Oversight hearings to examine the Securities and Exchange Commission.

[Gavel sounds.] Good morning. We'll call this hearing to order. What a difference a new administration makes. Not just time, a year, but the difference that leadership makes, and we are so thankful that we have new leadership at the SEC. So welcome, Mr. Atkins. Just over a year ago, under the Biden administration, Americans were dealing with an economy marred by instability and rising costs, fueled by an unaccountable federal government. Families in South Carolina felt it every single time they filled up their tanks, went to the grocery stores, or tried to plan for their future. Small businesses felt it when Washington made it harder to grow, invest, and hire. Today, we are on a different path, thank God. Under President Trump, we are refocusing on growth, opportunity, and common sense. This means clarity instead of chaos, accountability instead of bureaucracy, and a government that serves the American people, not gets in their way. Chair Atkins, the SEC under your leadership reflects that approach. This can be seen in how your SEC is addressing digital assets. For years under the Biden administration, regulation of digital asset markets took the form of regulation by enforcement. Instead of clear rules, businesses, builders, and investors were left with confusion, subpoenas, and lawsuits. And instead of innovation growing here at home, much of it was pushed overseas. That approach failed. It failed investors who deserve transparency and protection, it failed entrepreneurs trying to build the next generation of American companies, and it failed our country at a time when global competitors are racing to lead in financial innovation. Congress is now doing its job as well, working in partnership with the SEC. The Senate version of the Clarity Act is about establishing clear rules of the road for digital assets. It defines responsibilities for regulators, protects investors, and gives businesses the certainty they need to innovate in the United States while keeping consumer protection paramount. Make no mistake, digital asset innovation will happen here at home in places like Greenville, South Carolina, Atlanta, Georgia, or Cary, North Carolina, not abroad anymore. Chair Atkins, your leadership at the SEC is also bringing clarity and common sense back to how it regulates our capital markets, which of course is incredibly important. You've pledged to make IPOs great again, and I really like that aspirational approach with a little touch of optimism, helping more companies go public so more American families can invest in the next generation of companies from the very beginning. You've also committed to fixing our broken public company disclosure regime, which drives up costs and pushes firms away from our markets instead of inviting them into our markets. Under your leadership, the SEC has extended compliance dates for several costly rules finalized under Chair Gensler and withdrawn proposed rules that would have damaged our capital markets if finalized, including rules that would have imposed ESG requirements on registered funds and investment advisors. You've done important work, hard work, a lot of work, but that work is still in its infancy. After four years of dysfunction, the SEC has once again become a partner in growth, returning to its core mission of protecting investors, maintaining fair and orderly markets, and facilitating capital formation for everyday Americans. By getting the SEC back to the basics, you are helping our capital markets work better for investors, entrepreneurs, and innovators. Now Congress must do our part as well. That is why our committee here will work to advance a capital formation package known as the Empowering Main Street in America Act to help small businesses grow and expand investment opportunities for everyday Americans. In the greatest country on the planet, it should not take wealth to create wealth. If we get this right, we can improve confidence in our capital markets, keep innovation in America, and make sure the next generation has more opportunity than the last. Once again, thank you, Chair, for being here with us. I look forward to your testimony. I now turn to our ranking member.

Thank you very much, Mr. Chairman. Our markets are the envy of the world, and they deliver enormous opportunity. I want American businesses to thrive. But markets without rules mean that the wealthy and the powerful take all the gains while small businesses and workers and consumers get cheated. The SEC's job is to make sure that our markets are fair and honest. But nearly a year into running the agency, Chair Atkins is unleashing a golden age of fraud. The billionaires will cash in while millions of American businesses and families will end up paying the price. Now, as soon as he was confirmed, Chair Atkins set to work letting scammers off the hook and unraveling investor protection rules that keep everyday investors from getting cheated. At every fork in the road, he has turned toward Wall Street over Main Street. And here are just a few examples. For decades, the SEC has monitored corporations and refused to let them go public if they're scams. Now, thanks to Chair Atkins, that oversight has nearly disappeared. Investors have said over and over they want more information so they can make better decisions. But Chair Atkins is working to slash current disclosures so that companies can hide just how risky they've become. Under Chair Atkins, the SEC has also made it easier for companies to prevent investors from going to court when those investors have been cheated. Chair Atkins seems to think that if investors get cheated, they should just suck it up. The Trump SEC has made it easier for executives to silence shareholders and to ignore suggestions for improving corporate governance. And perhaps most dangerous of all, the Trump SEC has gutted oversight and enforcement tools, even proposing to dismantle the database that helps the SEC catch insider trading, market manipulation, and other corporate crime. And the proof that the SEC has largely quit enforcing the law is right there in the numbers. Over the past year, the SEC collected less in monetary penalties against bad actors than it has in over a decade. And I don't think anyone can say with a straight face that's because corporate CEOs are suddenly behaving better. For crooked CEOs and companies built on fraud, Trump's SEC is a dream come true. Atkins has taken the SEC cops off the beat, and under his watch, the SEC has cut way back on investigating companies that break the law and hurt investors. So who benefits from the Trump administration's sidelining the cops at the SEC? President Trump and his billionaire buddies. Rich CEOs like Trevor Milton and companies like Kraken, Coinbase, and Gemini who donated big time to Trump, and then the SEC cases against them suddenly disappeared. While the SEC spends its time handing out special favors, risk is building up in our financial system. And we have seen this movie before. In fact, the SEC Chair who sits here today played a starring role in an earlier financial crash. In the years leading up to the 2008 crash, Chair Atkins, who was then a commissioner on the SEC, along with other regulators, let companies flood the market with complex, risky financial products. Taxpayers ended up bailing out Wall Street while millions of people on Main Street lost their jobs, their homes, and their pensions. And here we are, 20 years after the crash, and the lesson for Republicans seems to be that so long as you take care of the big boys, Donald Trump and his friends are happy and no further investigation is needed. Once again, American families are being put at risk of losing their shirts because Trump's SEC refuses to do its job and enforce our laws. Thank you, Mr. Chairman.

Thank you, Senator Warren. Today we will hear from the Securities and Exchange Commission Chairman, Paul Atkins. Chair Atkins, we look forward to your testimony.

