SEC Chair Atkins on Protecting Investors, Promoting Markets, Powering Growth

Kenneth E. Bentsen, Jr.: Right. Well, thank you so much for being with us today. I know you’ve got a lot on your agenda, and so it’s a real honor and pleasure to have you here and be with us.

Chairman Paul Atkins: Thanks, Ken.

Bentsen: Before taking on this role, you had a distinguished career as I was noting, both in public service and the private sector, including your time at the SEC as a commissioner on senior staff and your work in the industry. How has that experience shaped your perspectives and prepared you for the challenges that you have today leading this, to us perhaps the most important agency, and all the opportunities that you have before you as chairman of the commission?

Chairman Atkins: Well, thanks, Ken.

Well, so I mean, everything you do in life leads up to, of course, ultimately what’s your last job? But anyway, so as you noted before, I started out working in finance for transactions as a lawyer up in New York and Paris. Got to see the nuts and bolts of how these transactions are put together and some of the issues back in the 1980s, at least, that people had to confront.

But then working at the SEC, now this is my third time, third time’s the charm, let’s hope, but anyway, for basically four two chairman and with three more, so five chairman over that period of time. Got to at least see dos and don’ts and things that worked and just things to watch out for the shoal waters basically.

Bentsen: Since you’ve gotten back to the commission as chair, you’ve emphasized the importance of the SEC returning to its core mission: promoting market growth, fostering innovation, and ensuring our markets remain competitive and dynamic. Can you share how your philosophy on how the SEC can best achieve that balance between protecting investors while also achieving innovation and capital formation and driving economic growth?

Chairman Atkins: Well, as everyone in this room knows, investors are number one. They’re your customers, obviously. For the SEC, they’re the primary people that we want to make sure get a fair deal in the marketplace and aren’t taken advantage of and understand what they’re getting into and to make sure that they get sufficient and good information to help them make their decisions.

That’s what motivates me and has done all throughout the years. Having been an investor myself, obviously there’s some things that you wish were a little bit different and smoother and that sort of thing. Especially now with all of the new products, I think investors have a huge choice these days of doing things with their money. And so I think this is our goal is to help there be a innovative and dynamic marketplace for investors to place their money for growth and for their future.

Bentsen: We’re going to dig into some of those different new opportunities and assets that are out there. But maybe before we get there, you’ve also spoken about the importance of regulatory relief, ensuring that rules are not overly burdensome, that they align with the SEC’s core mission of, again, promoting fair and efficient markets.

Where do you see opportunities to recalibrate the regulatory agenda, possibly pulling back in areas of major focus? I know you’ve talked about in differences to your most immediate predecessor, but things such as ESG disclosures or trying to prioritize issues that are maybe more directly tied to market growth.

Chairman Atkins: Well, suffice it to say that the rulebook has grown over the years that I’ve been in and around SEC some 30 years now. And so I think it’s time for recalibration and to look long and hard because ultimately investors pay for all the regulatory apparatus. That’s not just through tax dollars and supporting the SEC, but also of course as far as fees that they pay to their agents and intermediaries and things like that, marketing intermediaries.

Also through if the regulatory costs inhibit people from entering the marketplace with new ideas and services, ultimately investors pay through reduced competition and that which affects obviously prices and whatnot. I think it’s high time that we do take a look at our rulebook.

Reg SK, for example, is the backbone of disclosure for the Ks and the Qs and the proxy statements and that sort of thing. And so it has not really been looked at in a overall sense since, well, for 40 years since it was put together, which was a great work product out of the 1980s. The core is there, but let’s just say things have been larded on. It’s time for a good spring-cleaning, so the attic, the basement, and the garage, to go through that and make sure that it’s fit-for-purpose now in the 21st century.

