"Is Regulation by Enforcement Dead Under Atkins?"

Is Regulation by Enforcement Dead Under Atkins?

The SEC’s enforcement activity has slowed to a crawl. In the first half of fiscal year 2025, the SEC filed 362 cases. In the second half? Only 144. The typical September surge of 200-plus enforcement actions to close out the fiscal year was a mere 47.

Why the “unprecedented slowdown”? Hosts Morgan and Zaccaro are joined by Dr. Jan Jindra and Dr. Adrienna Huffman, two former SEC financial economists now with the Brattle Group. They dive into their new report, which analyzes the numbers behind the dramatic policy shift from the Gensler-led Commission to the new Atkins administration.

Agency Litigation Powers May Be in Trump’s Sights, Official Says

The Trump administration may target the independent litigation authority of federal agencies if the Supreme Court grants the president the power he seeks to fire executive branch employees at will, a senior Justice Department official said.

Federal law allows certain agencies like the Federal Trade Commission and the Labor Department to represent themselves in court, and in some instances to prosecute cases without requiring direct oversight from the White House. The independence is intended to insulate the agencies from political pressure.

That independence also makes it challenging for the president to direct their policy making, civil division head Brett Shumate said at the Federalist Society’s annual lawyers conference in Washington on Thursday.

“We don’t see their briefs. We don’t control their litigation,” said Shumate, who participated on a panel about the administration’s priorities. “But maybe that will change in the future if all these removal cases turn out in the president’s favor.”

Key Takeaways from Securities Enforcement Forum 2025: Insights on the New Era of Securities Enforcement

The morning kicked off with Sarah Heaton Concannon moderating an insightful discussion on parallel investigations. Jonathan Barr noted that while DOJ enforcement has been steadily declining for decades, SEC enforcement has increased. Particularly striking was his observation that 25% of FBI white collar agents have been reassigned to cartel work, though SDNY continues searching for resources. Other agencies are stepping in — SEC IG is supporting fraud cases and Postal Inspectors are ramping up financial fraud work.

Alex Koch predicted we’ll see different focuses from the SEC, with parallel investigations continuing but with different partners. He highlighted increased involvement of state AGs, a focus on Chinese issuers, and more OCC debanking cases. Susan Markel reminded the audience that accounting issues and internal control investigations will remain steady, though criminal parallel investigations may decrease while embezzlement work continues. She noted that pre-Enron, selling criminal financial fraud work to DOJ was difficult — now cases that start civil can evolve to criminal when you “poke the bear” of SEC staff.

Judge Declares Mistrial in MIT Grad Brothers Fraud Case

A jury was unable to reach a verdict in the fraud trial of two brothers, both recently graduated from the Massachusetts Institute of Technology, who were accused of stealing roughly $25 million in cryptocurrency from traders on the Ethereum blockchain.

US District Judge Jessica Clarke declared a mistrial Friday in the case against James Peraire-Bueno, 29, and his brother Anton, 25, after a highly technical three-week trial. Jurors deliberated for three days, but they told the judge they would be unable to reach a unanimous decision. […]

The trial had focused on controversial crypto trades known as “sandwich attacks,” which use bots to place large trades before and after another user’s transaction. The attacker profits by selling immediately after driving up the price at the expense of the sandwiched user.

The brothers, who developed a complex strategy to seize attackers’ funds, argued their actions were fair game in an unregulated market. The government contended their actions were a straightforward theft.

Changing the Mindset About Securities Class Actions

The current state of SCA litigation is characterized by a high settlement rate and a lack of proving the merits of a case, which benefits the plaintiffs’ bar. To combat this trend, a concerted effort must be made to defend more SCAs through summary judgment or trial. To do this, defendants, defense counsel, insurers, and brokers need to work collegially to pick the right cases in which to test the merits. Only by testing the merits more often can we restore balance and break the cycle of ever-increasing lawsuits and D&O costs.

Bottom line: More SCAs need to be litigated, even through trial.