Paul Atkins testifies before the Senate Banking, Housing, & Urban Affairs Committee during his confirmation hearing to be Chairman of the U.S. Securities and Exchange Commission, on Thursday, March 27, 2025. Photo: Diego M. Radzinschi/ALM
The Securities and Exchange Commission chairman on Tuesday described the agency's handling of off-channel communications over the last couple of years as "not the way a regulator should act."
SEC Chair Paul Atkins was responding to a question posed by Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, at the group's annual meeting in Washington, about his thoughts on "e-communication, off-channel, the whole issue around that — the uncertainty."
Said Atkins: "We have to address that."
Atkins noted during a recent speech that the agency "must go after cases of genuine harm and bad acts, but we must view cases of benign or innocent actions differently. In the past, we have seen examples of enforcement actions in areas, such as retention of books and records, that consumed excessive Commission resources not commensurate with any measure of investor harm."
In an Oct. 15 letter, SIFMA urged the SEC to modernize the communications and records retention rules for advisors and brokers. The settlements in the SEC’s off-channel communications cases "starkly exposed the challenges of complying with the existing communications retention requirements under federal securities laws," SIFMA said. "The SEC brought over 90 cases, imposing penalties of over $2.2 billion and burdensome undertakings on settling firms."
CAT, E-Delivery, Alts in 401(k)s
As to the Consolidated Audit Trail, or CAT, Atkins stated during the Q&A with Bentsen that his "demand on the system here is to bring the cost way down; we get way back to what's essential."
Atkins instructed agency staff in late September to undertake a comprehensive review of the CAT, which tracks orders and trades and was conceived by the SEC after the 2010 "flash crash."
"Over time, the costs of operating the CAT have ballooned beyond belief," Atkins said. "When the CAT was established, in November 2016, its ongoing annual costs were estimated to total, at the upper end, about $55 million. Unfortunately, even that estimate proved woefully unrealistic, and costs have regularly increased."
Bentsen also asked Atkins if the agency also has the authority to tackle e-delivery. "Yes, we will address that issue," Atkins said.
The Senate Banking Committee is considering a bill directing the SEC to make electronic delivery the primary means of disclosure to investors. SIFMA supports the bill.
As to private assets in 401(k) plans, Atkins said that "if you talk to pension fund managers, they'll tell you you cannot have a balanced, diverse portfolio if you don't have exposure these days to the private markets. So we need to have that ability for, especially for investors through 401(k) plans or through their pension plans, to be exposed to that — but within reason."
SEC Chair Paul Atkins. Credit: Diego M. Radzinschi/ALM
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