Bentsen: Just a follow-up process question, so you mentioned SK. You did a roundtable or the commission did a roundtable on that. We’ll talk about a little in a second, the roundtable on NMS or the trade through rule. I recently participated in a roundtable that you did with the CFTC. Should we expect to see the commission doing more roundtables and maybe concept release requests for information in terms of gathering information about what the commission should do or shouldn’t do as opposed to just going out with a proposed rulemaking?

Chairman Atkins: Yeah, well, so I take very seriously the Administrative Procedure Act, which I think is a backbone of due process of the SEC. The whole idea is to put questions out and then get feedback from affected parties and the general public.

And so for example, for foreign private issuers, we came out with a concept release looking at how are we treating foreign private issuers. Are the rules still pertinent now in 2025? There’ve been a lot of changes in that marketplace, and so the concept release is the advanced notice of proposal. Getting that down, we’ll get comments, and then we’ll come back with a proposed rule and then ultimately for adoption, wherever that may go.

But so I encourage people to please comment, please take this seriously. It is a serious process, and it’s vital to get feedback. The roundtables, I think, are to take them on the road. There’s so many areas where I think it’s pertinent. We’re talking about having retail investors put money into private funds and private products, not registered products. There are a lot of issues around that obviously, but we will be working with the Department of Labor on that. Probably take things on the road to get feedback and other things with cryptocurrencies, we’ve already, and digital assets.

We’ve had a number of roundtables at the SEC, so we’ll continue that whole progress process. I think it’s a very important aspect.

Bentsen: I think that’s great. I just think trying to get more information out there and more input before you go to a rulemaking is very important.

Let’s turn to digital assets. Obviously, a very hot topic. You establish the crypto task force that you have your fellow commissioner, Commissioner Peirce, working on. There are so many different issues: tokenization, digital assets, blockchain technology. It’s all impacting the future of capital markets. You’ve highlighted the need for regulatory clarity to promote innovation, which is an objective that we’ve supported for many years because the rules haven’t been clear.

At the same time as you know, we’ve raised concerns others about how do we match that with long-standing investor protection rules, market integrity rules, which we think are bedrock principles that underpin the strength of the US market system. As you’re thinking about it, the commission’s thinking about it, although I know you’re just speaking for yourself, but how do you think the principles of investor protection fair and orderly markets can be extended to trading of digital securities and other digital assets where appropriate?

Chairman Atkins: Yeah, well, so the whole revolution now in the digital asset space and distributed technology is, I think, really exciting and I think portends great things for the future. I am so lucky to have Commissioner Peirce on the commission, so both she and Commissioner Uyeda used to be my council when I was commissioner back 15 and 20 years ago. It’s great to have them there, and they’re working, and Commissioner Crenshaw as well. I think we have a good group to address these issues.

But as far as the new technology goes, I think there’s, the cryptocurrencies are one aspect in the most kind of thing that captures the public’s imagination immediately, and obviously interest from investors. But also the distributed ledger technology as a new innovation I think could be a real boon to the financial services industry for de-risking, for example. Just think we had a great push with my predecessor for T+1, so maybe have been a little quicker as far as the demands that came on than some people would’ve wanted, but at least we’re-

Bentsen: We know that well. We were right in the middle of it.

Chairman Atkins: Anyway, so that came through.

But just imagine basically almost instantaneous RDVP, RVP on chain for financial products with tokenization of securities and everything else. I think that’s what really gets me very confident for the future for de-risking, as I said, decreasing of costs. There’ll be some disintermediation obviously with some features of the financial services system.

But anyway, but good advice will still be needed by investors and there’ll be a lot of innovation I think, on chain and around that whole ecosystem. We’ve only just begun to consider it.

Bentsen: As the task force that you set up is proceeding and going through. We’ve engaged with them quite a bit. A lot of all across the ecosystem, people have been engaging with them, and it strikes me as they’re very deliberative and methodical in the work they’re doing.

Do you see them putting out a report at some point, putting out a concept release?

Chairman Atkins: Oh, sure. There’ll be a barrage, so we’ve been leading up to that. This has been a learning type of process. We’ve been talking about an innovation exemption, so we’re working on things like that.

