SEC Expected to Shift Priorities and Adopt a More Business-Friendly Approach in 2025

This is the fourth in our 2025 Year in Preview series examining important trends in white collar law and investigations in the coming year. We will be posting further installments in the series throughout the next several weeks. Our previous post, "Higher Education in 2025: Focal Points for Compliance and Investigations " can be found here. 

The U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) is undergoing substantial changes following the reelection of Donald J. Trump in November 2024. From an overhaul in the Commission’s leadership to the flurry of executive orders signed by President Trump implicating the Commission’s regulatory and enforcement priorities, we expect the SEC to pursue different priorities in 2025 than it did under the direction of former Chairman Gary Gensler, which we discuss in this White Collar Year in Preview. We also highlight key Supreme Court cases that will have a substantial impact on the SEC’s enforcement efforts moving forward. And we conclude by looking back at the SEC Enforcement Division’s (“Enforcement” or the “Division”) performance in fiscal year 2024. 

Following the reelection of President Trump, two SEC Commissioners, including its Chair, announced their departures. Meanwhile, then-President Elect Trump nominated Paul Atkins to replace former Chair Gensler as SEC Chair. Atkins, a financial services adviser and former SEC Commissioner during the George W. Bush Administration, has been a vocal critic of the Commission’s enforcement activities, including by arguing that corporate fines unfairly penalize shareholders and that enforcement efforts should focus on individual violators. He has criticized what he characterized as the practice of pursuing minor securities law infractions to boost enforcement statistics. While Atkins’s Senate confirmation is pending, President Trump has appointed Commissioner Mark Uyeda as Acting Chair. 

The Commission is typically overseen by five commissioners. Currently, the Commission is composed of two Republicans, Acting Chair Uyeda and Commissioner Hester Peirce, and one Democrat, Commissioner Caroline Crenshaw. The current composition of the SEC signals a shift away from the heavy regulatory hand during the Gensler era. Acting Chair Uyeda emphasized recently that this transition will permit the SEC to “focus [its] efforts … on capital formation and ensuring companies aren’t impeded by ineffective regulation.” Commissioner Peirce likewise commented that the SEC would be promoting “a regulatory environment that protects investors, facilitates capital formation, fosters market integrity, and supports innovation.” These comments indicate a move away from the climate and social regulatory agenda advanced by former Chair Gensler to refocus more on traditional enforcement concerns such as material misstatements, deficient internal controls, and gatekeeper failures. In another signal of shifting priorities, on February 10, 2025, the Trump Administration issued an executive order that directs Attorney General Pam Bondi to effectively pause the Justice Department’s enforcement of the Foreign Corrupt Practices Act (“FCPA”). While the Executive Order was silent as to the SEC—and the SEC retains its own authority to conduct investigations and enforce the FCPA, particularly for violations of the books-and-records and internal-controls provisions—the new leadership of the agency will very likely re-align its FCPA enforcement efforts to reflect the administration’s expressed priorities although there has been no clear directive to that effect yet. 

On January 21, 2025, Acting Chair Uyeda announced that the SEC was launching a task force spearheaded by Commissioner Peirce in an effort to develop a comprehensive and clear regulatory framework governing crypto assets. Commissioner Peirce has been a longstanding critic of the agency’s approach to crypto assets, which has primarily relied on enforcement actions. In a recent speech, she noted that the task force would be focused on determining whether various crypto assets constitute “securities” under the securities laws; potentially recommending the Commission to provide temporary or retroactive relief from registration requirements for coin or token offerings following the issuing entity’s provision of information regarding the asset; and working with investment advisers to establish a framework within which advisers can legally and practically custody crypto assets on behalf of their clients. 

The SEC’s newly-minted crypto task force dovetails with President Trump’s January 23, 2025 executive order promoting the advancement of cryptocurrencies in the United States. The executive order touts the importance of the digital asset industry to the innovation and economic development of the United States and establishes a working group to consider a national digital asset stockpile. The executive order also outlines other priorities, including protecting individuals and companies that use blockchain networks and developers and miners who develop crypto assets. 

The SEC has long been focused on combatting insider trading. The Commission brought 35 insider trading actions in 2024, representing 6% of all actions brought and a slight increase from the prior year. While many of the insider trading cases brought were the “bread and butter variety,” in the previous administration’s final year, the SEC continued to stretch just how far insider trading law can be pushed. 

