come to this and I think what you are trying to do is to create an atmosphere in which small companies can grow and thrive, and not simply be the ones that are managed by private equity programs. Based upon that, it seems as though you are trying to bring companies back in the.
▶ 0:45:22Sen. Rounds: Part of it has to do with enforcement and the philosophy of the appropriate way to enforce rules and regulations that the s.e.c. Is responsible for, for creating and then enforcing and having oversight. Can you talk a little bit about your philosophy? Because I think that is critical at this point, to give you that opportunity.
▶ 0:45:44Mr. Atkins: Yes, I firmly believe that the law is the law, and that we have a duty, as senator warren said, to the investing public, to police our markets. I take that extremely seriously. Some of these cases that were dropped happened before I arrived.
▶ 0:46:09Mr. Atkins: So between inauguration day and -- >> say that again. Some of the cases who are accused of getting involved in had been dropped before you arrived? >> after inauguration. And in an effort by the commissioners to withdraw from things that they viewed as regulation through enforcement.
▶ 0:46:36Mr. Atkins: So these are mostly registration issues. Section five of the securities act. And that was a regulation through enforcement where the s.e.c. Said, come in. Just fill out a form on our website. Fill it in and talk to us about it. There was no effort to accommodate the new technologies in these new products that I would argue were not securities in the first place.
▶ 0:47:06Mr. Atkins: That is a changed attitude from s.e.c., and that accounts for most of those cases that were dropped. Seven of the crypto litigation dismissals of the nine that were dispensed with because of this registration issue. Under the trump administration, since the beginning of the administration a year ago, the s.e.c. Has brought about five crypto asset related cases.
▶ 0:47:36Mr. Atkins: I don't have that number here in front of me. Those are ongoing. Anyway, we are active in this area. Fraud is fraud. Some of these other stats, I don't know where they come from, but I take exception.
▶ 0:47:59Sen. Rounds: I think really important is artificial intelligence and its use. Under the biden administration, there was securities regulation used to achieve social goals often at the expense of small businesses. Thank you for your commitment to returning the s.e.c. To its core mission. The administration's 2025 ai action plan encourages the development of regulatory sandboxes at independent agencies, including the s.e.c.
▶ 0:48:30Sen. Rounds: This venue would allow s.e.c.-regulated entities such as investment advisers to test new ai tools under structured oversight. I have introduced legislation that would do just that. Bipartisan legislation. Do you believe that our legislation would give the s.e.c. The tools it needs to foster responsible ai innovation? Could it serve as a useful model as the s.e.c. Implements the ai action plan?
▶ 0:49:04Sen. Rounds: >> thank you, senator. I have not had the opportunity to review your plan. Happy to discuss it. The premise, I would agree with you very much. It would be very useful, in talking about innovation, to begin that at the s.e.c. Now come up with entrepreneurs in the sandbox-like environment that is time-limited, transparent, flexible, and based on investor protection.
▶ 0:49:34Sen. Rounds: All of those principles I think are important and allow people to try different things in a particular environment.
▶ 0:49:44Sen. Rounds: It's not going away, is it? Thank you, Mr. chairman.
▶ 0:49:50Sen. Tillis: I'm sure you saw me come in with mixed emotions.
▶ 0:49:55Chair Scott: Emotions were not mixed, though. [laughter]
▶ 0:50:02Sen. Tillis: I don't know if you have paid attention to some of my comments. I've been critical of some folks in the administration. You are not one of them. I am really glad that you are leading the s.e.c. I have a real quick question for you. I will submit some for the record. But I am trying to wrap my head around the rationale of at least four, maybe five state owned enterprises now that relate to ownership. You think about intel.
▶ 0:50:34Sen. Tillis: You think about U.S. steel. A couple of other companies, we have a stake that ranges from 10% to 15%. I understand the circumstances that got us there. I'm worried more about whether or not that raises the bar for upstarts at other businesses in that space, and when you have that level of ownership in U.S.
▶ 0:50:58Sen. Tillis: Government and you also have all the devices of supervision and oversight at those same companies, how is our ownership not the only vote that matters on a board?
▶ 0:51:11Mr. Atkins: Thank you, senator. Those particular cases, I am clearly familiar with the details as to the decision-making in the national security issues and whatnot. But, you know, ownership is the thing that really drives things in the united states, and competition is really important for all the firms here.
▶ 0:51:42Mr. Atkins: So having government -- I'm not sure that having government involvement necessarily means it is a golden key to success. You look at other government entities that might not be so --
▶ 0:51:58Sen. Tillis: I just worry. I did not mean to put you in a bind. You were the best person I could propose the question too. We have intel, almost a 10% stake. We have mp materials, 15% stake, rare earth minerals. We have lithium america as a 10% stake, and we have trilogy metals, a 10% stake.
▶ 0:52:28Sen. Tillis: Let's say that we had somebody who wanted to be with lithium america. What is the likelihood that anybody would take on that risk? I'm asking a general business question. If you know you have an 800 pound gorilla that not only has an equity stake, but has the entire regulatory resources behind it?
▶ 0:52:54Sen. Tillis: Just logically, if I were advising businesses again, which I may be doing in about 325 days, I would say, you know, before I go and try to take on big lithium, lithium america, trilogy materials, rare earth minerals, I may want to search another market until that settles down. I don't expect you to respond to it, but it is something that really is an artifact of 2025.
▶ 0:53:25Sen. Tillis: And I hope that the U.S. golden share -- I do not like the name of it because it sounds like a golden ticket, which sounds like their ticket to run a company if they want to. To me, it seems anti-free market.
▶ 0:53:40Sen. Tillis: If you could just opine on whether or not -- for the record, and only from your perspective, what would that do for a budding new company in the enterprise space if they have not got the 800 pound gorilla in the room? You don't have to answer now. I did not mean to catch you flat-footed, but thank you for your insight and being before the committee.
▶ 0:54:08Chair Scott: Sen. paul: -- senator alsobrooks, it would be your turn. Are you ready?
▶ 0:54:17Sen. Alsobrooks: I think I am ready. Thank you so much to chair scott and ranking member warren for holding today's hearing. Chairman atkins, my number one priority on the banking committee is pursuing policy that will create real economic opportunity. I want more of my constituents, quite frankly, not to live on the margins, but to be able to build generational wealth for themselves and their families. I'm not afraid to say this.
