HOUSE APPROPRIATIONS FINANCIAL SERVICES & GENERAL GOVERNMENT SUBCOMMITTEE HEARING WITH SEC CHAIRMAN ATKINS
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On May 20, the House Appropriations Committee Financial Services and General Government Subcommittee held a hearing entitled “Oversight Hearing of the U.S. Securities and Exchange Commission,” with SEC Chairman Paul Atkins as the witness. Chairman Atkins’ testimony is available here.
Key Takeaways
- Chairman Atkins discussed the importance of adhering to the Administrative Procedure Act (APA) and ensuring that rules are clearly defined, tailored to statutory authority, and responsive to public and interagency input. He outlined his continued review of all rules finalized between inauguration and April 21 to evaluate whether any should be rescinded or revised, alongside targeted and commonsense Commission reorganization. He described how outdated or duplicative rules, if left unaddressed, can inhibit innovation, increase compliance costs, and detract from U.S. leadership in markets and economic innovation.
- Atkins emphasized the need for a rational and tailored regulatory framework for digital assets, citing significant legal uncertainty over what constitutes a security and framing uncertainty as an inhibitor of innovation, capital formation, and market efficiency. He called for clear regulatory lanes and defined jurisdiction to guide market participants and investors, alongside delineating authority between the SEC and CFTC to avoid regulatory gaps and ensure jurisdictional clarity. He noted that existing authorities under the Securities Act, Exchange Act, and Investment Company Act provide flexibility to accommodate emerging technologies as he pledged to work with Congress to establish clear, fit-for-purpose rules. He confirmed that the SEC’s Crypto Task Force, led by Commissioner Peirce, is actively conducting roundtables and preparing for rulemaking.
- Atkins stated that he does not intend to create a separate division within the SEC for digital assets, emphasizing that innovation should be integrated across all Divisions rather than confined to a standalone office. He cited this reasoning as the basis for his proposal to disband the Strategic Hub for Innovation and Financial Technology (FinHub), outlining why oversight of emerging technologies should be embedded within the SEC’s broader organization and operational framework to evolve with innovation.
- Subcommittee Chairman Joyce (R-OH) criticized prior SEC leadership for imposing sweeping rules without sufficient cost-benefit analysis or public engagement, emphasizing that regulation by enforcement is counterproductive. He stressed the need to reduce regulatory burdens and supported continued cost-benefit analysis to maintain global competitiveness.
- Atkins affirmed that the SEC is actively reviewing the Consolidated Audit Trail (CAT) to assess its costs, benefits, and cybersecurity vulnerabilities, particularly regarding the collection of personally identifiable information (PII). He acknowledged the risk of data breaches and foreign adversary exploitation, emphasizing the need to strengthen system defenses and referencing ongoing SEC efforts. He stated that DOGE identified approximately $90 million in savings through reviewing overlapping contracts, as he pledged to continue evaluating the SEC’s technology infrastructure to address inefficiencies and security.
- In response to a question from Representative Alford (R-TX), Atkins stated that any decision to transfer authority over the Public Company Accounting Oversight Board (PCAOB) to the SEC is a matter for Congress to determine.
- Representatives Hinson (R-IA) and Alford questioned Atkins on the status and potential rescission of the SEC’s climate disclosure rule, referencing it in critiquing burdensome and unnecessary SEC regulations. Atkins responded that the rule, adopted in March 2024, was voluntarily stayed by the SEC following multiple legal challenges and noted the Commission is actively reviewing its position, responding to court inquiries in the coming weeks, and evaluating next steps.
SUMMARY
Opening Statements and Testimony
Subcommittee Chairman Dave Joyce (R-OH)
The Commission has already taken steps to roll back overly burdensome regulations that would have made American companies less competitive in an ever-changing global economy. Advancements in blockchain technologies and digital assets also present an incredible opportunity for American entrepreneurs, businesses, and our economy. If we do not take the lead in making the U.S. a hub for digital asset innovation, our global competitors will. Markets thrive the most when they can rely on regulatory fairness and certainty. As lawmakers continue bipartisan conversations around market structure frameworks and digital assets more broadly, the SEC and other regulators should work to provide as much clarity to market participants as possible. The newly created Crypto Task Force at the SEC has provided a forum for regulators, innovators, and market participants to collaborate and provide recommendations on regulatory framework for the digital asset ecosystem.