For example, the SEC secured a victory in its first “shadow trading” enforcement action in SEC v. Panuwat. Shadow trading is a novel theory of insider trading that involves an investor possessing material non-public information about Company A, who trades in the securities of Company B, another company with which Company A shares some connection in the market (such as competitor or comparable company). In Panuwat, the SEC alleged that Panuwat, the then-head of business development at Medivation (a mid-sized, oncology focused biopharma company), purchased short-term, out-of-the-money stock options in Incyte Corporation (another mid-sized, oncology focused biopharma company), just days before the August 22, 2016 announcement that Pfizer would acquire Medivation at a significant premium. According to the complaint, when he did so, Panuwat knew that investment bankers had cited Incyte as a comparable company in discussions with Medivation and he anticipated that the acquisition of Medivation would likely lead to an increase in Incyte’s stock price. In April 2024, Panuwat was found liable for insider trading based on the novel shadow trading theory. The case was appealed in November 2024, so the shadow trading theory is headed for review in the appellate courts. Moreover, on the heels of this decision, final judgment by consent was entered in another shadow trading case pending in the Northern District of California.

It is of course difficult to predict where incoming Chair Atkins will choose to focus his efforts in leading the agency, but it seems most likely that he will pick up where President Trump’s last administration left off: staple SEC cases rather than cases based on new theories of liability, and fewer insider trading cases overall. This does not mean that SEC enforcement of insider trading is going away. Indeed, data from SEC enforcement during the previous Trump Administration reveals insider trading cases were pursued, but not to the same degree as in other administrations. For example, in 2019, the SEC pursued the lowest number of insider trading enforcement actions since 1996 and charged the lowest number of defendants since the Reagan Administration. More still, it seems doubtful the new administration will continue to push the envelope on what insider trading law covers. And the record-breaking penalties seen in 2024 are unlikely to persist in 2025. The SEC is instead expected to take a more conservative approach, seeking smaller penalties from corporations so as not to inadvertently punish shareholders.

In the past year, the SEC continued to bring enforcement actions against regulated entities—such as broker-dealers and investment advisers—that failed to comply with recordkeeping requirements. Under the Investment Advisers Act of 1940 and other relevant statutes and regulations, registered investment advisors must maintain certain books and records. In particular, the SEC pursued actions where entities failed to ensure that “off-channel communications,” such as those taking place via employees’ text messages and messaging apps, were maintained as required by the Investment Advisers Act. 

According to the SEC, compliance with these requirements is necessary for protecting investors and ensuring well-functioning markets. In fiscal 2024, the SEC brought recordkeeping cases that resulted in over $600 million in civil penalties assessed against over 70 firms. Most of the firms admitted to the facts presented in their respective SEC orders and agreed to undertake remedial measures such as retaining an independent compliance consultant. These recordkeeping cases included the SEC bringing standalone actions against investment advisors for the first time. Since December 2021, the SEC has charged over 100 firms and levied over $2 billion in penalties for record keeping failures. 

The Trump Administration will change course with the agency’s initiatives given that President Trump has tapped Acting Chair Uyeda, and Atkins as incoming Chair. On September 24, 2024, Acting Chair Uyeda issued a joint statement with Commissioner Peirce urging reconsideration of the enforcement approach to off-channel communications given that “…even well-intentioned firms could find themselves in the Commission’s enforcement queue time and again.” Their statement calls for the development of “…a pragmatic and privacy-respecting approach that enables firms and the Commission to have the records they need for compliance, examination, and enforcement at a reasonable cost in both financial and privacy terms.” Notably, Incoming Chair Atkins has expressed support for overhauling the SEC’s enforcement methods and noted off-channel communications investigations is an area where the agency has overstepped its bounds. 

Looking ahead, we expect the SEC’s enforcement activity regarding off-channel communications will diminish relative to other enforcement priorities and the agency will no longer continue to conduct industry sweeps for record keeping violations. The SEC may also provide more clarity on the types of record-keeping cases it considers as meriting enforcement action. 

Individual accountability remained a pillar of the SEC’s enforcement program in 2024, and is expected to remain a focus into 2025. The SEC obtained 124 orders barring individuals from serving as officers and directors of public companies, the second highest number in a decade. In one specific case, it obtained a verdict against an individual for over $200 million in disgorgement and civil penalties. And there are signs that holding individuals accountable will become even more of a focus in 2025. Incoming Chair Atkins has consistently suggested it is more appropriate to pursue individuals responsible for the securities violations rather than firms for oversight issues that may have led to such harm, based on his belief that pursuing the firms doubly harms investors. Industry analysts have commented that unlike Gensler, who was willing to go after firms for negligence, incoming Chair Atkins thinks there should be willful intent for the SEC to get involved. This suggests that the SEC’s focus will be on serious cases in which there is both injury to investors and evidence of conduct involving at least recklessness by individual executives rather than the failure of a company to follow policies or procedures. 