Okay, well, thank you very much, Chairman Scott, Ranking Member Warren, and members of the committee. It's a great honor to testify before you today. Thank you for this opportunity to discuss the work of the Securities and Exchange Commission. Nine months ago, I returned to the SEC with a clear mandate to recommit the agency to our core mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. I'm grateful to work alongside dedicated public servants who have hit the ground running in pursuit of these priorities. America's $124 trillion capital markets are the deepest and the most liquid in the world. They're a marvel of human ingenuity. Yet over the years, rules have multiplied faster than the problems that they were intended to solve. This Congress and the Trump administration are focused to bring down the cost of living for the American people, and the SEC has a vital role to play. For example, public companies spend $2.7 billion a year to file their annual reports. This is $2.7 billion that companies are not reinvesting in their businesses to create jobs. It's $2.7 billion that our disclosure regime is diverting from your constituents to corporate lawyers, accountants, and consultants. Now, this is not to say that we want to gut corporate disclosure, which is vital. But we must modernize, rationalize, and streamline reports so that they are meaningful, understandable, and not a repellent to investors. After all, how many of you would read through an annual filing like this one right here of more than two reams of paper that rivals War and Peace? Disclosure documents of that length can do more to obscure than to illuminate. For context, shortly after I left the SEC in the mid-1990s, there were more than 7,800 companies listed on U.S. exchanges. By the time I returned as Chairman, that figure had fallen by roughly 40 percent. This trajectory tells a cautionary tale that the SEC is working to rectify through the three pillars of my plan to make IPOs great again. First, re-anchoring disclosures in materiality. Second, depoliticizing shareholder meetings. And third, allowing public companies to have litigation alternatives so that we shield innovators from the frivolous and investors from the fraudulent. I also applaud the bipartisan initiatives before Congress, including those in the Senate's Empowering Main Street in America Act and the House's INVEST Act, to help keep America's capital markets open, dynamic, and above all, worthy of investors' trust. Of course, I also support congressional efforts to enact the Clarity Act. Upon its passage, the Commission stands ready to implement this landmark legislation. A federal framework for crypto markets is long overdue. Under Commissioner Hester Peirce's leadership of our crypto task force, SEC staff has provided more clarity in the past year than in the prior decade. But there is no action we can take that future-proofs our rulebook more formidably than nonpartisan market structure legislation. As Congress completes its vital work, CFTC Chairman Mike Selig and I intend to provide a bridge towards legislation. Through our now joint Project Crypto, we will consider a token taxonomy to offer both investors and innovators a clear understanding of their regulatory obligations. We will also look to consider exemptions that would allow market participants to move and transact on-chain. Finally, and most fundamentally, capital markets thrive on many factors, but they endure on trust. So the SEC is returning its enforcement program to first principles of rooting out fraud and remedying investor harm. Since I joined the Commission, we have brought enforcement actions to address offering frauds, insider trading, accounting and financial frauds, and breaches of fiduciary duty by investment advisors. Since the formation of our cross-border task force in the fall, meanwhile, we have suspended trading in the stocks of 14 Asia-based issuers upon evidence of potential market manipulation. I am working within the securities laws to protect investors from those who seek to use international borders to evade and undermine U.S. investor protections. Markets are global; investor protection must be as well. As I said at the outset of this testimony, the SEC is returning to its core mission that remains as vital today as it was when Congress set it out for us over 90 years ago. So I want to thank you and thank this committee once again for convening today's hearing. I look forward to answering your questions and to our shared work ahead. Thank you very much.

Thank you, Chair Atkins. Each member will have five minutes to ask questions. I'll start. I believe that blockchain technology and digital assets are the future of finance in so many ways in our country and around the world, frankly. If we can set up clear rules of the road, we can drive innovation here at home and make America the crypto capital of the world. I will say without questions, Chair of this committee, we have worked diligently together on market structure legislation for the last six months plus. Democrats, Republicans meeting thousands of hours at this point trying to figure out the path forward. I think it's incredibly important for us to do so, and I think it's very helpful for us to have rules of the road that are already in place. Can you speak to why providing legislative clarity for digital assets is critical for American competitiveness and protecting investors at the same time?

Well, thank you, Chairman Scott. I, yes, so really I support your efforts and I agree with you that you here in the Senate and your staff and those in the House have really spent a lot of time and energy to come up with a, you know, with what will be, I think, a very good bill once you iron out the details. So we have been providing technical assistance to both houses and on both sides of the aisle as well and spent a lot of time ourselves to try to support your efforts and help them come out in the right place. And so the real issue that is so important about this legislation is to future-proof things so that there's a clarity to innovators as between the SEC and the CFTC. I like to compare the past 40-some years as two fortresses on either side of a no-man's land with where you have innovators and other would-be new products getting, you know, bogged down in that no-man's land with a crossfire and then never really coming to market. And so we need to give people clarity as to what they need to do. And in the past, which has been the problem with SEC of the past few years, is that the SEC stayed mum. It didn't try to alter and accommodate its filings and its forms and rules to accommodate this new innovative technology. So we need firm grounding in statute so that we can't have any backsliding in the future.

Thank you. I'll turn my attention to my comment during my opening comments about the importance of not having as a prerequisite wealth to make wealth. I think it's such an important part of achieving the American dream. Obviously, owning a home is the first component of that, the foundation for most of us who think of the American dream is homeownership. For myself, that certainly was real, and then I had the blessing of starting a small business and realized that there's a big step forward if you are able to get yourself into an equity position beyond your house in America. It's critically important. Millions of Americans work hard, they all play by the rules and do well for themselves but are locked out of investment opportunities because in America today, it still takes that wealth to build wealth. And we're trying to find a way to look at the accredited investor definition and make it more flexible for people who have the knowledge and not simply the money. And I think that's an important part of what's broken about the current definition. And my IMSA, for short, Act really does put us in a position to expand the definition of accredited investor, opening the door to investment opportunities for Americans based on their knowledge and qualifications and not just how much money they have. Chair Atkins, what is the SEC doing to expand the accredited investor definition and more broadly ensure that it does not take wealth to build wealth?

Well, thank you, Senator. I really agree with your points. And so I've been now at the SEC three times over the last 35 years, and each time this has been an issue that's been debated. And so I think it is time, and as you've put in your bill, to consider other alternatives. Why should a professor making $100,000 a year who's an economist or whatever, finance professor, not be an accredited investor, but somebody who's just inherited $3 million or something like that is an accredited investor? So that's not the way that things should be. We should have ways for people who are willing to take risks and then demonstrate the knowledge that would be prerequisite to do this, whether that be by testing or something, but we need to be open for those alternatives.