And then ultimately we’ll need rulemaking. We’ll see what happens with Congress. And so I really salute Congress and the President for the inaction of the GENIUS Act. That’s the first time that the United States government has actually recognized and put a framework around digital asset, and that’s of course stable currencies. Those are not securities, and those are very capably, I think, being addressed by Jonathan Gould as controller of the currency in his office.

Then the Clarity Act having come out of the House and is now in the Senate, so I look forward to, once the government shutdown is finished, hopefully Congress will address that issue. And then maybe the president’s asked for a bill on his desk before the end of the year, so what we’ve been helping with technical assistance to both houses of Congress in that regard. Look forward to continuing on that.

I think there will be legislation at some point, I imagine, but we have plenty of authority as an agency to plow ahead to look at taxonomy, for example, around what is the security, what’s not, and then to be able to adopt rules and exemptive orders and that sort of thing around it.

Bentsen: I want to get to exemptive orders, but before I do, as the commission is working its way through this and coming up with taxonomy and determining what’s what, which again, I think is very important, there’s been a lot of discussion around DeFi: decentralized issuance, issuance on blockchain, decentralized trading models for digital assets, including some that will be securities tokenized, securities tokenized equities, and the like.

Your colleague Commissioner Peirce has actually said in some cases there have been some products have been developed, look a lot like securities, back swaps, and she said those are securities. There some are seeking relief for applications. And that to us look a lot like intermediaries and look like perhaps, perhaps like an ATS. How are you thinking, how’s the commission thinking as it considers things like innovation exemptions, where you have a product or a function that looks very similar to a traditional securities intermediary? How are you thinking of what rules should apply there or not, or how you define what they are?

Chairman Atkins: Well, I think basically the direction should be functional regulation, so it should be seamless as far as the ability of people to be able to comply.

I think part of the problem that we’ve seen over the last few years is that at first with respect to new products and innovative products, the SEC at first had an ostrich-with-a-head-in-the-sand approach. Hopefully this will just go away and we won’t have to deal with it. And then secondly came the regulation through enforcement, where the mantra was, well, we have this form on the website, just go in and fill it out. It’s easy, then come in and talk to us. Well, it’s not so easy because the forms which were originally conceived back in the 1940s and ’50s and whatever are in opposite to what’s today’s marketplace, and especially for these digital assets where how do you have three years of audited financial statements or governance disclosure. You don’t have a board or things like that, especially when you start talking about DeFi.

The commission needs to look hard at its own rules and the forms that it’s asking people to complete and to register. We have to adapt our processes to the marketplace. We can’t expect people to adapt their products to our forms. I mean, that’s really a backwards way of doing it. And so the process and the process we basically forced people to leave the country and to do their products development offshore, which is terrible in many ways. Just have to point to FTX as an example of what happens if you do force things offshore. What I like to point out is that out of the whole FTX system there, they had one asset here in the United States, LedgerX, which they had bought, which was a swaps trading platform and specifically for crypto assets. And so LedgerX was registered under the CFTC, which was geared towards institutional the marketplace. SEC is of course more retail-oriented.

But anyway, so it was registered under the CFTC. With the implosion of FTX, LedgerX did not skip a beat. Frankly, they had segregated accounts, no customers lost any money, and ultimately it was acquired by MIAXdx. It is still going strong from what I know. Good for them. But that shows how a regulatory system that can accommodate new assets and innovations is very strong and is good for the markets and good for investors because it basically protects them. What we’re trying to do is adapt our regulatory system to accommodate these new products, have them here on shore under, as the President said, with American technology and to be developed here in America rather than for Americans to then buy things offshore, which is obviously not the ideal aspect.

Bentsen: That’s interesting. Using that example, if you will, or taking it a little bit further in thinking about the innovation exemption that you and the commissioner talked about involving digital securities, are you thinking about this as a sandbox as a term? I think Commissioner Peirce has used the term beach or whatever. It’s something involving sand, I guess.

