What Will Be Left of the SEC When Paul Atkins Arrives?

Acting SEC Head Remakes Agency Before Trump Pick Confirmed

“There has never been anything this dramatic or far-reaching as what you’re seeing now,” said Joel Seligman, a law professor at the University of Washington in St. Louis and SEC historian.

The agency has to proceed carefully, Seligman and four other academics warned in a public letter published this month. Staffing cuts and fewer eyes on the markets didn’t bode well during the 2008 financial crisis, they said, and market players may take advantage of investors if they perceive the SEC as weak or too overloaded to take on enforcement actions.

“With growing concern, we fear that we are watching the SEC face a death by 1,000 cuts,” the professors wrote. “The end result might be a shell of its former self, as the SEC becomes an agency with little power, capacity or independent judgement.”

Debunking a Post-Jarkesy Oxymoron: “Equitable” Administrative Sanctions

When the Supreme Court ruled last year in Jarkesy that the Securities and Exchange Commission can no longer impose civil monetary penalties in its juryless home-court administrative tribunals, a consensus quickly emerged that the agency can still use those administrative tribunals to prosecute cases that threaten only non-monetary “equitable” sanctions—such as industry bars and suspensions, disgorgement, and cease-and-desist orders.

That consensus is profoundly mistaken, and it needs to be refuted at every available opportunity before the SEC successfully convinces some unsuspecting court to go along with it.

Stated as simply as possible, the SEC has no lawful power to adjudicate cases in equity, nor to dispense remedies in equity. None.

Paul Weiss—and Big Law—Face ‘An Existential Threat’ Amid Intensifying Trump Administration Pressure

President Donald Trump’s order targeting Paul, Weiss, Rifkind, Wharton & Garrison late Friday may inflict significant damage to the New York law firm, both in client matters and in a larger battle for top talent, according to legal experts and observers.

It’s also part of a wider strategy that the Trump administration appears to be waging against many in Big Law. Just on Monday, Trump’s EEOC said it was investigating 20 law firms for its DEI programs and policies, including many top Am Law 100 firms.

Friday’s order against Paul Weiss also called out “global law firms” that it alleges have undermined the judicial process. Meanwhile, Steven Bannon, a conservative strategist, said the Trump administration is seeking to bankrupt “major firms.”

“They’re not going to be walking around making four and five, six million bucks a year because he’s going to put those law firms out of business. Let me repeat this. There’s major law firms in Washington, D.C. and … what we are trying to do is put you out of business and bankrupt you,” Bannon said in a televised interview posted on Thursday.

SEC Enforcement Director Loses Obama-Era Subpoena Authority

The SEC under Trump-appointed leadership is widely expected to target traditional fraud rather than disclosure-based infractions, setting itself apart from Biden-era Chair Gary Gensler and perceptions he was too aggressive cracking down on climate and other disclosures.

Stripping the enforcement director of the delegated order authority may have the unintended consequence of shifting more investigations toward regulated entities that are already required by the SEC to respond to information requests, according to Melissa Hodgman, a partner at Freshfields LLP and former associate director in the SEC’s enforcement division.

But SEC probes can also accomplish a lot informally without an order, she noted.

Gary and the commission already took formal order authority off the plates of the associate directors, so it had already been pulled to the director level,” she said. “My teams and I did investigations soup to nuts without getting a formal order.”

Gap Flags DEI Scrutiny as New Risk Factor in Shareholder Report

The Gap, Inc. told investors on Tuesday that heightened scrutiny of corporate diversity, equity and inclusion initiatives posed a risk to its business.

In its 10-K annual report, the clothing giant pointed to mounting attention on DEI, adding that “negative perception of our diversity, equity, and inclusion initiatives, whether due to perceived over or under pursuit of such initiatives, may likewise result in criticism as well as potential litigation or other adverse impacts.”

The retail chain also joined dozens of companies in shifting how it refers to diversity in its annual report, using “inclusion and belonging” instead of “diversity, …

Cybersecurity and the Duty of Oversight

In the immediate aftermath of the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, which revitalized so-called Caremark claims for breach of the duty of oversight, one question I was asked was whether claimants might seek to assert breach of the duty of oversight claims in the context of cybersecurity and data privacy issues. Claimants did, in fact, subsequently raise Caremark claims in connection with the high-profile date breaches at Marriott and SolarWinds, but in each case, the Delaware Chancery Court granted the defendants’ motions to dismiss (as discussed here and here, respectively), raising questions about the viability of duty of oversight claims in the cybersecurity context.

Notwithstanding the less than promising track record for these kinds of claims, in a recent article, NYU Law Professor Jennifer Arlen argues that cybersecurity-related claims for breach of the duty of oversight should support Caremark liability in at least one class of cases – that is, cases relating to companies for whom cybersecurity is a “mission critical legal risk” and in which it is alleged that the company had inadequate cybersecurity that risked (and later caused) substantial harm to businesses and government agency customers, and that the company had misled the customers through statements that were designed to defraud the customers into believing that the company’s cybersecurity systems were materially better than they were….