▶ 0:54:47Sen. Alsobrooks: I think it means access to capital, credit markets, and means robust investor protections. I want to briefly mention two topics surrounding the development of market structure, which I believe is really important. Young people are extremely interested in these technologies. I think about my daughter and all of her friends. We need to protect both consumers and our financial system by regulating.
▶ 0:55:16Sen. Alsobrooks: I speak for so many of my colleagues who wanted to get to a really good bipartisan product that protects investors and the integrity of our markets. And part of this process, like others have noted, means getting a full slate of democratic commissioners confirmed to the commission. There is no reason that this white house cannot nominate qualified individuals to the positions that safeguard our financial system.
▶ 0:55:42Sen. Alsobrooks: You have spoken at length, chair atkins, about tokenization, the technology behind converting ownership of traditional financial assets including securities on the block chain. As this technology develops, it is going to be really important that we assure the owners of tokenized securities have all the same rights as owners of traditional securities. This is vital for protecting investors and the capital markets that make us the envy of the world.
▶ 0:56:11Sen. Alsobrooks: Congress should play an important role here in providing guardrails and direction, and I would be grateful for your continued cooperation. Do I have your commitment in this regard?
▶ 0:56:25Mr. Atkins: Yes, senator, thank you very much. With current law, tokenized securities are securities, and we treat them as such. That is our firm position at the s.e.c., and I think our authority is clear, no matter how securities are recorded, whether it is old-fashioned paper certificates or whether
▶ 0:56:55Mr. Atkins: They are traded on chain as tokenized securities. I am happy to work with you and your colleagues to get you comfortable with that as you continue to work on market structure. That is down important precept, and I think that is clear.
▶ 0:57:15Sen. Alsobrooks: Thank you so much. Another issue is preserving state consumer investor protector laws. Maryland's regulator is at the front lines of protecting maryland investors from fraud and misrepresentation. Chair atkins, do you believe it is important to protect state consumer and investor protection laws that prohibit companies from lying to or misleading investors about their business dealings or their stock offerings?
▶ 0:57:43Mr. Atkins: As far as I know, generally -- I don't know about the specific names you are talking about. Generally, the securities acts are very careful not to preempt states with regards to consumer issues. I cannot think of an exception. I think that is a strong piece of federalism as an approach.
▶ 0:58:16Sen. Alsobrooks: Maryland is one of the most entrepreneurial states in the country. We have about 112 small businesses for every 1000 residents, and this puts us at the top tier nationally. We are home to world-class research institutions and more federal research labs than any other state, including fda and nasa. But innovation cannot scale without capital. America ranks fifth in the nation for -- maryland ranks fifth for venture capital investment.
▶ 0:58:46Sen. Alsobrooks: How do we lower, in your opinion, barriers for emerging and first-time founders to access without compromising investor protections?
▶ 0:59:00Mr. Atkins: That is a good issue and I am intent on trying to find some solutions to help with that, because small businesses are the engine of growth for jobs in this country. It has always been that way. What we want to do by fostering the ability for capital to find its way to those entrepreneurs, so they can build their business -- part of it -- I talk about making ipo's great again.
▶ 0:59:29Mr. Atkins: In the old days, back when I was a young lawyer in new york, in the mid-1980's, microsoft and apple and all the big companies like dat tapped into the public markets to build their equipment, and came up with r&d to market their products and whatnot.
▶ 0:59:52Mr. Atkins: Now, it has become so complicated and costly, it is out of reach for a lot of smaller companies to go that route, so they stay with venture capital and private equity for, it could be decades. We are trying to make it friendlier as an environment for smaller companies.
▶ 1:00:13Sen. Alsobrooks: Thank you. I yelled.
▶ 1:00:17Sen. Banks: Chairman atkins, millions of americans are looking at -- or handing over their social security numbers to banking apps tied to china. Senator tuberville and I have written you and your predecessor regarding chinese broker-dealers with deep ties to the prc that pose clear risk to U.S. user data. We know that china does not play by our rules. What steps has the s.e.c.
▶ 1:00:47Sen. Banks: Taken to delist chinese companies from U.S. markets and resend chinese owned broker-dealer licenses to operate in the U.S.?
▶ 1:00:58Mr. Atkins: We have limited authority under the securities laws. We cannot delist a company if it has not kept its filings current, for example, and we can stop trading in a company where there is a sign of manipulative activity in the market. But we have been working with china-related companies.
▶ 1:01:24Mr. Atkins: We have a task force set up in our enforcement division where we are monitoring trade, and we have shut down trading in 13 companies on the nasdaq, and more recently one on the new york stock exchange, with a company after there was a sign of a pump and dump scheme. The company came out and said we do not have news that should justify this increase. The price was like a meme stock.
▶ 1:01:55Mr. Atkins: We stopped trading on that company for a day. The new york stock exchange stepped in and is doing an investigation. So our remedies are limited in this, but we are working on it.
▶ 1:02:14Sen. Banks: We so the underwriting of ali baba, which aided military actions against targets in the U.S. what is the potential -- potential impact to america's national security?
▶ 1:02:35Mr. Atkins: We have taken steps to -- for example, we came out with a concept release regarding private issuers, because many companies from china, especially the variable interest types, are operating in china or east asia, and are headquartered or run out of china, inc.
▶ 1:03:01Mr. Atkins: In the caribbean, and then are listed as a primary market here in the united states. That is why we have come out with this release to ask questions and come up with a remedy to focus on companies that are taking advantage of our more accommodating stance for issuers listed in the united
▶ 1:03:31Mr. Atkins: States. But if there is not a strict regime at home for regulation, that is where there is opportunity to evade some of our --
▶ 1:03:43Sen. Banks: China has taken steps to crack down on western accounting firms that offer auditing services to chinese companies, as you know. Chinese communist party authorities have rated the beijing headquarters of major western firms and bullied them with scam investigations. They have put enormous pressure on chinese companies to employ chinese auditors, not american or british firms.
▶ 1:04:05Sen. Banks: Do you think american investors should trust the financial reports they get on a chinese company if the auditors preparing that report answer to the chinese communist party?
▶ 1:04:15Mr. Atkins: I can't say blanket lee -- blanketly, but we have sworn in new board members for the public company category, and that is one of the main issues they will be focusing on.