Subcommittee Ranking Member Steny Hoyer (D-MD)
There is significant volatility and a lack of confidence in U.S. markets, with the Trump Administration’s tariffs shocking the stock market and rattling U.S bonds. The Chairman said, “Policy making will be done through notice and comment rulemaking, not through regulation by enforcement.” I am concerned about the reduction in enforcement. The SEC ought to address the current mistrust and fraud in markets by better protecting investors and improving enforcement, not reducing it. There are reports that the SEC has lost between fifteen and nineteen percent of staff, including large reductions to legal affairs, investment management, and trading and market divisions, because of the DOGE purge. Those cuts do not save the taxpayer any money sincethe SEC is entirely fee-funded. These reductions will make it harder for the SEC to enforce laws and regulations that keep markets fair, orderly, and efficient. Since Trump took office, the SEC has sought to dismiss numerous enforcement actions, including many with direct or indirect implications for personal or affiliated financial interests. This overhaul weakens the SEC and, by extension, our markets.
SEC Chairman Paul Atkins
Congress calls on the SEC to ensure our regulations balance costs and benefits and do not become needlessly burdensome, undermining capital formation. Regulations can support innovation and investment or burden businesses’ ability to compete and serve customers. How we implement regulations at the SEC is crucial. Regulation should be smart, effective, and appropriately tailored within the confines of our statutory authority. A key priority of my chairmanship will be developing a rational regulatory framework for crypto asset markets that establishes clear rules of the road for issuance, custody, and trading, while continuing to discourage bad actors from violating the law. Clear rules are necessary for investor protection against fraud. Policy will be made through notice-and-comment rulemaking, not regulation by enforcement. The Commission will use its existing authorities to set fit-for-purpose standards for market participants. Our enforcement approach will return to Congress’s original intent of policing violations of established obligations, particularly related to fraud and manipulation. Rulemaking will return to regular order. Comment periods will not be artificially short, and the public will have ample time to provide feedback. The SEC will also be sure to take into consideration how rules overlap and how regulatory burdens build, in keeping with our obligation to consider their costs and their benefits. Targeted, common-sense reorganizations will follow. I am seeking congressional approval to disband FinHub because innovation should be ingrained SEC-wide, not limited to a small office. We have begun reviewing our technology infrastructure and contractual obligations. We will work with our colleagues in the administration, other financial regulators, and Congress to bolster the economy and build on U.S. leadership in global markets.
DISCUSSION
Representative Joyce (R-OH): Are there any rules proposed or finalized by former Chair Gensler that you are currently focused on rescinding, and are there any that you believe Congress should defund? Atkins: We are reviewing what went on between inauguration and April 21st when I got to the SEC. The notice and comment process called for by the APA is an essential way for a regulator to make informed decisions, and even getting feedback from other agencies of the government to make sure we are not traipsing beyond our bounds and affecting what other agencies and departments are trying to do. We need to have clear rules, not regulation through enforcement.
Representative Joyce (R-OH): What does a rational regulatory framework for crypto asset markets look like to you, and what type of clarity is needed for market participants? Atkins: The problem right now is the amount of uncertainty in the marketplace as to what is a security and what is not. That affects innovation, and it goes beyond crypto assets. It extends to blockchain and the potential ramifications for efficiency and safety in the marketplaces that blockchain and distributed ledger technology can bring. But if lawyers cannot even write opinions for their clients as to what is or is not a security, which is the situation right now, that inhibits everything. Capital does not flow to where it might be needed and foster capital formation in new products, which is what I mean by trying to get a rational framework. We have the authority at the SEC under the various Securities Acts, and I intend to work with Congress and my colleagues in that vein. We will also be conducting roundtables, and as we do concept releases and proposals, we will be taking in comments from those outside the SEC. The Exchange Act, the Securities Act, and the ‘40 Acts give us somewhat broad exemptive authority and authority within the public interest to make changes to our forms and to accommodate this new technology, which the SEC has done in the past, not for crypto, but for other aspects. We will definitely work with the CFTC, and I look forward to Brian Quintenz becoming Chairman if the Senate confirms him. It is good to have the SEC and the CFTC working closely with respect to these issues, ensuring nothing falls through the cracks in whatever framework we come up with as well as to make sure the spot market is looked at, and both the security side and commodity side are addressed.
Representative Joyce (R-OH): Do you plan to create a new division or office within the SEC dedicated specifically to digital assets? Atkins: At this time, no. I want to optimize the SEC’s efficiency and focus on catching and dealing with criminals, making referrals to the Department of Justice where necessary. We must have good, efficient rules that provide certainty about how to run businesses and develop new products.