Yeah, I think you just put your finger on the pulse and hopefully we'll see the next iteration of that definition coming out of the SEC sometime soon. Ranking Member Warren.

Thank you, Mr. Chairman. So the SEC is supposed to be the cop on the beat, enforce our securities laws. But Chair Atkins, you've been rolling back investor protections just at a record clip. Meanwhile, there are just as many corporate crooks as ever, you know, maybe more. Those are the crooks who are cooking the books, defrauding investors, engaging in insider trading. But under your watch, the SEC doesn't seem interested in enforcing our laws against corporate crime. So I'm looking at the data here, and over the past year, the SEC has brought fewer new enforcement actions than at any point in the last decade. Do I have that right?

I'm not sure what data you're looking at because we actually haven't released our data yet, but I would disagree with your premise.

Well, I'll tell you, I'm looking at public data. Securities offerings, for example, down 10.64 percent in 2025 from 2024. Investment advisors enforcement down 23.71 percent. Issuer reporting, auditing, and accounting down 32.65 percent. Broker-dealer down 29.51 percent. You have any reason to believe those data are wrong? These all come from publicly reported data.

Again, I'm not sure what you're looking at, but we will release our numbers soon.

Well, I'll tell you what, we'll look, let's look at individual cases then. The SEC has dropped one case after another, even for convicted fraudsters who broke the law. So there's Devon Archer, the guy who sold $60 million in worthless bonds to pension holders, you turned him loose. Carlos Watson, who raked in tens of millions of dollars by lying to investors about his company's financial performance, you turned him loose. And Trevor Milton, who drew in hundreds of millions of dollars by defrauding investors in his company, you turned him loose after he donated $1.8 million to a Trump campaign fund. Three different ways to cheat investors, but there's one thing that all three have in common. Mr. Atkins, did each of these corporate executives who defrauded American investors first get clemency from President Trump and then, as the cherry on top of the whipped cream, got all the SEC charges and investigations against them dropped?

Well, each one of those cases had particular aspects to them which you're...

Oh, I'm sure they had particular aspects. But the part I raised is did they all get clemency from President Trump and then the SEC backed off and stopped all of its independent investigations and charges? Is that accurate?

Well, there is always the issue if the President has pardoned someone or given clemency, then it becomes very difficult to push forward a case.

You still have civil actions against them. You could have, but you dropped them all. Is that right?

We withdrew.

Look, yes, you withdrew. These fraudsters stole millions of dollars from their investors. They were convicted of crimes. But after Trump granted them clemency, SEC fell in line and dropped its pending cases against them too. You know, it's part of a broader pattern. Just look at the crypto companies that donated a whopping $85 million to President Trump's inauguration. They may have scammed investors and consumers, but once Trump was sworn in, the SEC started dropping these cases like hot potatoes. Kraken donated a million dollars, case dismissed. Coinbase, a million dollars, case dismissed. Gemini donated a million dollars, case dismissed. Binance and a UAE company gave the Trump family stablecoin a huge boost in a $2 billion deal, case against Binance dismissed. As a recent independent investigation found, and I'm going to quote it, 'The SEC no longer actively pursues any cases against firms with known Trump ties. The agency backtracked in investigating every firm that has relationships with the Trump family's crypto business or has donated to Mr. Trump's political causes.' Chair Atkins, help me out here. Prove the outside investigators wrong. List the cases the SEC is still actively pursuing against crypto companies that have made big donations to Donald Trump or Trump businesses.

Well, sir, your premise again, I think, is wrong. I'm not sure what...

Just name the cases that you are actively pursuing against people or against these giant crypto companies that have made huge contributions to Donald Trump. Are there any?

I don't know. I can't say offhand I can't say which ones have cases. The ones that we have dropped...

Just one.

Just one. Were on registration issues that because the prior Commission...

Thank you, Mr. Chairman. Mr. Atkins, first of all, I'm going to give you an opportunity to actually answer the questions and to correct perhaps some of the accusations that have been made here, particularly with regard to the President. But let me just start out with something that I've, just in looking back over your work here. You made it very clear that what you wanted to do in coming back in was to reverse the trend of the number of companies that were available for small investors to be able to get in and invest in. In fact, you indicated that there were more than 7,000 companies listed on the U.S. stock exchange back in the 1990s, from small-cap innovators to giants of the industry. And yet by the time that you've returned as Chairman earlier this year, that number had fallen by roughly 40 percent, meaning that small investors had fewer places to go to actually enjoy and create their own American dream. So I come to this from a little different attitude, that I think what you're trying to do is to create an atmosphere in which small companies can grow and thrive and not simply be the ones that are managed by private equity programs. Based upon that, it seems as though you're trying to bring companies back in. Part of it has to do with enforcement and the philosophy of the appropriate way to enforce rules and regulations that the SEC is responsible for, for number one, creating and then enforcing and having oversight on. Can you talk a little bit about your philosophy, because I think that's critical at this point to give you that opportunity? Are those ongoing?

Those are ongoing, right. So we are active in this area. Fraud is fraud, whether it be in the crypto area or not. So I don't know where these other stats come from, but I take exception to them.

Thank you. I want to move back into an area that I think is really important, and that is the development of artificial intelligence and its use. Under the Biden administration, we saw securities regulation used to achieve some political and social objectives, often at the expense of investors and small businesses. I want to thank you for your commitment to returning the SEC to its core mission. Chairman Atkins, the administration's 2025 AI action plan encourages the development of regulatory sandboxes at independent agencies, including the SEC. This venue would allow SEC-regulated entities, such as broker-dealers and investment advisors, to test new AI tools... ...under structured oversight. Now I've introduced legislation with Senators Heinrich, Kim, and Tillis that would do just that, bipartisan legislation. Do you believe that our legislation would give the SEC the tools it needs to foster responsible AI innovation and could it serve as a useful model as the SEC implements the AI action plan?

Well, thank you, Senator. I haven't actually had the opportunity to review your language, happy to do that and discuss it, but the premise I agree with you very much that I think it would be very useful and I've been talking about an innovation exemption to begin that at the SEC to allow entrepreneurs in a sandbox-like environment that's cabined, time-limited, transparent, flexible, and then focused on investor protection. So all of those principles, you know, I think are important and to allow people to try different things in a particular environment and then prove their concept.