▶ 1:04:31Sen. Banks: How is the s.e.c. Assuring that american investors are not being tricked into putting their money into chinese companies that ossify their financial information?
▶ 1:04:40Mr. Atkins: The antifraud enforcement and part of the security group -- we are focused on trying to root out any sort of type of fraudulent activity. It is not just with chinese companies or prc companies.
▶ 1:05:02Mr. Atkins: In the united states, the instances of using ai to help disguise phone calls and voices online is a real bane for normal people's existence right now.
▶ 1:05:15Sen. Banks: Thank you. My time is expired. I will submit other questions for the record.
▶ 1:05:20Sen. Reed: Welcome, Mr. chairman. I believe you would agree that the s.e.c.'s job is to recover investor money and impose penalties when security laws are violated. I also would think you would agree that securities fraud and other violations of security laws are still too prevalent. I raise these points because under your watch s.e.c.
▶ 1:05:50Sen. Reed: Enforcement has begun to disappear before our eyes. Between 2024, your predecessor's leadership, and 2025, staffing at the s.e.c. Has been cut 17%, with huge cuts to the enforcement division. The enforcement budget has been cut in half, going from $1.4 billion to $731 million. Not surprisingly, monetary settlements declined 45%.
▶ 1:06:23Sen. Reed: Falling to $808 million, down from $1.9 billion in the previous year. Disgorgement, the money that you require violators to pay, to repay to victims -- that has declined to $108 million, down from a previous year of 6 billion dollars. That is a 98% drop. It is the lowest in the modern era by far.
▶ 1:06:52Sen. Reed: This clearly indicates to me that the s.e.c. Is not dedicating the necessary resources to fighting for investor protection. The last time the s.e.c. Was shrinking staff and resources on this scale, it missed bernie made off's fraud, and the practices on wall street that led to the great recession, and I believe we are going down the same path.
▶ 1:07:19Sen. Reed: Will you commit to restoring the resources to the enforcement division and enforce the laws, not only to protect individual consumers, but the markets?
▶ 1:07:30Mr. Atkins: I'm not sure where you get your stats, so I don't agree with them.
▶ 1:07:36Sen. Reed: The data regarding enforcement is from your own agency financial report, published on january 16. The data regarding penalties and disgorgement was from -- from private sector analysis from cornerstone research and the law firm of paul weiss. We need to rely on these reports because your agency, the s.e.c., has not published the enforcement division report for fy 25 which usually lands in december.
▶ 1:08:06Sen. Reed: So you are either deliberately obscuring what you are trying to do, or -- when are you going to publish?
▶ 1:08:11Mr. Atkins: We had a 43 day and 43 nights shut that really threw a lot of our processes off. We are about to come out with an enforcement in the next few weeks. We will see. I do not know. But a lot of what you are talking about as far as penalties go were never collected. It is kind of like a ghost sort of thing where they are assessed but not collected.
▶ 1:08:42Mr. Atkins: We are actively enforcing the rules. We have a lot of these people left voluntarily or through buyouts before I arrived at the s.e.c., so I am looking at our numbers and I think we have very good -- a very good group of people in enforcement.
▶ 1:09:03Sen. Reed: You have deliberately cut the enforcement. That is part of the doge operation. It plays into the administration planned to weaken controls on capital in the united states.
▶ 1:09:15Mr. Atkins: I disagree. It happened before I got there.
▶ 1:09:19Sen. Reed: What have you done since you got there?
▶ 1:09:22Mr. Atkins: We have been working actively to look at our budget.
▶ 1:09:28Sen. Reed: What do you expect to be the number of people in the enforcement division in the next two or three months? Are you going to start hiring again?
▶ 1:09:37Mr. Atkins: We have gaps around in different divisions, so we will fill that. We have people retire. They had been there for a while. This provides opportunity for younger people --
▶ 1:09:49Sen. Reed: They retired because doge was running for the s.e.c. Like any other agency.
▶ 1:09:54Mr. Atkins: I disagree.
▶ 1:09:58Sen. Reed: Why would people at the prime of their careers retire? I think they felt that the direction was something they did not want to participate in, which is sitting around as americans are exploited and as the markets decline.
▶ 1:10:13Mr. Atkins: People have other types of opportunities. I talked to many of the people who retired, many of whom I knew from my former time at the s.e.c. I think a blanket painted that way is inaccurate.
▶ 1:10:27Chair Scott: Your time is up. Do you want to ask a question for the record?
▶ 1:10:33Sen. Reed: Absolutely. The synopsis is I think we are headed down the path to financial disaster. I know for the record senator warner and I are the only two members on this committee that were here during the writing of dodd-frank to put corrections in place. The ranking member was in the administration helping us. We saw this coming.
▶ 1:10:58Chair Scott: Thank you. Senator hagerty.
▶ 1:11:04Sen. Hagerty: Great to see you. Audrey, great to see you here. Chairman atkins, before I start my questions, I might ask you to take a minute and explain what the impact has been for the three day shutdown on the s.e.c. Operations. -- the 43 day shutdown on s.e.c. Operations.
▶ 1:11:22Mr. Atkins: It's set us back. 43 days is a long time to have people at home and have them come back and get started back up again. In 43 days, it is a big chunk, more than two months as far as being shut down. That has thrown off a lot of our work on investigations.
▶ 1:11:49Mr. Atkins: A number of people could continue under the rules, but for a while our rulemaking and the normal operations like coming out with enforcement data and review of fiscal year 2025 is yet to be done.
▶ 1:12:12Sen. Hagerty: Thank you. There is something I've wanted to talk to about on the public record for some time. It has to do with the proxy advisory firms. If you think about it, every day, americans are investing their 401(k)s, their pensions, but they don't vote the shares for those funds. The money managers don't even vote the shares. Those shares are, in effect, being dictated by a duopoly of foreign-owned enterprises known as proxy advisory boards.
▶ 1:12:43Sen. Hagerty: And this duopoly has created massive leverage here in america. What are they doing with the massive leverage? They are using it to backdoor regulations that we would never agree to, that we would not regulate. Consider say on pay. The say on pay should happen once every three years. The proxy advisory firms decided they wanted to happen once a year.
