Welcome to our biweekly recap, where we curate the top compliance news and insights from various industry publications. We have selected the most relevant and important updates related to regulatory compliance, industry news, and critical updates.
Today’s recap focuses on the impact of the election on the regulatory landscape, Trump’s new SEC Chair nomination, AI governance, SEC enforcement for fiscal year 2024, and the courts overturning another SEC rule.
Here are our top compliance articles as of December 6, 2024:
Trump Picks Paul Atkins to Run the S.E.C. (Authors – Matthew Goldstein and David Yaffe-Bellany, New York Times)
“President-elect Donald J. Trump picked Paul Atkins to serve as chair of the Securities and Exchange Commission, turning to a pro-business conservative and former regulator to run the agency that is in charge of protecting investors from fraud and malfeasance on Wall Street…
Mr. Atkins, 66, who was an S.E.C. commissioner under President George W. Bush, is a well-known, and generally admired, figure in Washington legal circles and the securities regulatory community. In the early 1990s he worked at the S.E.C. during both Republican and Democratic administrations.
He is also seen as a strong advocate for looser regulation of crypto assets — an issue that Mr. Trump adopted as part of his campaign.”
How AI Governance Can Adapt to a Fragmented Regulatory Landscape (Author – Tammy Whitehouse, Wall Street Journal)
Unlike the EU, which has formalized widespread AI governance, firms within the United States are facing “patchwork of state legislation, federal agency guidance, professional frameworks, and varied enforcement approaches, creating a fragmented landscape for commercial organizations to understand and navigate as they continue innovating with the rapidly advancing technology.”
Because firms do not have a singular reference point for AI-related rules and regulations, many firms are assessing their own internal controls and looking towards frameworks put out by bodies like NIST. The article suggests the following best practices for any firm/organization looking to put more stringent AI protocols into place:
- Formalize and build out AI governance programs
- Define tone at the top
- Inventory AI uses and classify risks
- Mitigate risks and install ongoing monitoring
- Adopt a continual improvement mindset
With Gensler exiting, SEC hits $8.2B record for fines (Author – Dan Shaw, Financial Planning)
“The Securities and Exchange Commission announced Friday that it had brought in $8.2 billion in “financial remedies” in its 2024 fiscal year, which ended on Sept. 30. That far exceeded the previous record of more than $6.4 billion set in its 2022 fiscal year.”
Of note in this year’s enforcement stats:
- Off-channel communications and Marketing Rule violations were some of the most common penalties
- Firms which self-reported and worked with the regulator were often given significantly reduced fines and penalties
- Of the 583 enforcement actions, 431 were stand-alone cases while 93 were follow-on proceedings
Court Strikes Down SEC Dealer Rule: SEC Roundup (Authors – Nicolas Morgan and Tom Zaccaro, ThinkAdvisor)
In this month’s roundup, Nicolas Morgan and Tom Zacarro are joined by Marisa Coppel to discuss “A federal court in Texas recently struck down a rule issued by the SEC in February that expanded the definition of “dealer” so broadly that it would have required SEC registration for many private fund advisers as well as everyone from software developers to the Federal Reserve….[as well as a] pair of rulings in parallel cases in which the judge concluded that the SEC had exceeded its statutory authority in promulgating the rule.”
What Trump’s next administration will mean for financial regulation (Author – Dan Shaw, Financial Planning)
Following the election night win for Trump, many are predicting how the change in executive leadership will impact the regulatory landscape. Trump made his pro-crypto and anti-regulation stance relatively clear during his campaign, so it would follow suit that the compliance regulations will be significantly impacted following his inauguration. The article lists several areas likely to be impacted, including:
- Slowdown in “penalty only” cases
- Putting the brakes on new rule
- Less ‘stick,’ more ‘carrot’ with crypto
- ‘Kinder, gentler SEC’
- States step up
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