Chairman Atkins: Bigger than a sandbox, a beach.

Bentsen: A trap, a bunker, or whatever, but is it something that is an umbrella term for a variety of actions? Or is it exempted relief, no action safe harbors, that are granted to specific projects, you think? Is it you’re trying to create an exemption for sort of an ecosystem that might develop, or is it one-offs for certain entities and how they want to function?

And then taking your FTX discussion, which is I think I hear you saying for new entrants that are doing traditional functions, you understand they may have difficulties with some of the rules have been around. But in terms of market operations, investor protection, you want to bring them into that structure.

Chairman Atkins: Absolutely. If something is a security, then obviously the law says it needs to be registered, and especially if it’s going to be sold publicly to more than 35 investors and this whole definition.

But the secret is to make it as accommodating as possible and so that there’s certainty so people know, “Okay, what I’m doing here should be registered under the CFTC,” or, “What I’m doing here is not even a security, and then we have to go to the controller because it’s a stable coin or whatever, or otherwise a security.” By having an innovation exemption, what we’re contemplating is something that’s hemmed in by size and amount of money and number of people and that sort of thing so that somebody can have a proof of concept. And then feel like they can do it here in the United States, and then within the bounds. And then after that then get approvals and then go full bore, but to have some sort of framework so they’re able to say, “I’m here and I’m under this exemption, and you’ll be developing this accordingly.”

Bentsen: Would that be primarily for non-securities, non-commodity… Well, obviously commodities you wouldn’t have jurisdiction anyway, but non-securities-type activities adjacent to the securities activity?

Chairman Atkins: Or security, so where if it’s unclear or it’s not clear how it would fit in to the construct that we have. And so we have to develop this concept obviously, but this is what we’re thinking of. Other countries have had analogs to this, and it’ll be a new feature here in the United States.

But I think something that’s really badly needed in order to, again, work with the people who are developing these innovative products and be able to embrace it rather than fend it off and say, “I’m sorry, you can’t do that here in the United States.”

Bentsen: Again, tremendous amount of work that the commission and the staff are doing. I think we’ve submitted four or five papers and every time we submit we get more questions, which is great, really great.

Do you think this is something that as you all think about exemptions that you’ll lay out either through roundtables, things that people can look at, comment on in the length?

Chairman Atkins: Of course. Yeah, we’ll not just bring it on people. You can’t have the exemptions swallow the rule either obviously, so this has to be calibrated.

But as we’ve been looking at the development over the last few years of various products, I think it would’ve been helpful in much more accommodating and then quicker from concept to marketing and sales if the SEC would be working with market participants to try to get things approved and underway more quickly.

Bentsen: Right.

Let’s shift gears a little bit and talk about capital formation. I know the commission and the commission staff have been looking at potential changes, primary markets, regulation. We’ve talked about the importance of public and private markets, and I think you’ve suggested… Well, while we’ve seen a little bit of an uptick in IPOs in the last quarter, stopped right now because of, obviously-

Chairman Atkins: Right, unfortunately.

Bentsen: But better than the winter when things and second quarter flattened out. We’re still I think we’re at like 5,600 plus public companies in the US. We’re well below whatever it was in 2000. We were like 10,000 or whatever. Maybe that was too many. But 2021 we started seeing an uptick flatten out, ’22. Now it’s going to come back a little bit.

I’ll come back to private markets, but you’ve talked about what is it making IPOs great again, I think. What do you mean by that?

Chairman Atkins: Well, you said it. We have about half of the number of public companies as we had 30 years ago. And so basically it’s uncool now to be a public company because it used to be one has arrived. You can ring the bell there on the New York Stock Exchange or NASDAQ floor and engaged in selling of your shares to the public. And so because of many basically three things I would say is one is of course the crush of rules and the cost of complying with the rules. Just the infrastructure that you have to build out internally is from going from a private company to a public company. Second is a litigation environment of class action lawsuits and all of that. Finally, third is the corporate governance situation, the weaponization of the annual general shareholders meeting and shareholder proposals and everything like that over the last few years over some of these various issues.