▶ 1:13:14Sen. Hagerty: If they don't do it, they suffer the consequences of the regulations. I served on a new york stock exchange board that was attacked by one of those advisory firms. Low and behold, the week after the attack, the call from the advisory says that the consulting division could help us out. After spending fees on the consulting division, suddenly all was all right. The conflict of interest and abuse of power is very clear.
▶ 1:13:42Sen. Hagerty: Now, we are seeing another example. The s.e.c. Recently clarified when companies were able to include -- not to leave that alone, iss has threatened to come in and recommend voting against the directors. For some reason, iss does not like the decision on which shareholder proposals to include. Far beyond what the s.e.c. Has been calling for. The pattern here is clear. Congress and the s.e.c.
▶ 1:14:12Sen. Hagerty: Set the rules, and the proxy cartel does whatever they want to backdoor alternatives to those rules. What is the result for the american public? It increases compliance cost, diminishes capital formation, and diminishes the effectiveness of going public here in america.
▶ 1:14:30Sen. Hagerty: It makes everyday americans suffer the financial consequences of ideologically driven and economically unfounded decisions that are resulting from these malicious proxy advisory recommendations. Chairman atkins, feel -- what ce steps could be taken to prevent these proxy advisors from using market dominance to become defective regulators in the U.S. market?
▶ 1:14:52Mr. Atkins: I don't want to prejudge anything because we are actively looking at this area. There is an executive order that we are actively addressing and reviewing all of the regulations in this area in that regard, collaborating with the department of labor and the federal trade commission as well.
▶ 1:15:18Mr. Atkins: I share your concerns in this respect and in many ways, these proxy advisory firms are a symptom of a problem underlying of shareholder proposals being weaponized by social activist shareholders that have special access to grind. You have spoken about this rebels in the past.
▶ 1:15:48Mr. Atkins: We will be looking at this from all different aspects and that is part of the goal have to make.
▶ 1:15:56Sen. Hagerty: I encourage you to take a hard look and thank you for taking a broad look across the entire government. The effect of these organizations. Since june of last year, I have been calling on our antitrust regulators to take a very hard look at this foreign-owned duopoly the market dominance there exercising to damage U.S. markets.
▶ 1:16:16Chair Scott: Senator warner.
▶ 1:16:19Sen. Warner: Before I dive back into the crypto world, senator alsobrooks raising questions I want to touch on another area which is a I. We note ai is going to transform everything. Markets, banking, both at the banker and dealer level but also the retail level.
▶ 1:16:44Sen. Warner: One thing I am concerned about is where the ai tools can self execute trades without any human input. I wonder if we don't have some guardrails here, are people going to be able to say, well, I ai agent did something that was clearly illegal or bad but I didn't -- that tool, it was not me as an individual or firm read
▶ 1:17:17Sen. Warner: First, do you think banks and broker-dealers will take it up a level, have appropriate guardrails in place today to make sure that that ai agent doesn't commit malfeasance or something illegal?
▶ 1:17:33Mr. Atkins: Those are very good questions and I share your concern. This is a new technology. People are still experimenting with it. I can't really say what is going on with respect to individual broker-dealers or anything else, but I do agree that we can't allow that --.
▶ 1:18:00Sen. Warner: I think there would be a lot of bipartisan interest in this. When we take addend of the retail level, I want to make sure that the same fair dealing and conflict of interest standards that exist for the retail investor would also apply to that ai agent who is acting on behalf of the retail investor.
▶ 1:18:19Mr. Atkins: I think that is important. Whichever way this technology grows and changes, I think we have to be very -- we have to be attuned to those potential problems. So even in this last discussion about proxies and whatnot, harvested, we have seen proxy advisory firms, starting to rely on ai rather than hiring out, farming out to third-party advisors.
▶ 1:18:49Sen. Warner: Was at this week or last week, I think one of the new tools came out and all the wealth management firms took a huge hit on the marketplace because they thought ai was going to take over. This is moving so quickly, it would be great if we could get a little ahead of it and not trying to chase it after the fact.
▶ 1:19:07Mr. Atkins: We have a special task force at the sec who is looking at ai for tools for us, for example, at the sec with respect to enforcement, reviews, and things like that.
▶ 1:19:27Sen. Warner: I will jump back into the old pool now. Around crypto. For all that are watching, we want to get this done. It has got to be done safely. Pushing folks like senator blunt rochester, her work on this, senator alsobrooks, a big working bipartisan group on this . And at the chairman's leadership.
▶ 1:19:48Sen. Warner: What I do feel like on -- there still is -- we have to make sure we don't set up a regime that allows bad actors or carveout enforcement something senator cortez masto is working on.
▶ 1:20:04Sen. Warner: Since you have addressed the fact stocks and stock is a stock is a stock, how are we thinking about this -- I know in a recent speech he said other forms of unchained software systems will be part of our security submarkets. And not drowned out by unnecessary regulation. I hope that unnecessary regulation would not include things like email rules?
▶ 1:20:29Mr. Atkins: That is vital. Maybe that context was more like looking at the potential for smart contracts. There are already developments out there to incorporate into the token itself aml and bsa sort of concerns.
▶ 1:20:56Mr. Atkins: The block chain is one example of that where people are experimenting with things that are embedded.
▶ 1:21:05Sen. Warner: We are trying to get technical support from you, how we deal with the front end. There are lots of expertise we definitely want to get this right because I think getting it wrong would be a disaster.
▶ 1:21:18Chair Scott: Senator moreno.
▶ 1:21:23Sen. Moreno: I find it a little troubling that during this entire hearing you haven't thanked gary gensler for setting such a low bar for competence. So thank you for doing this job. I think anybody who watched the biden years saw the sec was actually completely rogue agency. Thank you for bringing credibility back to the agency and thank you for your team for working so hard to make that happen.
▶ 1:21:53Sen. Moreno: You are way in the ditch when it came to credibility but what you've done in the short term has made a remarkable difference. Let's talk about some fundamental issues I think we can lay this out the right way. How do you see the role of your team, you and your team, in terms of functioning? Do you view yourself as enforcing law or do you view yourselves as somebody who creates laws through enforcement?
▶ 1:22:17Mr. Atkins: We should be enforcing the law and.
▶ 1:22:25Sen. Moreno: The reality is, this is not new technology. My son introduced me to the crypto world when he was 14 and he is now 28. So a long time ago. Congress has failed miserably in creating laws to give you the proper guardrails to say this is allowed and this is not allowed.