It's not going away, is it?

No.

No. Thank you. Thank you, Mr. Chairman.

Thank you. Senator Tillis.

Thank you, Mr. Chair. I'm sure you saw me come in with mixed emotions. I think you were about to wrap up the committee.

The emotions weren't mixed though.

[Laughter.] Mr. Atkins, thank you for being here. I don't know if you've paid attention to some of my comments, I've been critical of some folks in the administration. You're certainly not one of them. I'm really glad that you're leading the SEC. I've just got a real quick question for you because I'll submit some for the record, but I'm trying to wrap my head around the rationale of at least four, maybe five state-owned enterprises now in the state, or at least ownership. You think about Intel, you think about the golden share of US Steel, a couple of other countries where we have a state that ranges anywhere from 10 to 15 percent. I'm worried more about that, you know, I understand the circumstances that got us there, but I'm worried more about whether or not that raises the bar for upstarts and other businesses in that space, one. And two, when you have that level of ownership from the US government and you also have all the devices of supervision and oversight in those same companies, how is our ownership not the only vote that matters on a board?

Well, thank you, Senator. I, you know, there's those particular cases, you know, I'm not really familiar with all the details as to the decision-making there and the national security issues and whatnot. But, you know, there's entrepreneurship is, you know, the thing that really drives things here in the United States and competition is really important, you know, for our firms here. And so having government, I'm not sure that the worry about having government involvement necessarily means it's like the golden key to success that, you know, you look at other government entities that might not be so well-run.

Thank you, Senator. Senator Alsobrooks, it would be your turn. Would you like me to go to someone else to give you a few minutes, or are you ready?

I think I'm all ready.

All right. Sounds great.

All right. Good morning. Thank you so much to Chair Scott and Ranking Member Warren for holding today's hearing. Chairman Atkins, my number one priority on the Banking Committee is pursuing policies that will create real economic opportunity. And I want more of my constituents, quite frankly, not to live on the margins but to be able to build wealth, generational wealth, for themselves and their families. And so I'm not afraid to say this, and I think it means access to capital, credit, and markets, and it also means robust investor protections. And so I want to briefly mention a few topics surrounding the development of market structure legislation, which I believe is really important to underserved communities. Young people are extremely interested in these technologies, I think about my daughter and all of her friends, and we need to protect both consumers and our financial system by regulating them. So I speak for so many of my colleagues in wanting to get to a really good bipartisan product that protects investors and the integrity of our markets. And part of this process, like others have noted, means getting a full slate of Democratic commissioners confirmed to the commission very quickly. There's no reason that this White House cannot nominate qualified individuals to the positions that safeguard our financial system. Now you've spoken at length, Chair Atkins, about tokenization, the technology behind converting ownership of traditional financial assets, including securities on a blockchain. And as this technology develops, it's going to be really important that we ensure the owners of tokenized securities have all the same rights and protections as owners of traditional securities. This is vital for protecting investors and the capital markets that make us the envy of the world. Now Congress should play an important role here in providing guardrails and direction, and I'd be grateful for your continued cooperation. Do I, Chair, have your commitment in this regard?

Yes, Senator, thank you very much. But I think it goes without saying that under current law that tokenized securities are securities and we'll treat them as such and been, you know, that's our firm position at the SEC. So and I think our authority under that is clear no matter how securities are recorded, whether they're like the old-fashioned paper certificates or book entry at DTCC or whether they're traded on-chain, you know, as tokenized securities. So I'm happy to work with you and your colleagues to get you comfortable with that as you consider to work on market structure legislation, for example. But that's an important precept and, you know, we will obviously, that's I think that's clear under current law.

Thank you so much. Another important issue is preserving state consumer and investor protection laws. And Maryland's state securities regulator is at the front lines of protecting Maryland investors from fraud and misrepresentation. So Chair Atkins, do you believe it's important to protect state consumer and investor protection laws that prohibit companies from lying to or misleading investors about their business dealings or their stock offerings?

Well, so, you know, as far as I know with the generally, I don't know about the specific ones you're talking about, but generally the Securities Acts were very careful not to preempt state laws with respect to Blue Sky or other sorts of consumer issues. So offhand I can't think of an exception offhand, but I think that's a strong precept of the federalist federalism sort of approach was taken.

Okay. Thank you. Now Maryland's one of the most entrepreneurial states in the country. We have about 112 small businesses for every 1,000 residents. And this puts us at the top tier nationally. We're home to world-class research institutions and more federal research labs than any other state, including NIH, FDA, and NASA. But innovation can't scale without capital. And Maryland now ranks fifth in the nation for venture capital investment with roughly $1 billion raised last year. So how do we lower, in your opinion, Chair, barriers for emerging and first-time founders to access without compromising investor protections? Thank you. I yield.

Senator Banks.

Thank you, Mr. Chairman. Chairman Atkins, millions of Americans are handing over their Social Security numbers and their banking information to trading apps that are tied to Communist China. Senator Tuberville and I have written you and your predecessor regarding Webull and other Chinese broker-dealers with deep ties to the PRC that pose clear risk to US user data. We know that China doesn't play by our rules. But what steps has the SEC taken to delist Chinese companies from US markets and rescind Chinese-owned broker-dealers' licenses to operate in the US?

Oh, well, thank you, Senator. So we have very limited authority under the securities laws. We can delist a company if it hasn't kept its filings current, for example. And we can stop trading in a company where the there's a sign of manipulative activity in the market. So but we have been work with respect to China-related companies, we have a cross-border task force that I've set up in our enforcement division where we're monitoring trading. And so we've shut down trading in 13 so far companies on the Nasdaq and then more recently one on the New York Stock Exchange where the company, after there was sign of a pump and dump scheme, the company came out and said, we don't have any news that should justify this marked increase in our in our price. It was kind of like one of the meme stock crazes back when. So we stopped trading on that company for a day. New York Stock Exchange stepped in and is doing an investigation. So our our remedies are limited in this, but we are, you know, working on it with the SROs to try to...

In recent years, we've seen American banks underwrite the IPOs of CCP-affiliated companies, including Alibaba, which purportedly aid Chinese military operations against targets in the US. What kind of benefits do companies like Alibaba receive from these IPOs and what is the potential impact to America's national security?

