The Changing Tides of the SEC Under the Second Trump Administration

From the moment the second Trump presidential term became a reality in November 2024, it was widely expected that the Securities and Exchange Commission (SEC) would undergo broad changes under a Republican-led commission focused on rolling back many of the Biden administration’s regulatory and enforcement initiatives. What was not expected was how quickly the shifting priorities would come to fruition once President Donald Trump was inaugurated on January 20, 2025. Below, we analyze certain areas of the SEC where many expect a change in priorities, along with a summary of actions already taken by the SEC since Trump took office.

Rulemakings

Since the SEC’s formation in 1934, the agency’s mission has been to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation. We should expect the SEC under the second Trump administration to scale back rulemakings adopted under the Biden administration and former Chair Gary Gensler that many viewed as increasing impediments to one of the SEC’s core missions of capital formation. The freeze on any ongoing or recently finalized regulations began on January 20, 2025, with the issuance of an executive order by Trump, “Regulatory Freeze Pending Review,” which directed federal agencies – including the SEC – to stop all rulemaking activity pending within an agency and consider all rules already published as paused for 60 days. Additionally, on February 18, 2025, Trump issued another executive order, “Ensuring Accountability for All Agencies,” with the stated purpose of making federal agencies – including the SEC – “truly accountable to the American people” by exercising “Presidential supervision and control of the entire executive branch,” with the expected impact of such action causing all independent agencies to seek approval from the White House prior to any rulemakings moving forward.

Below is a summary of where certain rulemakings currently stand and what is expected of future rulemakings under the second Trump administration’s SEC.

Environmental, social and governance (ESG) matters and climate-related disclosure rules

On March 6, 2024, the SEC finalized a set of climate disclosure rules that were proposed by the SEC in 2022. As anticipated, once adopted, the rules quickly faced litigation, including a series of cases that were consolidated into a single proceeding before the US Court of Appeals for the Eighth Circuit. On February 11, 2025, we saw one of the first steps of the rulemaking scale-back operation noted above, when Acting Chair Mark Uyeda issued a statement explaining that he directed SEC staff to request the Eighth Circuit not to schedule oral arguments on the challenge to the SEC’s climate-related disclosure rules until the SEC decides whether to continue defending them. Uyeda’s decision to stall all SEC staff work on the legal defense of the climaterelated disclosure rules essentially puts an end to a set of disclosure rules that experts had long anticipated would not move forward given Trump’s anti-ESG stance – especially with respect to the SEC’s disclosure regime. It also is widely expected that a 2022 proposed rulemaking that would require investment advisers and registered funds to provide standardized ESG information to the SEC and their investors will not be adopted by the SEC under the new administration.

Periodic disclosure and governance requirements

With respect to periodic disclosure requirements, it is expected that few, if any, new disclosure requirements will be mandated under the second Trump administration’s SEC. However, it is expected that many of the initiatives adopted under the Biden administration – and under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) – with respect to periodic disclosures will be rolled back or rescinded altogether. This includes:

• Human capital management – While the SEC’s rulemaking agenda still lists the status of this rule, which was expected to enhance company disclosures related to human capital management due to a perceived lack in meaningful disclosure provided by companies under the current principles-based rule, as being in the rule proposal stage expected for October 2025, it is now expected that the SEC will not pursue the proposed rule under the Trump administration.
• Corporate board diversity – On December 11, 2024, the US Court of Appeals for the Fifth Circuit invalidated the Nasdaq Board Diversity Rule that had been approved by the SEC as not being consistent with the purposes and requirements of the Securities Exchange Act of 1934 (Exchange Act), and vacated the SEC approval. Further, while the SEC’s rulemaking agenda still lists the status of an SEC disclosure rule, which was expected to enhance company proxy disclosures about the diversity of board members and nominees, as being in the rule proposal stage expected for October 2025, it is now expected that the SEC will not pursue the proposed rule under the Trump administration.
• Rule 14a-8 shareholder proposals – While the SEC’s rulemaking agenda still lists the status of a rule, which was expected to amend Rule 14a-8 under the Exchange Act to narrow certain substantive bases for excluding shareholder proposals, as being in the rule proposal stage expected for October 2025, it is now expected that the SEC will not pursue the proposed rule under the Trump administration. In addition, the SEC’s Division of Corporation Finance recently issued long-expected new guidance in the form of Staff Legal Bulletin No. 14M (February 12, 2025), which rescinded prior SEC staff guidance issued under Gensler and reinstated previous guidance related to Rule 14a-8 issued under prior Chair Jay Clayton. Further, the SEC may amend Rule 14a-8 to increase the ownership thresholds regarding submission of Rule 14a-8 proposals.
• Dodd-Frank related rules – While it is uncertain whether rules adopted pursuant to Dodd-Frank will be repealed given the need for congressional action to do so, at a minimum, it is expected that the SEC and its staff will reign in enforcement and compliance priorities related to pay versus performance, CEO pay ratios, conflict minerals, mine safety and resource extraction disclosures.

Capital raising

Against the backdrop that the Trump administration believes the prior SEC failed in its mission to facilitate capital formation, it is anticipated that the SEC under Trump will institute a number of capital-raising initiatives through potential rulemakings and guidance. The SEC began the implementation of this mandate almost immediately after President Trump took office when on January 23, 2025, the SEC issued Staff Accounting Bulletin No. (SAB) 122, which rescinded the interpretive guidance included in SAB 121 with the decision coming after extensive feedback from stakeholders, including major banks and cryptocurrency firms, and will likely have significant implications for companies involved in safeguarding digital assets. Further, it is anticipated that many of the sought-after initiatives for SEC reform and rulemaking outlined in the 2025 Presidential Transition Project, or Project 2025, being organized by the Heritage Foundation will be addressed by the SEC in the near future. This includes:

• Amending the Securities Act of 1933 (Securities Act) to define what a “security” is in the area of digital assets and provide registration and disclosure requirements for cryptocurrencies and other digital asset offerings under the Securities Act.
• Broadening the definition of “accredited investor” under Regulation D or eliminating the accredited investor restriction entirely.
• Allowing Rule 506 offerings under Regulation D to self-certify accredited investor status.
• Exempting micro-cap offerings from the registration requirements of the Securities Act, presumably beyond the current requirements of Rule 504, which are limited to $10 million in any 12-month period.
• Abolishing Rule 144 under the Securities Act and other restrictions on securities resales under the Securities Act.
• Redefining and simplifying large accelerated filer, accelerated filer and smaller reporting company filer status;
• Loosening the requirements for a company to qualify as an emerging growth company (EGC), increasing the EGC on-ramp for complying with existing disclosure requirements and extending the duration for which an EGC would retain EGC status; and
• Revisiting quarterly reporting for public companies, potentially eliminating quarterly reporting entirely for certain issuers, such as emerging growth companies and smaller reporting companies.

Given the SEC has broad powers to amend its existing rules, forms and regulations without seeking congressional approval, it would not be surprising if many – and potentially all – of the capital-raising initiatives outlined above are implemented by the SEC under the Trump administration.

Enforcement activity

The SEC’s Division of Enforcement will very likely change its priorities under the new Trump administration, especially with Trump’s nomination of pro-deregulation and crypto enthusiast Paul Atkins as SEC chair. Under President Joe Biden, Gensler pursued a broad and aggressive enforcement agenda, with critics contending that the SEC pursued “regulation by enforcement” in areas like cryptocurrencies and digital assets, ESG, cybersecurity and artificial intelligence (AI), and a “broken windows” policy that sought to punish even the smallest infractions in order to deter more serious violations. With Republican commissioners Hester Peirce and Uyeda expected to have influential roles on the 10th floor at the SEC, an Atkins-led commission is anticipated to pare back the “regulation by enforcement” and “broken windows” themes under Gensler’s SEC – including stalling its pursuit of internal controls violations, reducing corporate penalties, and focusing more on “bread and butter” securities fraud matters, such as insider trading, ponzi scheme and accounting fraud cases.