▶ 1:22:47Sen. Moreno: How important is it for us to finally get this done, actually give you a regulatory framework that allows you to decide how to enforce laws and keep bad actors out and make certain good actors are given the room they need to develop and innovate here in america?
▶ 1:23:05Mr. Atkins: We do need I believe a good law coming out of congress and be enacted that would undergird efforts the sec has pretty broad authority to interpret and to have exemptions under various securities laws.
▶ 1:23:29Mr. Atkins: So that I think has been the missing link, frankly, over the last years where the sec has not made really any attempt to accommodate this technology.
▶ 1:23:43Mr. Atkins: So that has created such a gap between the possible and what people are actually achieved because the sec -- I compare it to the ostrich with the head in the state and secondly, just the regulation through enforcement you saying you know you can interpret the security flaws as well as we can, but then going after people with enforcement division.
▶ 1:24:12Mr. Atkins: I think that is not the way for a regulator to operate. Should proceed with the questions are in the industry and then address those. We have many tools to do it. Round tables, all sorts of things like that. It is the way a competent regulator should be working.
▶ 1:24:34Sen. Moreno: When you hear the exchange about less enforcement actions as necessarily a bad thing, the reality is, again, not to beat us to death, but for those who suffer through your gensler's reign of terror, he was a man eating absolute devastating lien. Enforcement actions were basically enforcement -- regulation through enforcement. You had completely arbitrary, capricious views of what should happen. What you're doing this following laws.
▶ 1:25:04Sen. Moreno: I urge my colleagues, let us get this bill across the finish line. The staff has spent thousands -- literally thousands of hours getting this done and I think it was long overdue. One question about something a lot of people, including myself, although no longer in this space because I do myself of all digital currencies -- by the way, a low number. What do you think about self custody? Tell me how you view that from your perspective.
▶ 1:25:35Sen. Moreno: Should I be able to be a custodian of my own digital assets if I ever were to get back into that space?
▶ 1:25:39Mr. Atkins: I believe so. I think you're right of your property should determine where it should be held. The differences perhaps in trading, we have to make sure things don't become vulcanized, liquidity that is nmi's.
▶ 1:26:02Mr. Atkins: For the national market system to work and to provide the engine that we have currently will take -- will have to accommodate all sorts of different ways of doing business.
▶ 1:26:18Sen. Moreno: Thank you for being in this role and thank you for rebuilding the credibility of the sec. It is very needed.
▶ 1:26:22Chair Scott: Senator van hollen.
▶ 1:26:27Sen. Van Hollen: Thank you. I have heard a couple of references to the impact of the shutdown and none of us want to see a shut down. I would suggest the 20 million americans who today have lost access to tax credits to help them purchase insurance are the ones who are suffering the most as a result of the negligence of this congress.
▶ 1:26:49Sen. Van Hollen: Let me say with respect to proxy advisory firms and individuals, I do sometimes find it extraordinary that some folks want to interfere in my ability, for example, to contract with whoever I want to provide me with advice. Why would we want interfere with my right to contract?
▶ 1:27:12Mr. Atkins: I don't think people are worried about or focused on interfering with the right to contract, but the reason why these sorts of facilities, firms have come about is anomalies with sec regulations that have proven to weaponized shareholder proposals.
▶ 1:27:39Sen. Van Hollen: I find it a bit of the nanny state. People, why not let the market work? Let me ask you this. I think you would agree that the sec benefits from having a diversity of views among its commissioners. Would you agree with that?
▶ 1:27:56Mr. Atkins: Yes. Simple van hollen at this moment in time, the trump administration has not reached out has traditionally has been done, including in the first trump administration to democratic leadership here in the senate to ask for appointments to fill the seats. You are 3-0 right now in terms of republican appointees to democrat appointees?
▶ 1:28:24Mr. Atkins: Three commissioners and --.
▶ 1:28:29Sen. Van Hollen: Could you call over the white house, would you be willing to commit to calling over to the white house and asking them to fulfill their traditional responsibility of reaching out so we can have a full contingent?
▶ 1:28:41Mr. Atkins: It takes two to tango always but with respect to nominees and -- I have been now at the sec three times and so I have worked for republican chairman and democrat chairman and was there with other --.
▶ 1:29:02Sen. Van Hollen: I know you have. That is why this is an unusual situation where we are 3-0 and where there is no indication that the white house is reaching out. Again, I want to reference the trump1 administration because I followed the traditional approach which is to work with democrats in the senate to fill these positions. Yes, it takes two to tango but the white house has not reached out.
▶ 1:29:30Sen. Van Hollen: I am asking you if you would encourage the white house to do its job and reach out in this regard? Mr. atkins: I have been in public and private supportive of having a full complement of commissioners. I think that helps with debates and everything else.
▶ 1:29:50Sen. Van Hollen: Good, that we are on the same page. You are a member of the financial stability oversight council and recently you indicated and other set your "in agreement that non-bank financial institutions don't pose systemic risk to our markets." I think you'll recall that outside the gse's, one of the biggest taxpayer bailout beneficiaries was a non-bank.
▶ 1:30:21Sen. Van Hollen: You recall that, right? Mr.
▶ 1:30:23Atkins: Yes.
▶ 1:30:26Sen. Van Hollen: It was aig? So isn't it true that non-bank entities can pose systemic risk to our economy. We have already seen it once. Doesn't it seem arbitrary to say , that is not possible and you are not going to look at the whole universe and environment out there and see if non-bank actors might pose systemic risk? There are ongoing issues right now the people are keeping an eye on, different sectors.
▶ 1:31:00Sen. Van Hollen: I guess this is a matter of principle. Why would you want to start the analysis by saying non-bank actors can't pose a systemic risk?
▶ 1:31:08Mr. Atkins: I don't know we've said that.
▶ 1:31:12Sen. Van Hollen: I am reading the statement you made.
▶ 1:31:13Mr. Atkins: As far as the non-bank financial institutions, we are in agreement with the fed and the treasury and other members of the financial board internationally that have not thank financial institutions don't pose systemic risk -- that non-bank financial institutions don't pose risk.