Yeah, well, so thank you. The we have taken steps to, well, for example, we came out with a foreign concept release regarding foreign private issuers because many companies from China, especially that have variable interest types of arrangements internally, have, you know, are operating in China and or East Asia, are and then they're headquartered or whatever run out of China, are incorporated in the Caribbean and then have then are listed as their primary market here in the United States. That's why we have come out with this concept release to ask, you know, questions about and to come up with a remedy to to focus on companies that, you know, are are taking advantage of our more, you know, let's just say accommodating stance for foreign issuers that are listed here in the United States. But where if there's not a strict regime at home for regulation, that's where there's opportunity for to evade some of our...

China has taken drastic steps to crack down on Western accounting firms that offer auditing services to Chinese companies, as you know. Chinese Communist Party authorities have raided the Beijing headquarters of major Western firms and bullied them with scam investigations. They have put enormous pressure on Chinese companies to employ Chinese auditors, not American or British firms, for example. Do you think that American investors should trust the financial reports that they get on a Chinese company if the auditors preparing that report answer to the Chinese Communist Party?

Well, I can't say blanketly, but we have now a new, we've just sworn in this week some new board members for the Public Company Accounting Oversight Board, and that is one of the main issues that they will be focusing on.

And how is the SEC ensuring that American investors aren't being tricked into putting their money in Chinese companies that falsify their financial data?

Well, so the whole anti-fraud force that we have with enforcement and our investigatory group, our examinations group, we are focused on trying to root out any sort of type of fraudulent activity. And it's not just with the Chinese companies or PRC type of companies, but here in the United States, the incidence of using now AI to help disguise phone calls and and voices online is a real, you know, bane for, you know, normal people's existence right now.

Thank you. My time has expired. I'll submit other questions for the record. Thank you for your time.

Thank you, Senator Banks. Senator Reed, the floor is yours.

Thank you, Mr. Chairman. Welcome, Mr. Chairman. I believe you'd agree that the SEC's job is to recover investors' money and impose penalties when our security laws are violated. And I also would think you'd agree that securities fraud and other violations of the security laws are still prevalent, too prevalent. So I raise these points because under your watch, SEC enforcement has begun to disappear before our eyes. Between 2024, your predecessor's leadership, and 2025, staffing at the SEC has been cut 17 percent with huge cuts to the enforcement division. The enforcement budget has been cut in half, falling from $1.4 billion to $731 million. Not surprisingly, monetary settlements declined 45 percent, falling to $808 million down from $1.9 billion in the previous year. Disgorgement, the money that you require violators to pay to repay to the victims, that's declined to $108 million down from the previous year of $6 billion. That's a 98 percent drop. And it's the lowest in modern era by far. And this clearly indicates to me that the SEC is not dedicated the necessary resources to fighting for investor protection and market integrity. And the last time the SEC was shredding staff and resources on this scale, it missed Bernie Madoff's fraud and the practices on Wall Street that led to the Great Recession. And I believe you're going down the same path. Will you commit to restoring the resources for the enforcement division and enforce the laws not only to protect individual consumers but the integrity of the markets?

Well, I'm not sure where you get your stats, so I don't really agree with...

Well, let me tell you where I'm getting my stats. The data regarding the enforcement budget is from your own agency financial report published on January 16. Data regarding penalties and disgorgement is from private sector analysis from Cornerstone Research and the law firm of Paul Weiss. And we need to rely on these reports because your agency, the SEC, has not published the enforcement division report for FY 2025. Usually that's done in December. So you're either deliberately obscuring what you're trying to do or...

Well, that's wrong.

Well, then when are you going to publish the report?

So we had a 43-day and 43-night shutdown that really threw a lot of our processes off. We're about to come out...

When?

...with an enforcement here in the next few weeks here. I'm not sure of the exact date.

And it will reflect these numbers.

Well, we'll see. I don't know again. But a lot of what you're talking about as far as penalties were never collected. They are, you know, it's kind of like a ghost sort of thing where they're assessed but not collected. So that's one...

Well, you don't even assess them.

Well, we are actively enforcing the rules. We have a lot of these people left voluntarily or through buyouts before I arrived at the SEC. So I am looking at our numbers of employees and I think we have a very good group of people in enforcement.

No, you have deliberately cut the enforcement. That's part of the DOGE operation because it plays into the administration's plan to weaken the controls on capital in the United States.

I disagree. That happened before I got to the SEC. So anyway.

Gee whiz, what have you done since you got there?

We've been looking at our, we have been working actively to, you know, look at our budget and and what we need.

What do you expect to be the number of people in the enforcement division in the next say three months? Are you going to start hiring immediately?

Well, that we have gaps around in different divisions and so we will fill that. But we had people retire. By definition that means that they had been there for a while. So this provides opportunity for younger people to rise up.

No, no, no. They retired because DOGE is running through SEC like every other agency.

I disagree.

Well, that DOGE in SEC from what I understand were focused. Why would people at the prime of their careers retire? Because I think they felt that the direction they were going was something they did not want to participate in, which is sitting around as Americans are exploited and as the markets decline. Let me change...

People have other types of opportunities and I've talked to many of the people who retired, many of whom I knew from my former time at the SEC. So I think to blanket paint it that way is inaccurate.

Senator Reed, your time is up. Do you want to ask a question for the record?

Mr. Chairman, absolutely. I will submit questions for the record.

You want to give us a synopsis real quick? By definition of a synopsis, it ended about 10 seconds ago. But thank you.

Thank you, Mr. Chairman. Chairman Atkins, it's great to see you. Audrey, great to see you here. Chairman Atkins, before I start with my questions, I might just ask you to take a minute longer and explain to us what the impact has been of the 43-day shutdown on the SEC's operation.

Well, it's set us back a lot because 43 days, you know, it's not just a month, it's not counting all the it's it's a long time to have people at home and then to have them come back and get started back up again. And so in 43 days, you know, is a big chunk, you know, more than the two months as far as being shut down. So anyway, so that has thrown off a lot of our work for investigations, you know, a number of enforcement people could continue under the rules, but for a while our rulemaking and the normal operations like coming out with an enforcement data, you know, review of fiscal year 2025, you know, is yet to be done.

