As D&O insurance professionals try to assess the potential impact on the industry from Donald Trump’s return to the White House next month, one area of focus has been on the Trump’s appointment powers. This includes, obviously, the President’s authority to appoint judges to the federal judiciary, but in addition involves his power to make appointments to the Presidential cabinet and to the federal agencies. As Trump’s appointments have unfolded over the last few weeks, none looms larger (for now at least) for the D&O arena than the announcement last Wednesday that Trump will nominate former SEC Commissioner Paul Atkins as SEC Chair. This appointment, if confirmed, could result in a significant change of direction at the SEC, which in turn could have important implications for the world of D&O.

Atkins is, in the words of Politico (here), “one of Washington’s most influential voices on financial markets.” He served as a Commissioner at the SEC from 2002 to 2008, during the George W. Bush Presidential administration, but his background at the SEC goes back even further than that. According to Politico, he first served as chief-of-staff to then-chair Richard Breeden and later as counsel to Breeden’s successor, Arthur Levitt. After leaving the agency in 2008, he formed a consulting firm, Patomak Global Partners, serving as its Chief Executive. With his return to the agency, he will be reunited with two former colleagues from his prior agency service – the two current Republican commissioners, Hester Pierce and Mark Uyeda, served as counsel for Atkins when he was a commissioner at the agency. Politico described Atkins as a “well-connected regulator whose understanding of the SEC could allow him to move quickly as he enacts his vision for the regulator.”

One of the predominant messages in the press coverage of Atkins’ nomination has been that his appointment will signal a significant change in direction from outgoing chair Gary Gensler. The Wall Street Journal in a December 4, 2024, editorial referred to Atkins as the “Anti-Gensler,” saying that Atkins is the “opposite of Gensler in temperament and regulatory ambition.” Atkins, Politico commented, has “sharply criticized what he considers to heavy-handed policymaking for the last two decades” and as an “outspoken critic of everything from the reform measures enacted in the wake of the 2008 financial crisis to corporate penalties to climate-related disclosures.”

One area on which the agency under Gensler focused that is likely to also be a priority under Atkins is with respect to cryptocurrency. A variety of high-profile crypto firms and crypto agencies have in fact previously hired his consulting firm, and Atkins himself is not only well known to the crypto community but he has served, according to the Wall Street Journal (here), as its “trusted consigliere,” even co-chairing an industry group set up to promote digital assets. The Journal cites crypto executives as saying that they “hope Atkins’s appointment will usher in a new era for the industry’s dealings with the SEC.” The crypto community, the Journal reports, “expects to see clearer guidelines that define digital assets as securities or commodities,” and they also expect that under Atkins the agency will “dismiss the dozens of lawsuits that the agency has filed against companies such as Coinbase and Kraken under the current chair, Gary Gensler.” As a more general matter, Atkins is likely to move the agency away from what has been criticized (particularly with respect to crypto) as the “agency’s habit of regulation by enforcement.”

Atkins has, according to Politico, “sharply criticized what he considers heavy-handed policy making over the last few years.” One area in which he has a long track record is with respect to ESG. In its editorial about Atkins appointment, the Journal observed that Atkins “was an early critic of how asset managers and proxy advisers used environmental, social and governance (ESG) standards to bully public companies” and suggests that one of Atkins’s “top priorities” will be “rolling back Mr. Gensler’s 885-page climate-change disclosure rules.”

As a general matter, Atkins likely will steer the agency away from regulating in order to address social policies. Cydney Posner, in a post on the Cooley law firm’s PubCo blog (here), cites a prior statement by Atkins that “The SEC, CFTC or whatnot can look at its own patch, but it really can’t change the world. There are certainly enough societal and economic problems that need to be addressed. I think the agencies have got to figure out what is the highest and best use for them, and let Congress and others figure out what the public policy should be.”  

While the SEC under Atkins is, as the Journal asserts, “likely to re-examine or revise much of what the agency did during the Biden administration,” this does not mean the SEC will retreat from its bailiwick. Atkins, the Journal says, “isn’t expected to dismantle core investor protections.” Based on his past public statements, the agency is likelier to focus on pursuing enforcement actions against individual violators, as opposed to pursuing actions against their companies.

Discussion

Arguably by contrast to certain others of Trump’s announced appointments, Atkins at least has the experience and qualifications to take on the responsibilities of the position to which Trump proposes to appoint him. To be sure, Atkins may represent every bit as much of the spirit of change as other Trump’s nominations, including even some of Trump’s more controversial selections.

There are certain things we can be sure about. The SEC under Atkins is going to provide more regulatory guidance for crypto firms and the crypto industry generally. The agency is going to pull back its climate change disclosure guidelines – and the agency under Atkins is not going to set up an ESG task force, as the agency did under Gensler.

There are other things that at this point may be less clear. For example, it isn’t clear what the agency’s approach under Atkins will be to certain emerging issues, such as, for example, artificial intelligence, and cyber security.

While there will undoubtedly be a change in direction from a policy standpoint, and from the standpoint of regulatory aggressiveness, that does not mean that the SEC will be withdrawing from policing the markets. To the contrary, the agency under Atkins seems likely to focus in particular on its agency’s core role of providing investor protections.

What does all of this mean for the world of directors’ and officers’ liability and insurance? It seems probable that the risk and liability exposures will change in certain identifiable ways, particularly when it comes to category-driven risks like ESG. There will be less regulation by enforcement as well. But the shift toward more of a focus on the core issues of investor protection means that executives at companies that are alleged to have misled investors will still face the possibility of an agency enforcement action. There could be every bit as much enforcement activity in the agency under Atkins, but the activity could have a different focus.

It is worth noting that Atkins nomination is still subject to approval in the Senate. While there is no reason to suppose that his nomination will not make it through the Senate, the process will still take some time. In a December 5, 2024 post on TheCorporateCounsel.net blog (here), Liz Dunshee notes that at the outset of the Biden administration, Gensler was nominated in late January 2021, after which his nomination went through the relevant Senate Committee and his confirmation came though in mid-April. So, it could well be several months into the new year before Atkins is able to take up the post as agency Chair; getting his agenda in motion and into effect likely will take a few months more. It could well be late 2025 or even early 2026 before the full impact becomes apparent.