September 1, 2026
This article was adapted from June 18 remarks at the National Association of Pension Attorneys (NAPPA) 2026 Legal Education Conference, where Daniel participated in a panel titled “The Evolving Enforcement Priorities of the SEC and Its Impact on Institutional Investors.
When President Trump named Paul S. Atkins as SEC Chair, we had a good sense of what institutional investors could expect to see from the second Trump Administration’s version of the Commission.
As SEC Commissioner from 2002-2008, Chair Atkins favored measures that encouraged capital formation and vigorously opposed what he saw as overzealous enforcement and burdensome regulation. So, we certainly expected to see these characteristics impact the agency’s direction.
With 18 months of data now in hand, we no longer need to speculate. SEC enforcement actions against publicly traded companies and their subsidiaries have declined sharply under the current administration. Accompanying that shift, the SEC has proposed or enacted policy and process changes that further erode investor protections.
A Shift from Enforcement Actions Against Public Companies
During the fiscal year ending September 30, 2025, the SEC brought 30% fewer enforcement actions against public companies and subsidiaries than the year before, according to analysis of the agency’s own data1. Strikingly, outgoing Chair Gary Gensler initiated 52 of the 56 cases filed in fiscal year 2025. The Atkins SEC initiated only four new enforcement actions in the second half of fiscal year 2025, the lowest total in a changeover year since at least 2013.2 Monetary settlements for FY2025 totaled $808 million, half the average annual amount over the previous decade.
The pattern has continued into this year, with the SEC starting enforcement actions against only five public companies in the first half of 2026. Further, the SEC dismissed three enforcement actions against public companies and subsidiaries during FY2025 and the first half of FY2026, including one against crypto company Coinbase. There had been no such dismissals for at least 16 years, the report noted.3
As it has deemphasized its enforcement role, the SEC also has reduced its workforce, encouraging employees to leave by offering voluntary departure incentives and imposing unpopular requirements, such as requiring employees to work in the office full-time. These measures contributed to 18% of SEC Enforcement employees leaving during the 2025 fiscal year, the Government Accountability Office reported in March. The SEC overall lost approximately 1,300 employees during that same period.
Those enforcement actions the agency has brought target investment advisor fraud, Ponzi schemes, and other small cases affecting retail investors rather than the cases against major public companies that are most important to institutional investors. All these actions are consistent with the SEC’s view of its role. In his public remarks, Chair Atkins has emphasized the agency’s focus on capital formation—pledging to “Make IPOs great again,” for example—and his desire to leave corporate governance standards to the states. “We must stay in our lane as a disclosure agency and not a merit regulator,” he said in May.
Finally, a procedural change requiring staff to get Commission approval before starting any investigation will certainly slow, if not completely block, investigations sought by the Division of Enforcement
Political Considerations
Fueling the perception that some enforcement decisions may be based more on political considerations than merits is a series of cases in which the SEC either dropped investigations after criminally convicted defendants received presidential pardons or resolved cases for relatively small amounts.
They include actions involving Elon Musk, who paid $1.5 million to settle a case alleging he saved 10 times that amount by misleading investors at the time of his acquisition of Twitter; Justin Sun, a Chinese businessman who invested at least $75 million into Trump-backed crypto tokens and likewise resolved SEC claims for a relatively modest amount; and Trevor Milton, the founder of hydrogen truck startup Nikola. Milton donated $1.8 million to President Trump’s re-election campaign and received a pardon after being convicted of multiple counts of securities fraud. The SEC later dropped its enforcement action against him.
Reuters also reported that SEC Director of Enforcement Meg Ryan resigned after serving for approximately six months due to her concerns that political considerations were impacting SEC enforcement decisions.
Policy Changes
Finally, the SEC under Atkins has proposed or carried out policy changes that could further diminish long-established investor protections and rights to sue in court.
In September 2025, it published a policy statement saying it would no longer refuse to accelerate its approval of IPOs that included mandatory arbitration clauses and class action waivers in IPO documents.
In November 2025, the SEC’s Division of Corporate Finance announced a policy shift that gives companies more leeway to exclude shareholder proposals from proxy materials, saying it would no longer respond to most requests for no-action letters—assurances that it would not take enforcement action against issuers for excluding the proposal.
In May, the SEC rescinded a longstanding policy that had prohibited settling defendants in enforcement actions from denying allegations contained in the written settlement. Now defendants can settle with the SEC while maintaining their innocence.
The SEC has recently proposed allowing public companies to file semi-annual financial reports, rather than the quarterly disclosures required for many decades. This change, if adopted, would result in less disclosure and less timely information for investors.
The Irreplaceable SEC
Why is the SEC’s evolution away from enforcement actions against public companies and robust regulation a threat to institutional investors? After all, investors—at least for now—retain their ability to sue publicly traded companies under federal securities law. Can’t they just fill the void left by the shrinking regulatory agency? The simple answer is no.
Private litigants lack many of the substantive and procedural tools available to the government agency. The SEC has the authority to obtain federal injunctions to combat securities law violations; the SEC can bring fraud claims without pleading or proving reliance or loss causation; and the SEC does not need to maintain their cases as class actions. Investors have none of these advantages in litigation.
Nor does the SEC need to comply with any of the stringent requirements imposed on private plaintiffs by the Private Securities Litigation Reform Act of 1995. The SEC can conduct fact discovery before it files a complaint while securities class action plaintiffs must overcome a motion to dismiss before gaining access to internal company documents and testimony. And the SEC need not show judges a strong inference of scienter—fraudulent intent—to overcome that motion to dismiss.
In short, less SEC enforcement will allow more unlawful conduct to go unaddressed or escape consequences for longer periods of time. Moreover, SEC actions often serve as a trigger or notice to investors of potential misconduct. Without notice of SEC investigations or enforcement actions, some misconduct will never be unearthed by private plaintiffs or will be discovered later, meaning more investor losses and harm.
Underscoring the need for robust SEC enforcement, a 2020 article in the Administrative Law Review concluded that parallel SEC enforcement actions benefited private securities litigation. From 2009 to 2018, about 20% of securities class action settlements had parallel SEC enforcement actions. Those securities class actions were less likely to be dismissed, settled faster, settled for more money, and were more likely to attract institutional lead plaintiff, the study found.4
Conclusion
With the SEC voluntarily reducing its enforcement of federal securities laws against public companies, pension funds and other institutional investors are now the last line of defense against securities fraud. As such, they should factor in the SEC’s diminished role as enforcers when considering whether to pursue federal securities class actions or file shareholder derivative actions that address corporate misconduct. At this high-stakes inflection point, it falls to institutional investors to act assertively to preserve their rights and the rights of all investors.
- See: SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2025 Update.
- See id.
- See: SEC Enforcement Against Public Companies and Subsidiaries in 1H FY 2026 | Cornerstone Research.
- Alexander Platt, “Gatekeeping’ In the Dark: SEC Control Over Private Securities Litigation Revisited,” p. 48. 2020 Administrative Law Review.