An Enforcement Update with the Regional Director of the U.S. Securities and Exchange Commission

The discussion focused on organizational shifts within the SEC, the SEC’s evolving enforcement priorities in cryptocurrency and artificial intelligence (“AI”), and implications of these changes for legal practitioners and their clients moving forward.

Organizational Changes at the SEC

The panelists kicked off the event by addressing the potential impact of Trump’s deferred resignation program and return-to-work mandate on SEC personnel and the commission’s enforcement capabilities. Under the Trump administration’s deferred resignation program, federal employees — including those at the SEC — have been offered the option to resign rather than face potential terminations or reassignments. Additionally, the return to work mandate, another pillar of the administration’s restructuring efforts, requires SEC employees to return to physical offices, reversing pandemic-era remote work policies. The panelists expressed concerns about the long-term impact of these policies, as they represent significant organizational change and will reshape the SEC’s workforce.

“I’ve always been able to say the core of the job of a staff attorney, the way your day-to-day works, really doesn’t change administration over administration. I was there for Obama one, Obama two, Trump one, and part of Biden,” Rebecca Fike said, noting that consistency within the commission is generally good for companies, as it diminishes uncertainty and allows investigations to move quickly and efficiently. Now, she stressed, “it’s the first time I think we’ve really felt the impact of an administration change. And part of it is just the bated breath with which we’re waiting to see what that does mean.”

Jessica Magee remarked, “You can’t swing a dead cat without hearing about the offer to all federal employees to resign.” She also raised concerns about the “sweeping” of key enforcement positions. Rather than filling vacant roles in the coming months, the Trump administration may consolidate them or get rid of them altogether. This reduction in resources and headcount, particularly among experienced staff, could delay investigations and enforcement actions, making regulatory oversight more challenging.

Eric Werner cautioned, “There’s a lot that I don’t know and a lot I can’t comment on. But what is accurate is that there is a lot of change.” He stated, however, that the incoming chair has deep experience within the SEC, and the staff at the Fort Worth office are exceptional. Despite shifting enforcement priorities and personnel changes, he emphasized that the mission of the SEC will always remain the same — to protect investors.

Evolving Enforcement Priorities

The panelists also explored the SEC’s shifting enforcement priorities under the second Trump administration, particularly in AI and cryptocurrency. In regard to crypto, Werner stated that “it’s no surprise that this commission will take a different approach, and it seems to be through the announcement of what they’re referring to as Crypto 2.0.”

Werner emphasized that the SEC’s stance on cryptocurrency remains uncertain and evolving, as jurisdictional debates persist over whether digital assets qualify as securities. Werner stated that the world of cryptocurrency has developed, and the incoming commissioner’s statements reflect a lack of consensus over whether the SEC even has authority over certain crypto assets. Adding to this uncertainty, there have been several news articles mentioning that the SEC’s crypto enforcement unit is shrinking, which may lead to crypto-related investigations being deprioritized or decelerated.

Magee described the crypto unit shrinking in size as a “visceral reaction to what many people in the market and in government have felt was a land grab by the SEC to not just enforce on a basis of fraud, which there’s plenty of to go around, but on a failure to register as a security.” She wondered what was going to happen to cryptocurrency enforcement actions in pending litigation, noting recent public comments from Commissioner Hester Peirce about “disentangling” from them.

Fike discussed how recent case studies of SEC enforcement in AI reveal why enforcement of cryptocurrency is so difficult. She stated while AI is “flashy” and “catchy,” it’s an area where “the commission can stand on very firm ground of you can’t make misstatements to people when you’re asking them for money and when you’re making disclosures about an investment, they have to be accurate and full.” Thus, while the AI field represents a new and risky area for investors, the securities law is firm. In contrast, the SEC is still grappling with whether cryptocurrency even falls within the commission’s jurisdiction.

Despite the uncertainty surrounding both AI and crypto regulation, Werner stressed that the SEC remains committed to preventing fraud in these two industries and will likely take a case-by-case approach to enforcement in the new administration.

The Role of Cooperation Among the SEC, Practitioners and Clients Moving Forward

With the organizational shifts and enforcement priority changes upcoming in the new administration, the panelists also highlighted the increasing importance of cooperation credit and the SEC’s growing reliance on companies to facilitate investigations.

Werner emphasized that the SEC values and rewards cooperation, pointing to the Presto Automation case as a case study where sufficient cooperation from the company led to no civil penalty being imposed. He noted that the Fort Worth office receives more tips and complaints than any other SEC regional office, making resource allocation critical and cooperation essential. Werner stressed that “cooperation credit is real,” and companies that receive the benefits of cooperation with the SEC should communicate it to other public companies and those in the defense world.

Fike noted, however, that recognition for cooperation often goes unnoticed because investigation closures and cooperation credit decisions are not made public. Public companies often do not want closed investigations publicized. Similarly, Magee pointed out that, while the SEC has made strides in communicating how cooperation factors into enforcement decisions, the commission still lacks clear guidelines on cooperation credit and communicating credit decisions.

Magee highlighted that cooperation between enforcement teams and companies will become even more essential moving forward, as there will be fewer staff and resources available to handle the same workload. She stated, in light of the upcoming changes, “I would say the job of the Fort Worth Division of Enforcement and other staff around the federal government and in the SEC is going to be harder, not easier. I would submit you [the commission] will have no choice but to make cooperation more of a two-way street.”

As enforcement teams throughout the country become leaner, the SEC will have to rely more heavily on companies to facilitate investigations. The SEC’s approach may become more business-forward — prioritizing pragmatic resolutions over aggressive litigation. Self-reporting and proactive compliance will become even more critical, and companies that assist in gathering evidence and making the SEC’s job easier may see more favorable outcomes.

Final Thoughts

The panelists concluded that, while the SEC is undergoing significant transitions that will impact its enforcement strategies, the commission’s core mission of investor protection remains unchanged.

For corporate counsel and securities lawyers in private practice, staying informed and engaged with the SEC’s evolving approach will be critical to navigating the shifting enforcement landscape in the second Trump administration. Fike emphasized that, from a securities enforcement defense perspective, more information and communication from the SEC is always better for legal practitioners and their clients.

Watch the discussion.