We’re in the process of addressing all three. We talked about regulatory reform of SK and others to get it right sized. Because I mean, for example, we mentioned roundtables, so one of the first roundtables we had after I came on board was over executive compensation, which is so completely complicated now. It’s amazing. And so I was thinking that there would be a lot of, let’s just say [inaudible 00:26:34] around that, people saying, “Oh, you touched the third rail.”

But instead actually there was pretty much unanimity among the participants in that roundtable and outside of that as well, it is so complicated. No one can understand this stuff. We need to get it back to basic principles of disclosure. And so that’s just one example. If we can tackle things like that where, again as I said earlier, things have gotten larded on year after year to bring it back to basics. With litigation reform, we just put out a commission principle that says that yes, you may go public if you have a bylaw that demands mandatory arbitration rather than a lawsuit from shareholders against the company for fiduciary and other acts. And then the same with a loser pays fee-shifting type of provision, which apparently has been okay all along, but nobody has really brought those forward.

Not saying that people should or should not have them in their bylaws, but the companies have been turned away in the past by the staff over that. Now we’ve made it clear that that’s not going to be the case anymore.

And then finally, with corporate governance, we’ll be making reforms to try to address some of the gamesmanship and the weaponization. I gave a speech in Delaware a week or so ago about addressing some of the issues and going, again, back to first principles. What is the SEC’s role in that area? I submit that we have veered away from state law since the 1940s, and so we will be addressing some of these issues.

Bentsen: French Hill in this afternoon, chairman of the House Financial Services Committee, and he’s certainly pushed capital formation as part of his agenda. I know Tim Scott, the Senate has as well. It sounds like you’ve got a lot going on, but do you feel you’re at the bounds of your statutory authority that you could get help from Congress on things that could further expand capital formation?

Chairman Atkins: Well, so I think we have plenty of authority that Congress has given us in each of the Securities Acts to be able to do all the things I’m talking about. It’s always great to have on the Clarity Act or something like that. It’s great to be undergirded by statute, so the current thinking of Congress, so I welcome whatever they may come out with.

But suffice and say, I do think that we have plenty of authority to take all these steps and to be forward-looking, forward leaning, and to make things, I think, a better fit-for-purpose and to help for capital formation, which is what the capital market’s all about. I mean, it’s not for making money, trading securities. It’s about the underlying raising capital for businesses, which is what has built the United States. I mean, when I traveled to Europe, as I’ve had to do a couple of times here for financial stability board meetings and whatnot, and visiting four cities in five days and the crazy American-type of trip, but anyway that Europeans like to make fun of…

But anyway, in each city, London, Paris, Frankfurt, Berlin, Brussels, I hear the same thing of how the Europeans really admire our capital markets, what we’ve been able to achieve in the United States. Wish that they had an investment culture, especially with the demographics that Europe is facing. And then finally with a very risk-averse society, let’s just say, that don’t have that entrepreneurial investment spirit so much as America has, which of course has built our country.

We have to remember that that’s what the capital markets are all about, to serve investors and to then serve companies that are looking for capital, to build new products, to forge ahead with new ideas, and that sort of thing. That everyone in this room is helping that infrastructure deliver the goods for investors and then also with respect to the companies that need this lifeblood.

And so that’s why it is too bad that the public markets have fallen away over the last 30 years. That is one the basic reason why I think we have to have a pivot, have to make it cool to be a public company again, and then to rebuild that. Because the S&P 500 right now if you look at it is heavily weighted towards IT, and so that’s fine, but where have we seen that moving before and what can happen after that anyway. We have to get back to basics.