Well, thank you for clarifying that. Chairman Atkins, it's something I've wanted to talk to you about on the public record for some time. It has to do with the proxy advisory firms. And if you think about it, every day Americans are investing their 401(k)s, their pensions, they're investing in index funds. But they don't vote the shares for those funds. Their money managers don't even vote the shares. Those shares are in effect being voted or being dictated by a duopoly of foreign-owned enterprises known as proxy advisory firms. So Chairman Atkins, I'd like to know what you feel, what concrete steps could be taken to prevent these proxy advisors from using their market dominance to become de facto regulators here in the US market?

Well, thank you, Senator. You know, I don't want to prejudge anything because we are actively looking at this area. There's an executive order that, you know, we are actively addressing and reviewing all the regulations in this area with that regard and collaborating with the Department of Labor and the Federal Trade Commission as well. So but I share your concerns in this respect and, you know, in many ways these proxy advisory firms are a symptom of a problem underlying it of predatory shareholder proposals that have been weaponized by social activist shareholders that have special axes to grind. And so you've spoken about this and addressed it through bills in the past. So I think that, so anyway, we will be looking at this from, you know, all different aspects and that's part of the goal that I have to make IPOs great again.

I very much encourage you to continue to take a very hard look and thank you for taking a broad-based look across the entire government at the effect of these organizations. And I just to make clear, since June of last year, since June of last year, I've been calling on our antitrust regulators to take a very hard look at this foreign-owned duopoly and the market dominance that they're exercising to damage US markets. Thank you. Thank you, Mr. Chairman.

Yes, sir. Senator Warner.

Yeah, well, those are very good questions and I share your concern with that. And this is a new technology, obviously, and people are still experimenting with it. And so I can't really say, you know, what's going on with respect to individual broker-dealers or anything else, but I do agree that, you know, we can't allow that.

Well, I would hope we, I think there'd be a lot of bipartisan interest in helping on this. And then when we take it down to like the retail level, I just want to make sure that, you know, that the same fair dealing and conflict of interest standards that exist for the retail investor would also apply to that agentic AI agent who is acting on behalf of the retail investor.

Yes, I think that's important. And so whichever way this technology grows and changes, I think we have to be very attuned to those potential, you know, problems. And so with so even with in this last discussion here about proxies and whatnot... ...obviously we've seen proxy advisory firms, we've seen banks now starting to rely on AI rather than, you know, hiring out, farming it out to third-party advisors.

Yeah, and again we saw, was it this week or last week where, I think one of the new tools came out and all the wealth management firms took a huge hit on the marketplace because they thought AI was going to take over. I just think this is moving so quickly, it would be great if we could get a little bit ahead of it and we're not trying to chase it after the fact.

Yeah, we have a special task force at the SEC headed by a former enforcement attorney, Valery Szczepanik, who's looking at AI for tools for us, for example, at the SEC with respect to enforcement, corporation finance reviews, and things like that.

I'm going to jump back into the old pool now around crypto and for all that are watching, we want to get this done, it's got to be done safely. I appreciate folks like Senator Lummis, her work on this, and Senator Gillibrand, and there's a big working bipartisan group on this and the chairman's leadership. So I just, but I do feel like on DeFi, that there still is, we've got to make sure that we don't set up a regime that allows bad actors or carve out enforcement, something Senator Cortez Masto is working on. Since you've already addressed the fact that tokenized stocks are still a stock and a stock is a stock is a stock, how are we thinking about this? I know in a recent speech you said decentralized finance and other forms of on-chain software systems will be part of our securities and markets and not driven out by duplicative or unnecessary regulation. I hope that unnecessary regulation would not include things like AML rules. What do you think?

No, that's vital. But I think maybe that context was more like looking at the potential for smart contracts. There are already developments out there to incorporate into the token itself AML and BSA sort of concerns. ERC-3643 is the on the Ethereum blockchain is one example of that where people are experimenting with things that are embedded.

Well, we are working and many of my Republican colleagues are working on this as well. We're trying to get technical support from you, how we deal with the front ends. There's lots of expertise that we need. We definitely want to get this right because I think getting it wrong would be a disaster. Thank you, Mr. Chairman.

Thank you, sir. Senator Moreno.

Thank you, Mr. Chairman. Chairman Atkins, I find it a little troubling that during this entire hearing you haven't thanked Gary Gensler for setting such a low bar for competence. So thank you for doing this job and I think anybody who watched the Biden years saw an SEC that was actually a completely rogue agency. So thank you for bringing credibility back to the agency and thank you for your team for working so hard to make that happen. You were way in the ditch when it came to credibility and what you've done just in your short term has made a remarkable difference. Let's talk about just some fundamental issues. I think we can lay this out the right way. How do you see the role of your team, you and your team, in terms of functioning? Do you view yourselves as enforcing law or do you view yourselves as somebody who creates laws through enforcement?

No, we should be enforcing the law and we shouldn't be regulating through enforcement.

And so springing right back into the crypto world, the reality is this is not new technology. My son introduced me to the crypto world when he was 14 years old, he's now 28. It was a long time ago. And the Congress has failed miserably in creating laws to give you the proper guardrails to say this is allowed and this is not allowed. How important is it for us to finally get this done, to actually give you a regulatory framework that allows you to decide how to enforce laws and keep bad actors out and make certain that good actors are given the room they need to develop and innovate here in America?

Well, thank you, Senator. So we do need, I believe, a good law coming out of Congress to be enacted that would undergird our efforts. The SEC has pretty broad authority to interpret and to have exemptions under the various securities laws. And so that, I think, has been the missing link here frankly over the last years where the SEC has not made really any attempt to accommodate this technology. And so that's created such a gap between the possible and what people were actually able to achieve because the SEC was just, I compare it first to the ostrich with the head in the sand and then secondly just the regulation through enforcement view saying you know you can interpret the securities laws as well as we can but then going after people with the enforcement division. I think that's not the way for a regulator to operate. A regulator should perceive what the questions are in the industry and then address those. And we have many tools to do it: notice and comment rulemaking, roundtables, all sorts of things like that is the way a competent regulator should be working.

Yeah, and so when you hear the exchange about less enforcement actions as necessarily a bad thing, the reality is during, again not to beat this to death, but for those who suffered through Gary Gensler's reign of terror, he wasn't an ostrich, he was a man-eating absolute devastating lion. So the enforcement actions were basically, again, regulation through enforcement. So you had just completely arbitrary, capricious views of what should happen and what you're doing is following the law. So I just urge my colleagues to let's get this bill across the finish line. The staff has spent thousands, literally thousands of hours getting this done and I think it's long overdue. Let me just ask you one question about something that a lot of people, including myself, although no longer in the space because I divested myself of all digital currencies, by the way at a low number, but what do you think about self-custody? Tell me how you view that from your perspective. Should I be able to be a custodian of my own digital assets if I ever were to get back in that space?