▶ 1:31:38Sen. Van Hollen: It appeared from the minutes that you were indicating that you are going to take that analysis off the table. It is simply you're saying at this moment --.
▶ 1:31:48Chair Scott: Senator mccormick?
▶ 1:31:51Sen. Mccormick: Thank you. The trump administration's prioritized preserving the united states a believer in financial innovations and enabling financial firms to offer new innovative products while also ensuring robust consumer protection. Production markets are in area where there appears to be tremendous opportunity come often price discovery and additional tools to manage risk.
▶ 1:32:18Sen. Mccormick: I know this falls primarily in the cmt see jurisdiction rated but how is the sec working with the cftc provide greater clarity for U.S. market participants?
▶ 1:32:32Mr. Atkins: That is a huge issue we are focused on and so I am happy to say the chairman of the cftc, great guy, very competent, and he was in my office so I can surely say that the two agencies will be harmonized more than ever before. So we are meeting once a week to do that and with our staffs.
▶ 1:33:03Mr. Atkins: That is a very important aspect of trying to harmonize. Prediction markets are exactly one thing where there is overlapping jurisdiction potentially, and you are right, it is mostly at least currently, on the safety seaside. We need to be harmonized in the way we are addressing it.
▶ 1:33:23Sen. Mccormick: Do you see any rulemaking on the immediate horizon? Any need for legislation in those areas?
▶ 1:33:30Mr. Atkins: We will see what you all come up with here with respect to clarity. Again, I think we have enough authority as I said before, security is a security regardless how it is. Some of the nuance with prediction markets and the products and wording and what exactly is being done. Anyway, that just points up because of the potential gaps the sec and cftc need to be very well internet on that.
▶ 1:34:02Sen. Mccormick: Moving at a blistering pace including digital assets, I commend you on your efforts to provide the necessary rules and safeguards for digital assets while we continue to hopefully come forward with legislation on the clarity act. You have spoken about your support for super apps. Which would allow for seamless side-by-side trading of different asset classes. For example, user on one platform could buy or sell crypto alongside traditional stocks while accessing other financial services.
▶ 1:34:32Sen. Mccormick: Would you outline for us how the super act -- super apps would increase global competitiveness for registered financial firms and the consumer protection principles that should guide the approach a to superpps?
▶ 1:34:47Mr. Atkins: It comes back to harmonization with the cftc. Here we have two agencies that should be very well knit together and so there are no gaps as a markets have evolved in the last 40 years and there are actors or market participants in both markets -- futures and cash markets.
▶ 1:35:16Mr. Atkins: It is incumbent on us to help make this as a fishing for them as possible so that they can compete effectively with foreign or other source of firms in other jurisdictions that will have dichotomy as between futures regulator and cash markets regulator.
▶ 1:35:37Mr. Atkins: That is our goal, to make it efficient from anywherein from cross marging and portfolio margin ning to just what sort of medallion you need to do x, y, z. The more harmonized we are the better, the more efficient.
▶ 1:35:55Sen. Mccormick: A final question to squeeze in on your focus on making ipos great again, you discussed how raising capital through ipo should not only be a privilege for larger companies is a number of ipos -- could you discuss the broader impact on markets and the economy when a handful of companies dominate the s&p 500's market cap?
▶ 1:36:21Mr. Atkins: We in the U.S. account for about half the total world's capitalization and now that is on the public markets and now that is concentrated on relatively fewer companies and even the magnificent seven or whatever number we have these days.
▶ 1:36:40Mr. Atkins: The more diversity that we can get into the public markets, I think the better because, again, the people are harmed are the folks -- average investors who are not allowed to diversify into the private markets. Can suffer because it is much more concentrated than public.
▶ 1:37:01Sen. Mccormick: Thank you.
▶ 1:37:01Chair Scott: Senator warnock.
▶ 1:37:05Sen. Warnock: Thank you. I want to reiterate some of the concerns raised by my colleague senator van hollen. Congress established bipartisan commissions to incorporate dissenting viewpoints and to moderate rulemaking, ensuring fun rules are durable. That they last from administration to administration. This helps provide a level of regulatory certainty.
▶ 1:37:34Sen. Warnock: Since no one likes it when policies go back and forth between administration, that is not helpful to anybody involved. Chet atkins, welcome. If the next president is a democrat in this regard, I'm thinking through practical implications, are there specific rules that the sec is working on that you hope will endure or do you intend for all of them to be immediately scrapped and rewritten after your term ends?
▶ 1:38:02Mr. Atkins: Absolutely, we want to have things that endure. Especially now here on the crypto side, what we are doing and what we will be doing in the next couple of years will set the pace regeneration. That is why I'm looking forward to the an active from congress.
▶ 1:38:25Mr. Atkins: I will work with whomever the president appoints, other commissioners at the fcc and the one commissioner who just left -- I tasked her with doing -- focusing on one aspect of ouralj process in general with rules. I can work with all sorts of people across the aisle.
▶ 1:38:48Sen. Warnock: It is good to know you support having a bipartisan commission. I don't want to put words in your mouth, that is fair.
▶ 1:38:55Mr. Atkins: Whomever --.
▶ 1:39:00Sen. Warnock: I am asking because we are in the midst of market structure legislation right now. As we work through all of these ideas in a way that makes sense for the marketplace and durable, ways that are durable provokes of that industry, I think you could get -- you could get bipartisan support behind many of your ideas.
▶ 1:39:32Sen. Warnock: But unfortunately, democrats have been locked out of the process. Do you agree that incorporating dissenting viewpoints at the commissioner level would help moderate rulemakings and ensure they last beyond this administration, making the sec a better, more trusted and consistent financial regulator?
▶ 1:39:52Mr. Atkins: I hope what we are working on and can receive affirmation from all sides. We should not have a ping-pong back and forth over the years. I see how you even have bipartisan commissions where if somebody is hell-bent on doing something, the last administration, overwriting doesn't necessarily endure braid to your point, I think there is a benefit to having all sorts of viewpoints but I am happy to
▶ 1:40:23Mr. Atkins: Work with whomever.
▶ 1:40:23Sen. Warnock: Welcoming the president has only been appointing republican commissioners. That is a real problem for the work we are in the midst of right now, which is deeply consequential. Frankly, it is unhelpful. For us to have this kind of partisan approach at the commissioner level. So this has implications for work we're doing right now. This is not just some kind of political argument.