A summary of what to expect from an Atkins-led SEC with respect to enforcement priorities in certain key areas is discussed below.

Crypto and digital assets

With respect to digital assets, Gensler’s SEC took the position that most digital tokens are securities under the Howey test formulated in the infamous case, SEC v. W. J. Howey Co., and thus, must be registered under the Securities Act. In Howey, the US Supreme Court held that an investment contract is a “security” under the Securities Act if it involves “an investment of money in a common enterprise with profits to come solely from the efforts of others.” This approach led to the often-criticized “regulation by enforcement” approach to digital assets, which resulted in a number of SEC enforcement settlements and fines against cryptocurrency and digital asset issuers. However, as noted above, it is expected that an Atkins-led SEC is likely to propose new regulations to clarify the definition of digital assets and curb its enforcement priorities of unregistered securities offerings of digital assets to only those circumstances where fraud and abuse is evident. This is further exhibited by the recent establishment of the SEC’s new Crypto Task Force, led by Peirce and charged with developing a “comprehensive and clear regulatory framework” for crypto assets. The SEC’s establishment of the Crypto Task Force shows an immediate focus from the SEC on cryptocurrencies and digital assets and could shed some early light on what the SEC’s priorities in this area will look like.

Cybersecurity

Uyeda and Peirce have long been critics of the SEC’s enforcement actions against victims of cybersecurity attacks, taking the position that the SEC’s enforcement actions in this area are based on little more than hindsight and immaterial details. As a result, similar to the SEC’s enforcement priorities related to cryptocurrencies and digital assets, the SEC’s priority with respect to cybersecurity enforcement will likely focus more on broader cybercrimes against retail investors and pare back the SEC’s recent efforts to bring cybersecurity controls within the scope of a company’s internal accounting controls. The SEC’s recent announcement on February 20, 2025, of the creation of a Cyber and Emerging Technologies Unit within the Division of Enforcement to “focus on combatting cyber-related misconduct and to protect retail investors from bad actors in the emerging technologies space” further emphasizes the Trump administration’s evolving approach to cybersecurity.

ESG enforcement

The SEC’s ESG enforcement initiatives also are likely to fade away under an Atkins-led SEC. As noted above, the SEC has already signaled the beginning of the end to the climate-related disclosure rules, and the proposed rules related to ESG disclosures will likely be abandoned. As a result, absent indicia of fraud, wrongdoing and/or harm to investors, it is likely the SEC will not pursue enforcement cases related to ESG disclosures alone.

Corporate penalties

Under Gensler, corporate penalties and disgorgement reached record highs. But Republican commissioners have long criticized the SEC’s high corporate penalties, arguing that disproportionately large settlements drive out legitimate market participants and punish the wrong parties, usually shareholders. Accordingly, we should expect an Atkins-led SEC to favor smaller corporate penalties and to focus more on punishing individual bad actors with stricter penalties and fines.

Foreign Corrupt Practices Act (FCPA)

On February 10, 2025, Trump signed an executive order, “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.” The order directs the US attorney general to review and update guidelines and policies governing the FCPA and to cease initiating any new FCPA investigations and enforcement actions. The order focuses solely on the Department of Justice’s actions, meaning that it does not affect the SEC’s civil enforcement of the FCPA’s anti-bribery and accounting provisions against publicly traded companies. However, this may be subject to change in the future.

In summary, the Trump administration’s priorities and focus areas related to the SEC’s rulemaking and enforcement initiatives are well underway. With the US Senate confirmation of Atkins as SEC chair expected to occur in early-to-late spring 2025, it is anticipated that many of the rulemaking initiatives and changes in enforcement priorities outlined above will take further shape shortly thereafter.