Yes, I believe so. I mean, I think that your right of your property should determine where it should be held. And then the differences perhaps in trading, we have to make sure that things don't become balkanized, that we don't have liquidity that's atomized. But for the national market system to work and to provide the engine that we have currently, we'll have to accommodate all sorts of different ways of doing business.

Thank you. And thank you for being in this role. Thank you for rebuilding the credibility of the SEC. It's very, very needed.

Senator Van Hollen.

Thank you, Mr. Chairman. Welcome. I've heard a couple references to the impact of the shutdown and none of us wanted to see a shutdown. I would just suggest that the 20 million Americans who today have lost access to tax credits to help them purchase insurance are the ones who are suffering the most as a result of the negligence of this Congress. Let me just say with respect to proxy advisory firms and individuals, I do sometimes find it extraordinary that some folks want to interfere in my ability, for example, to contract with whoever I want to provide me with advice. Why would we want to interfere with my right to contract?

Well, I don't think people are worried about or are focused on interfering with right to contract. But the reason why these sorts of facilities and firms have come about is anomalies with SEC regulations that have proven to weaponize shareholder proposals and other aspects. Yes.

Yet at this moment in time, the president, the Trump administration, has not reached out as traditionally has been done, including in the first Trump administration, to Democratic leadership here in the Senate to ask for appointments to fill the seats. Because you're at three to nothing right now, isn't that right in terms of Republican appointees to Democratic appointees? Is that where we are?

There are three commissioners and...

I mean, would you, I just want, could you call over to the White House? Would you be willing to commit to calling over to the White House and asking them to fulfill their traditional responsibility of reaching out so we can have a full contingent?

Well, it takes two to tango always, but with respect to nominees and the, but I have been now at the SEC for three times and so I've worked for a Republican chairman, a Democratic chairman, and was there with in the aughts with other...

No, I know you have and that's why this is an unusual situation where we're three-nothing and where there's no indication that the White House is reaching out. Again, I want to reference the Trump 1 administration because they followed the traditional approach, which is to work with Democrats in the Senate to fill these positions. Yes, it takes two to tango, but you know, the White House has not reached out. So I'm just asking you if you would encourage the White House to do its job and reach out in this regard.

I've been public and also in private supportive of having a full complement of commissioners. I think that helps with debates and everything else.

All right, well good, we're on the same page. I just, hopefully the White House will move forward on that. You're a member of course of the Financial Stability Oversight Council and recently you indicated and others that you're, quote, "in agreement that non-bank financial institutions don't pose systemic risk to our markets," unquote. I think you recall that outside of the GSEs, one of the biggest taxpayer bailout beneficiaries was a non-bank. You recall that, right?

Yes.

It was AIG, right?

Right. Well, I don't know that we've said that. I mean...

Well, I'm just reading a statement that you made.

Well, so the as far as the non-bank financial institutions, I mean, we're in agreement with the Fed and the Treasury and other members of the Financial Stability Board internationally that at the current time non-bank financial institutions don't pose a systemic risk to the banking system.

So but you're not taking off, it appeared from the minutes that you were indicating that you were going to take that analysis off the table. So it's simply that you're saying at this moment in time there is no such non-bank. Is that right?

Senator's time has expired.

Is that right?

Yes.

Senator McCormick.

Thank you, Mr. Chairman, Ranking Member Warner, and Chairman Atkins, good to see you. The Trump administration's prioritized preserving the United States as a global leader in financial innovations and enabling financial firms to offer new innovative products while also ensuring robust consumer protection. Prediction markets are an area where there appears to be tremendous opportunity offering price discovery and additional tools to manage risk. Now I know this falls primarily in the CFTC's jurisdiction, but how is the SEC working with the CFTC to provide greater clarity for U.S. market participants in prediction markets?

Yeah, so that is a huge issue that we're focused on. And so I'm happy to say that Mike Selig is now, the president appointed him to be chairman of the CFTC. Great guy, very competent, and he was in my office, so I can surely say that the two agencies will be harmonized more than ever before. And so we're meeting once a week with our staffs. And so that's a very important aspect of trying to harmonize. So prediction markets are exactly one thing that where there's overlapping jurisdiction potentially, and you're right, it's mostly at least at the current time on the CFTC side, but we need to be harmonized in the way we're addressing those markets.

And do you see any rulemaking on the immediate horizon and any thoughts on the need for legislation in those areas?

Well, so we'll see. I mean, we'll see what you all come up with here with respect to clarity. But again, I think we have enough authority as I said before, you know, a security's a security regardless how it is and some of the nuance with prediction markets and the products depends on wording and what exactly is being done. So anyway, but that just points up because of the potential gaps that the SEC and the CFTC need to be very well interknit on that.

Okay. Financial innovation's moving at a blistering pace in lots of areas including digital assets. I commend you on your efforts to provide the necessary rules and safeguards for digital assets while we continue to hopefully come forward with legislation on the Clarity Act. You've spoken about your support for super apps, which would allow for seamless side-by-side trading of different asset classes. For example, a user on one platform could buy or sell crypto alongside traditional stocks while accessing other financial services. Would you outline for us how the super apps would increase global competitiveness for U.S. registered financial firms and the consumer protection principles that should guide the approach to super apps?

Well, thank you. Well, it comes again back to harmonization with the CFTC. So here we have two agencies that should be very well knit together and so that there are no gaps. And as the markets have evolved over the last 40 years and where there are actors or market participants in both markets, futures and cash markets, it's really incumbent on us to help make this as efficient for them as possible so that they can compete effectively with foreign or other sorts of firms that where in other jurisdictions they don't have a dichotomy as between a futures regulator and a cash markets regulator. So that's our goal is to make it efficient from anywhere from cross-margining and portfolio margining to just what sort of medallion you need to do X, Y, and Z. So the more harmonized we are, the better, more efficient.

Thank you. And I'll ask a final question, just squeeze in here on your focus on making IPOs great again. You discussed how raising capital through IPOs should not only be a privilege for larger companies as the number of IPOs has diminished dramatically. Could you discuss the broader impact on markets and the economy when a handful of companies dominate the S&P 500's market cap?