▶ 1:40:56Sen. Warnock: And so this is why I am pushing you on that question. I hope you will advocate to the white house the importance of putting democrats on the commission as an important part of actually moving not only market structure legislation but a whole range of issues that need to be addressed moving forward.
▶ 1:41:16Sen. Warnock: It has been reported the sec has seen staffing reduction of at least 15%, more than 600 employees, with key staff leaving the agency and legal affairs, investment management, and trading market division. I understand robust staffing alone does not necessarily result in a fair and robust enforcement of security laws. But you do need capacity. Do you believe the sec has adequate enforcement staffing and produce to fully protect investors?
▶ 1:41:45Mr. Atkins: I think we do, senator. The people who have left, that was before I arrived at the sec. They took volunteer retirements and buyouts and by definition they had been there a number of years. So what actually is salutary about this, it helps younger folks rise up in the ranks. There is always a brain drain --.
▶ 1:42:15Sen. Warnock: We have seen a reduction, not just a generational change. We have seen a huge reduction in the size of the workforce.
▶ 1:42:21Chair Scott: Senator britt.
▶ 1:42:25Sen. Britt: Chairman atkins, it is great to see you. Appreciate you being here today. There's been a lot of discussion on digital assets and other things and I just want to say how much I appreciate your work to embrace technology and industry and innovation and how we do that well on our shores. The new and measured perspective that you have brought to the agency is also refreshing, particularly compared to your predecessor.
▶ 1:42:52Sen. Britt: I look forward to continuing to work with you and the committee to ensure the U.S. remains the global leader in the crypto space. I wanted to just ask a couple of questions, a follow up on a conversation we had at your confirmation about cat. I've highlighted numerous times the serious privacy and security risk posed by cat and from my perspective and potentially constitutionally, the concerns that are there.
▶ 1:43:22Sen. Britt: I am very encouraged under your leadership that the sec has taken steps to fix some of these issues, including reducing the enormous cost and stopping the collection of consumers personally identifiable information. I do worry that by the sec just using the exemptive relief that these changes could potentially be reversed by a future administration. Like under chair gensler that does not take consumer data privacy or cost savings.
▶ 1:43:52Sen. Britt: Can you speak to this and how we can implement long-term structural changes?
▶ 1:43:56Mr. Atkins: Thank you. The problem with consolidated auto trail, basically from the beginning, as lack of clear roadmap for what it was to become and what attributes it had. It is like a christmas tree, all bubbles got added to it over the years without a lot of necessarily good management planning.
▶ 1:44:23Mr. Atkins: I think that is a problem with the agent, the sec and working with sros. When I first got to the sec, called together the sro's teams and told him this is not going to be -- it is not one to be business as usual, that we need to cut the cost down by under $100 million a year.
▶ 1:44:50Mr. Atkins: We have to address some of these really long-standing issues about the constitutionality and protection of investor data. We are actively working on that and I am happy to say the cost has come down. So we still have a number of issues to work out. We will be engaging in rulemaking on this eventually to get this right sized. It is a real critical issue.
▶ 1:45:20Mr. Atkins: But we have blue sheets that don't necessarily exist anymore and so we have issues there that we need to figure out what will replace that.
▶ 1:45:33Sen. Britt: What is the time you see for that?
▶ 1:45:36Mr. Atkins: It is critical, so hoping this year that we can address a lot of this. It is just a matter of rulemaking and.
▶ 1:45:47Sen. Britt: I appreciate you are on tailored regulation. I discussed this with sec. Bessent last week. When our agencies properly calibrate regulation and focus on actual serial risk rather than hypotheticals, it ensures that supervision is grounded in economic reality rather than subjective ideology. I would assume you agree with me on that.
▶ 1:46:12Sen. Britt: I know you have mentioned a plan to target what you have called " information overload." can you speak to that and give me a little bit more detail on your thoughts there?
▶ 1:46:23Mr. Atkins: One of the main principles of securities disclosure was articulated very well by thurgood marshall back in 1976 running for the court where he said the disclosure needs to be grounded in materiality.
▶ 1:46:44Mr. Atkins: Meaning for the reasonable investor, what is essential for that person to know to buy, sell, hold or about his investments -- vote his investments? If you don't have that grounding, there is a danger of information overload just avalanche of trivial information.
▶ 1:47:06Mr. Atkins: So here with this entergy of 10k annual report weighing in at almost 1000 pages, that is an example of how things I think have gotten way out of whack and we have to address it.
▶ 1:47:20Sen. Britt: I am out of time but have a couple more questions I will submit for the record.
▶ 1:47:25Chair Scott: The very patient senator blunt rochester.
▶ 1:47:32Sen. Blunt Rochester: Thank you for being with us today. I want to focus my questions on insider trading and insider self-dealing. Something I appreciate you have taken very seriously. I have a series of yes or no questions. They should go pretty quickly. Over time, congress has provided additional authorities to the sec to police insider trading above and beyond general antifraud authority.
▶ 1:48:03Sen. Blunt Rochester: Correct?
▶ 1:48:03Mr. Atkins: Yes.
▶ 1:48:08Sen. Blunt Rochester: The sec's duty based insider regime prohibits conduct by people who have confidential information or control. For example, telling a friend when the trade. Correct?
▶ 1:48:21Mr. Atkins: Yeah, all of this is very circumstantial facts.
▶ 1:48:30Sen. Blunt Rochester: I think that is why the trading rules focus on insider conduct, who is trading and what they know. Just like the case that you brought in august 2025 against three individuals, one being an executive of an investor communications firm who advised biotech and pharmaceutical companies and his two friends. I think I read an article where there were envelopes of cash and everything.
▶ 1:48:55Sen. Blunt Rochester: Just to confirm again, this is really about who is trading and what they know and making sure that we are doing things on the up and up read would you say that is correct?
▶ 1:49:10Mr. Atkins: In general. It depends -- there are a lot of things affects and circumstances.
▶ 1:49:17Sen. Blunt Rochester: But the focus is insider trading, conduct. The sec forces those rules even if the tradable asset in question is not the underlying security such as equity-based derivatives?
▶ 1:49:27Mr. Atkins: Well, there has to be an -- the cftc otherwise has analogous permission so it is in their jurisdiction. It does depend on whether it is security --.