Bentsen: At the same time we have perhaps at the expense of the public companies, but also maybe organically, we have a very mature private company or a maturing private company sector and investing in private companies. Which we’ve had private companies forever, but it’s become its own sector and asset class in many ways. You mentioned at the outset the work that you’re doing, the work that the commission’s doing with the Department of Labor of thinking about access to private market companies for or private market assets for retail investors. I think you mentioned you’re going to do maybe some road shows on this and all.

We’ve talked about this a little bit. How do you see the SEC’s journey on this of thinking about what’s appropriate again? How do you maintain investor protection but also opening access to this important market sector?

Chairman Atkins: Yeah, well, so the private markets are really essential and great, and they’ve grown tremendously obviously over the last few decades. It’s great. Thank goodness for private credit right now because had we not had private credit, our economy would not be where it is. You compare us to Europe, for example. I mean, the crushing burden that the banks have on the capital side has basically made them unable to lend into the small-to-medium enterprise sector in the United States. Luckily private credit has stepped in to fill that void and keep things moving.

But and private equity obviously has been around for a long time, but for people to be able to choose whether or not to be private or public I think has become much more weighted towards the private side. And so we’ve seen the effect on valuations and integrity around that in the private markets. I’ve been investor in private markets for a long time myself, so I think I carry some insights into that and how we can approach that with the Department of Labor to try to make it accessible to investors.

But if you talk to any sort of asset managers or an even pension fund managers, I mean, they’ll tell you that you cannot have a balanced diverse portfolio if you don’t have exposure these days to the private markets. And so we need to have that ability for especially investors through 401(k) plans or through their pension plans to be exposed to that, but within reason.

I mean, all of us know issues around valuation, liquidity, where you stand in the capital stack, and then issues of diversification and so forth. If you look at how, because of the public markets being constrained and people not wanting to go and sell companies into the public markets, that takes away a real key valuation aspect. If you have these continuation funds, evergreen funds, where things never really get sold from one investment to a house to the next and never really break out of that, it is hard to say where the values lie.

I think that we can have a more robust and healthy system if we can make it so that the difference between the two, public and private markets, is a lot less from a cost and other aspects.

Bentsen: We have less than two minutes left, but I want to go through a lightning round of a few issues, so just more to come.

But equity market structure, you had the roundtable on trade through. Are we going to see proposals on Reg NMS?

Chairman Atkins: Yes, that’s been an issue for a long time. I can say I told you so when you look at the status of the market today, the fragmentation, and the gamesmanship around some of the rent seeking with respect to the markets. Yes, we will. I think we had a very successful series of roundtables, and we’ll build off of that and come up with a proposal.

Bentsen: You mentioned the foreign private issuers. I know we’ve talked to you about low price stocks and all, so thank you for taking a look at that.

Consolidated Audit Trail, I know you’re trying to get the cost down. I think RFI first quarter next year or something like that.

Chairman Atkins: Yes, so we lost the keys lawsuit, so I’m not actually surprised at that. But anyway, but my demand on the system here is that we bring the costs way down. We get back to what’s essential. We don’t need all the googas that have a lot of money, and that’s another issue, PII, so which is the subject of another lawsuit.

Anyway, so yes, we will reform that.

Bentsen: E-delivery, I know we talked about that. Something the commission has the authority to do-

Chairman Atkins: Yes-

Bentsen: Y’all thinking about it?

Chairman Atkins: … we will address that issue, too.

Bentsen: Treasury clearing, we talked to Mark all the time about that.

E-communications off channel, the whole issue around that, the uncertainty.

Chairman Atkins: We have to address that. I mean, I think it’s not the way a regulator should act from what we’ve seen over the last couple years in that area. It’s unbelievable how we have this kind of ad hoc demand depending on which statute or which area you’re operating in to have different standards and difference between CFTC and SEC. We have to get down to something that’s rational.

Bentsen: Chairman Atkins, thank you so much for spending some time with us today. Thank you for your service and for having an open door to hear us out.

Chairman Atkins: Sure. Well, thank you, Ken.