Further, as noted above, incoming Chair Atkins and the Trump Administration have expressed concern about large penalties imposed on companies because such penalties are ultimately passed on to shareholders who were not responsible for the company misconduct. We expect the SEC in 2025 to continue vigorously pursuing individuals who have committed violations of securities laws.

As artificial intelligence continues to rapidly increase in wide-spread usage and capability, the SEC continues to focus on AI-related misrepresentations by regulated entities. This emerging area of enforcement targets so-called “AI washing,” or overstatements or other misrepresentations regarding the use or capabilities of artificial intelligence to promote a product or service. 

In 2024, the SEC charged China-based investment adviser QZ Asset Management for allegedly falsely claiming that the company would use proprietary AI-based technology to generate “extraordinary” weekly returns, while also promising “100% protection” for client funds. The case is currently pending in the U.S. District Court for the District of South Dakota.

The SEC also settled charges against two investment advisers: one firm, Delphia, claimed to have an AI tool that could predict which companies and trends were “about to make it big and invest in them before everyone else,” but did not actually have such AI capabilities. The other adviser, Global Predictions, falsely claimed to be the “first regulated AI financial adviser” and misrepresented that its platform provided “AI-driven” forecasts. Another settlement involved charges against the company Rimar Capital, its owner and CEO, and a board member. The SEC alleged that Rimar and the individuals “lured” investors and clients using fabrications and “buzzwords” regarding the use of AI.

In 2025, the SEC has already settled charges against yet another company, Presto Automation. The company allegedly made false and misleading statements about its flagship AI product Presto Voice, which uses AI-assisted speech recognition to automate certain aspects of drive-through ordering, in SEC filings and public statements. Specifically, the company failed to disclose that the AI technology used in Presto Voice for a period of time was actually owned and operated by a third party. It also falsely claimed that its product eliminated the need for human intervention in order-taking. 

We expect “AI washing” to continue to be at the forefront of the Commission’s enforcement efforts, given the pervasiveness of artificial intelligence across all industries. 

On March 6, 2024, the SEC adopted the Enhancement and Standardization of Climate-Related Disclosures for Investors rule. This rule requires information about a registrant’s climate-related risks that have materially impacted, or were likely to materially impact, its business strategy, results of operations, or financial condition. Now, nearly a year later, the rule is likely no more. On February 11, 2025, acting SEC Chairman Uyeda released a statement criticizing the rule as deeply flawed and capable of inflicting significant harm on capital markets and the economy, and directed the agency to request a pause in litigation concerning the rule currently pending in the Eighth Circuit. As a result, we expect that aggressive regulation and enforcement activity related to climate disclosures will no longer go forward.

Nevertheless, readers should not rule out the possibility of continued “greenwashing” cases. In late 2024, the SEC continued to charge companies and individuals for making misstatements related to environmental and sustainability factors. While incoming Chair Atkins may not be as focused on enforcement of Environmental, Social, and Governance rules directly, his SEC may still bring enforcement actions in the right circumstances where companies fraudulently tout their environmental credentials.

In fiscal 2024, the SEC demonstrated that it would reward market participants for self-reporting, promptly undertaking remedial measures, and meaningfully cooperating with the agency. Public companies, investment advisors, and broker dealers that promoted a culture of proactive compliance were credited by the Division. In fact, the SEC approved multiple resolutions imposing reduced or even no civil penalties for entities that took these steps in matters involving a broad array of alleged violations such as fraud, recordkeeping violations, and material misstatements. In one case involving Cloopen Group Holding Limited, a Chinese cloud-based communications provider, the SEC chose not to impose civil penalties after the company proactively self-reported accounting matters, meaningfully cooperated with the agency during the investigation, and undertook remedial measures. In response to Cloopen Group Holding Limited’s measures, Gurbir Grewal—the former Director of the Division—highlighted how this demonstrated the “real benefits to companies that self-report their potential securities law violations, assist during [an] investigation, and undertake remedial measures.” Further, the SEC announced that several defendant firms that self-reported their violations received significantly lower civil penalties. In fact, in December 2024, the SEC refrained from imposing civil penalties against a publicly traded biotechnology company that self-reported, proactively remediated, and meaningfully cooperated with the Division. 

It remains to be seen whether the SEC will continue to provide substantial incentives to companies who self-report securities violations in 2025. Former Chair Gensler fostered a culture of self-reporting and cooperation throughout his tenure with the SEC. The new Administration promises to be more business friendly, suggesting that the change in Commissioners is unlikely to cause the Commission to pull back on efforts to provide incentives to companies that self-report violations. 