▶ 1:49:47Sen. Blunt Rochester: So the risk of insider abuse doesn't change just because --.
▶ 1:49:53Mr. Atkins: It depends on the law. Different markets have different standards.
▶ 1:49:59Sen. Blunt Rochester: So there's been a lot of discussion about market structure because this committee's is working on that issue right now and I want to shift specifically to crypto as it relates to this. In many crypto markets, founders or insiders can exert control or otherwise have confidential information on token supply, the schedule of token releases, governance changes, or major technical decisions, especially before public trading.
▶ 1:50:32Sen. Blunt Rochester: You would say that is correct?
▶ 1:50:34Mr. Atkins: I guess. It depends on the instrument and the token.
▶ 1:50:39Sen. Blunt Rochester: I know it kind of depends, but all in all, this is kind of the way it works. Case-by-case, this does happen, correct?
▶ 1:50:50Mr. Atkins: It could.
▶ 1:50:52Sen. Blunt Rochester: Today I think it is insider trading or self-dealing, regardless of asset classification, by someone with confidential information or insider control harmful to market integrity and investors?
▶ 1:51:08Mr. Atkins: We want to make sure the markets are transparent and whatnot.
▶ 1:51:16Sen. Blunt Rochester: These are basic simple questions. What I'm trying to get at is that to me, insider trading is bad. It shouldn't happen anywhere. I think we agree on that, right?
▶ 1:51:32Mr. Atkins: It depends -- the futures markets, it is kind of --.
▶ 1:51:40Sen. Blunt Rochester: But the concept of insider trading, this is something you are against, right?
▶ 1:51:46Mr. Atkins: On the security's markets, yes.
▶ 1:51:49Sen. Blunt Rochester: This did not go the way I thought it was going to go because I thought these were sort of like basic all of us agree insider trading is bad and wrong. Even the case I referenced that you did the complaint against, this was like a guy giving his friends tips and in the passing him envelopes of cash.
▶ 1:52:09Sen. Blunt Rochester: To me, what I think for our committee is going to be important as we look at something as consequential as market structure is that we are also paying attention to making sure that people don't have this self-dealing or insider trading. I'm going to yield back to the chairman. Thank you for your presence here. I look forward to the continued work.
▶ 1:52:33Chair Scott: Senator ricketts.
▶ 1:52:37Sen. Ricketts: Thank you for being here. The united states has the strongest and most trusted capital markets in the world and that did not happen by accident. It happened because we have a system that relies on clear rules, disclosures, enforcement that is predictable and grounded in law. This is near and dear to my heart as I worked in the regulated industry. Fair and transparent regulations allow our country to have the most transparent and liquid markets in the world.
▶ 1:53:08Sen. Ricketts: Those standards are even more important in a time strategic competition, especially talking about communist china. Communist china is not an ordinary foreign market. They are the biggest existential threat to our country, external threat to our country. They are a strategic competitor with a state directed economy rate operates with no transparency and imposes restrictions to prevent U.S.
▶ 1:53:36Sen. Ricketts: Regulators from having the same inspection enforcement access that we would expect here at home. Do you agree these differences limit the sec's ability to provide the same level of oversight and investor protection for china-based companies as it does for domestic issuers?
▶ 1:53:53Mr. Atkins: There are a number of issues to work out. I agree with respect to the various markets and where these securities are from.
▶ 1:54:08Sen. Ricketts: You have an agreement that the pca will be with the chinese regulators established in 2022 that allows us inspection access to chinese based firms and despite existing law requiring foreign firms to open up for inspectors, chinese company's have been shielding their books and used auditors under their control to provide dishonest information with data rate all the while we cannot audit chinese companies directly to get to the bottom of the truth.
▶ 1:54:40Sen. Ricketts: We have not taken action to do this noncompliant chinese companies from our stock exchange because of this. Given thepcaob have audit deficiencies chinese from serving china-based issuers, do you believe it creates an uneven playing field for U.S.
▶ 1:55:03Sen. Ricketts: Companies when this issuers can access our markets without being subject to the same level of oversight and inspections?
▶ 1:55:12Mr. Atkins: Yes, sir, I think also a couple of things. One is just this week we swore in some new members, new chairman and new members for the public accounting oversight board. And so that is one of the things that the new board will be focused on. With respect to china-related companies.
▶ 1:55:33Mr. Atkins: And then how actually the ones that are listed here in the united states, whether or not there is a robust access by competent auditors operating our rules, working with this particular companies.
▶ 1:55:55Mr. Atkins: And secondly, we put out a release back in the summer asking questions regarding foreign private issuers, especially those companies that are may be based in another country inc. Site in the caribbean but then their primary listing is in the united states such as on nasdaq.
▶ 1:56:18Mr. Atkins: And whether or not the accommodations generally given to foreign private issuers, predicated on robust rogatory scheme, the home country is actually also the case in some cases like with chinese companies that are listed here. We are out to address this and so I agree with your issues.
▶ 1:56:50Sen. Ricketts: I'm glad you brought this up because there about 286 chinese companies listed on ours is of march of last year and 151 are these variable interest entities vie's. They had the arrangement you're talking about, taking advantage of the arrangement you are talking about. They represent over $1 trillion $.1 trillion american citizens savings going into these firms.
▶ 1:57:15Sen. Ricketts: They use these structures because chinese law restricts foreign ownership and key sector so they can't sell the equity in operating copies directly to U.S. investors. They set these up as you said in the cayman islands or whatever and shares in offshore holding company that rely on these contracts but not ownership to have economic interest in the business. Do you believe the average american retail investor understands that difference today?
▶ 1:57:40Mr. Atkins: I fear may be they don't, so we are looking at the disclosures around these sorts of entities and how that is actually being accomplished now or not.
▶ 1:57:58Sen. Ricketts: I think you need to look closely at these disclosure requirements and take action against any chinese firm that is not complying with U.S. law. If we cannot get the same sort of comfort from chinese company should be listed from our exchanges, we should not allow americans to find our chief adversary in the world.
▶ 1:58:18Chair Scott: That concludes our hearing portion of this hearing and we will say for senators who wish to submit questions for the hearing record, those questions are due one week from today thursday, february 19. Check ins will have 45 days from that date to submit your responses in record in writing and thank you so much. Committee adjourned.