Representative Hoyer (D-MD): Since your prior tenure, has the SEC seen substantial personnel reductions, particularly in enforcement, despite a significant increase in workload? Atkins: In our enforcement division, the headcount is down by fifteen, which is not as high as the General Counsel’s Office, Investment Management, or Trading and Markets. The enforcement division is at the average of the overall decrease.
Representative Ivey (D-MA): Where do you see things going with respect to the SEC and meme coins? Atkins: Meme coins are not aimed at being like bitcoin. They are a new collectible type that, as outlined by SEC staff, does not have the attributes of a security. We must explore how to carve out clear rules of the road that will help guide and govern this digital asset space. That includes working with the CFTC on where they might have jurisdiction over digital assets that are commodities and not securities. There is a collection of potential rules and uncertainty out there, as people try to parse Supreme Court rulings like the eighty-year-old Howey test and others that are not really tailored to the 21st century.
Representative Bishop (D-GA): What do you see as the SEC’s role in regulating cryptocurrency, and which aspects are most important to address to reduce fraud and eliminate effectively useless or valueless coins? Atkins: I share your concern about fraud in any market, but we have a lot of fraud in the traditional financial markets as well. In many respects, there is more transparency on the digital asset and blockchain side than cash and other sorts of things. We need to foster innovation. There are really no rules tailored for this part of the market, which has grown significantly. We need firm rules that give people direction and lanes to stay in, as well as outline our jurisdiction. Then we can take action against fraudulent activity.
Representative Hinson (R-IA): What is the status of the SEC’s climate disclosure rule, and what are the SEC’s plans for formally rescinding it? Atkins: That rule was adopted in March of last year by the Commission, but lawsuits were quickly filed in various jurisdictions. The SEC at the time voluntarily put it on ice, and that is the current status. We are actively working to figure out the next steps.
Representative Hinson (R-IA): What is the status of reviewing burdensome and unnecessary regulations at the SEC, and what does that process look like? Are you anticipating creating a public portal, like the Federal Trade Commission’s (FTC), where people can flag rules for review as potentially burdensome or anti-competitive? Atkins: Burdensome and unnecessary regulations raise costs for everybody and inhibit innovation in the marketplace due to the uncertainty of those rules, especially when they create impediments that do not necessarily balance costs and benefits. A central part of rulemaking is reviewing rules to ensure that, with changes in technology and the marketplace, we stay up to speed and make sure the rules are fit for purpose, whether that means paring back or adding, depending on what is needed. A feedback portal is a good idea. We will enter into roundtables, like on the crypto side. More generally, having something like a suggestion box is not a bad idea to address anomalies that SEC staff, not being active practitioners, may not be aware of.
Representative Hinson (R-IA): How will you address concerns about data retention and broader cybersecurity vulnerabilities, especially given adversaries potentially looking to exploit weaknesses and misuse sensitive information? What steps are you taking to protect investors and markets from the cybersecurity vulnerabilities presented by CAT? Do you think DOGE could be helpful, especially given their findings of duplicative technologies and the need for targeted investment? Have you worked with their team on suggestions for improvements? Atkins: I completely share your concern. At the SEC, we take our obligations seriously regarding the collection and dissemination of information, especially confidentiality. We are looking into this, and that is one reason I welcome the help in reviewing our information technology systems. It is time to identify gaps, strengthen our systems, and make them better. We are reviewing CAT to assess its benefits, costs, and potential vulnerabilities. All of that will be under consideration. Shoring up the defenses and integrity of our systems is incredibly critical, especially given all the information the SEC handles. I pledge to focus on that, bring in the best minds to work on solutions, and consider how we might restructure. DOGE is already at work. In reviewing overlapping contracts and efficiencies, they identified up to $90 million in savings so far. That is a great start, and they are not finished yet.
Representative Alford (R-TX): How would a provision to transfer PCAOB authority directly to the SEC improve accountability to Congress and prevent future politicization of the Board? Atkins: Congress must decide what to do with the PCOAB. We will accommodate whatever is decided, but we are fully capable of taking on the duties that the PCAOB performs. We would need resources to do that, but we will be looking at it.
Representative Alford (R-TX): Will you commit to reviewing whether continued investment in CAT is justified, given concerns over requiring brokers to submit investors’ personally identifiable information and regulators’ poor record of protecting sensitive data? Atkins: Absolutely. I share your concerns, and we will review where we stand with CAT’s costs and vulnerabilities.
Representative Edwards (R-NC): When do you expect the first Task Force report? Atkins: I would need to talk to Commissioner Peirce about that and our steps forward, but we should have something in the next few months with proposed steps forward.