Two Supreme Court decisions from the last term loom large over the SEC’s enforcement powers entering 2025. In SEC v. Jarkesy, the Supreme Court held that the Seventh Amendment entitles defendants to a jury trial in cases where the SEC seeks civil penalties. And in Loper Bright Enterprises v. Raimondo, the Supreme Court overruled courts’ longstanding deference to agencies in their interpretation of federal statutes. Both cases signal a trend of reduced agency authority and present significant challenges to the SEC’s expansive view of its regulatory power regarding what it can require companies to disclose in financial statements to how it interprets its authority to prosecute and settle cases. 

In Jarkesy, the Supreme Court agreed that the SEC’s in-house adjudication process violated defendants’ right to a jury trial where the SEC pursued civil penalties designed to punish or deter the wrongdoer. This decision calls into serious question the SEC’s ability to pursue financial remedies and disbarments in its in-house administrative proceedings customarily used by the SEC to adjudicate enforcement actions. Requiring that more enforcement actions be filed in federal court will require additional resources, potentially limiting the total volume of enforcement actions the SEC will bring in 2025. 

Jarkesy’s ramifications may be even more daunting for the Public Company Accounting Oversight Board (“PCAOB”). The PCAOB, a creature of the 2002 Sarbanes-Oxley Act, conducts investigations and brings disciplinary proceedings against registered public accounting firms and associated persons. Unlike the SEC, however, the PCAOB has no statutory authority to commence enforcement proceedings in federal court, resulting in the PCAOB conducting its disciplinary proceedings in-house. Despite Jarkesy concerning just the SEC, its holding seems equally applicable to the PCAOB’s in-house disciplinary proceedings. In fact, targets of PCAOB in-house disciplinary proceedings have already commenced constitutional challenges against the Board, seeking to enjoin those proceedings from moving forward.

In the Loper Bright case, the Supreme Court overruled the long-standing Chevron doctrine, which required judicial deference to agency interpretations of ambiguous statutes, ruling instead that courts must engage in their own independent statutory construction of ambiguous statutes. This decision represented a major blow to agencies’ authority, including the SEC. Indeed, while Loper Bright involved a different federal agency’s actions, its holding is broad enough to implicate the SEC’s enforcement powers. Under the Loper Bright holding, which requires courts to undertake an independent assessment of an agency’s interpretation of a statute, all agency action is far more vulnerable to review, and, ultimately, reversal. As a result, agencies like the SEC might engage in a slower rule promulgation process to develop a fuller record on which the agency can defend its actions in the face of challenge.

Despite the sea change expected at the Commission in 2025, it is nevertheless worthwhile to take stock in how Enforcement performed in fiscal year 2024. The Division announced that it initiated 583 total enforcement actions in fiscal year 2024 (a 26% decline from fiscal year 2023), while obtaining orders for $8.2 billion in financial remedies. Of the total enforcement actions filed, the Commission filed 431 “stand alone” actions (i.e., enforcement actions excluding those brought against issuers for delinquent filings and “follow-on” administrative proceedings seeking bars against individuals, a 14% decrease from fiscal 2023); 59 actions against issuers for delinquent filings (a 51% decrease from fiscal year 2023); and 93 “follow-on” administrative proceedings (a 43% decrease from fiscal year 2023). The $8.2 billion collected represents the highest amount recorded in SEC history and consists of $6.1 billion in disgorgement and prejudgment interest and $2.1 billion in civil penalties. More than half of that $8.2 billion came from the monetary judgment the SEC secured following its jury trial win against Terraform Labs and Do Kwon, its principal, who were both charged with one of the largest securities frauds in U.S. history. The SEC returned $345 million to harmed investors in fiscal year 2024, marking more than $2.7 billion returned to investors since the start of fiscal year 2021. 

The SEC reported receiving 45,130 tips, complaints, and referrals in fiscal year 2024, the most the SEC has ever received in one year. This figure includes more than 24,000 whistleblower tips. The SEC, in turn, issued whistleblower awards totaling $255 million. The Commission also authorized a series of settled enforcement actions to address violations of the Dodd-Frank whistleblower protection rule, which prohibits market participants from taking retaliatory actions against whistleblowers for contacting the SEC. 

While 2024 was a robust year for enforcement, we expect that 2025 will still be a busy year for the SEC. We anticipate the SEC will shift toward other enforcement priorities and potentially signal new substantive guidance in areas such as crypto enforcement while recalibrating in other areas, such as financial statement disclosure requirements and record keeping requirements. We also expect the SEC to continue to look at individual conduct in financial fraud and insider trading cases. We will continue to provide updates as the year progresses.