Yeah, well that just points up how we now in the United States account for about a half of the total world's capitalization. And now that is on the public markets and then now that is concentrated on relatively fewer companies and even the Magnificent Seven or whatever number we have these days. So we, you know, the more diversity that we can get into the public markets I think the better because again the people who are harmed are the folks, average investors who are not allowed to diversify into the private markets who can suffer because it's much more concentrated in the public markets.

Very good. Thank you.

Senator Warnock.

No, well that's absolutely, you know, we want to have things that endure and especially now here on the crypto side, you know, what we are doing and what we will be doing in the next couple years will set the pace for a generation. And so that's why I'm looking forward to a bill being enacted from Congress. I'll work with whomever the president appoints to be other commissioners at the SEC and the one commissioner who just left, I actually tasked her with doing, focusing on one aspect of our ALJ process and in general with rules there. So I can work with all sorts of people across the aisle.

Well, it's good to know that you support having a bipartisan commission. I don't want to put words in your mouth. Is that fair?

Well, again, whomever the president, you all need to work with the president on that.

That you support having a bipartisan commission. I'm asking because we're in the midst of market structure legislation right now. And as we work through all of these ideas in a way that makes sense for the marketplace, that are durable, ways that are durable for the folks in that industry, I think you could get bipartisan support behind many of your ideas, but unfortunately Democrats have been locked out of the process. Do you agree that incorporating dissenting viewpoints at the commissioner level would help moderate rulemakings and ensure that they last beyond this administration, making the SEC a better, more trusted and consistent financial regulator?

Well, I hope that what we're working on can receive approbation from all sides and we shouldn't have the ping-ponging back and forth over the years. But we've seen how even have bipartisan commissions where if somebody is hell-bent on doing something as in the last administration and overriding others, it doesn't necessarily endure. So I mean, to your point, I think there's a benefit to having all sorts of viewpoints, but I'm happy to work with whomever the president... I think we do, Senator. And you know, the people who've left, that was before I arrived at the SEC, but they took voluntary retirements and buyouts. So and by definition they had been there a number years. So what actually is really salutary about this is that it helps younger folks rise up in the ranks and because there's always a brain drain of...

Well, we've seen a reduction, not just a generational change. We've seen a vast, a huge reduction in the size of the workforce. Thank you, Senator.

Thank you. We'll move on to Senator Britt.

And what is the timeline that you see for that?

Well, I think that's critical. So I'm hoping this year that we can address a lot of this and it's just a matter of rulemaking and the process there for notice and comment.

Good. I also appreciate your focused on tailored regulation. I actually discussed this with Secretary Bessent here last week. When our agencies properly calibrate regulation and focus on actual material risk rather than hypotheticals, it ensures that supervision is grounded in economic reality rather than subjective ideology. I would assume that you agree with me on that and I know that you've mentioned a plan to target what you've called, quote, "information overload." Can you speak to that and kind of give me a little bit more detail on your thoughts there?

Well, one of the main principles of securities disclosure was articulated very well by Thurgood Marshall back in 1976 writing from the court where he said that disclosure needs to be grounded in materiality, meaning what for the reasonable investor, what is essential for that person to know to buy, sell, or hold or vote his investment. And so and if you don't have that grounding, then there's a danger of information overload, just an avalanche of trivial information. And so here with this Entergy 10-K annual report weighing in at almost a thousand pages, I mean that's an example of how things have I think gotten way out of whack and we have to address that.

Thank you so much. I'm out of time but I have a couple more questions so I'll submit those for the record. Thank you.

Thank you. The very patient Senator Blunt Rochester.

Thank you, Chairman Scott, and Ranking Member Warren, and thank you, Chairman Atkins, for being with us today. I want to focus my questions on insider trading and insider self-dealing, something that I appreciate that you've taken very seriously. I have a series of yes or no questions, so it should go pretty quickly. Chairman Atkins, over time Congress has provided additional authorities to the SEC to police insider trading above and beyond general anti-fraud authority. Is that correct?

I think that's a general yes.

Yes. The SEC's duty-based insider trading regime focuses on prohibiting conduct by people who have confidential information or control. For example, telling a friend when to trade. Correct?

Yeah, all this is very circumstantial, facts and circumstances very much.

And I think that's why the trading rules focus on insider conduct, who is trading and what they know, just... ...just like the case that you brought in August of 2025 against three individuals, one being an executive of an investor communications firm who advised biotech and pharmaceutical companies and his two friends. I think I even read an article where there were like envelopes of cash and everything. And so just to confirm again, this is really about who is trading and what they know and making sure that we are doing things on the up and up. Would you say that's correct?

In general, yes, it depends on intent and I mean there are a lot of things that come into it and the facts and circumstances.

But the focus is really insider trading, insider conduct. The SEC enforces those rules even if the tradable asset in question is not the underlying security such as equity-based derivatives, correct?

Well, it depends. There has to be a nexus with the securities markets for us to do it. Otherwise the CFTC, you know, has an analogous provision to 10b and so it's in their jurisdiction. So it does depend on whether it's a security or not.

So the risk of insider abuse doesn't disappear simply because the asset is traded differently though, correct?

Well, it depends on the law, it depends on the asset. I mean, but anyway, different markets have different standards.

So there's been a lot of discussion about market structure because this committee is working on that issue right now. And I want to shift specifically to crypto as it relates to this. In many crypto markets, founders or insiders can exert control or otherwise have confidential information on token supply, the schedule of token releases, governance changes, or major technical decisions, especially before public trading. You would say that's correct.

I guess it depends on the instrument and the token and...

Right, I know it kind of depends on, but all in all, this is kind of the way it works. There are case by case, this does happen, correct?

Yeah, it could. Yes.

Okay. And so today, I think it's is insider trading or self-dealing regardless of asset classification by someone with confidential information or insider control harmful to market integrity and investors?

Well, we want to make sure that the markets are transparent and whatnot. So but again, it depends.

I really think I tried to like these are like kind of basic simple questions. I think what I'm trying to get at is that to me insider trading is bad. No matter it shouldn't happen anywhere. And I think we agree on that, right?

Well, it depends on the like on the futures markets, I mean it's kind of added and that's...

Okay, so we're not talking about futures, puts, calls, but the concept of insider trading. This is something you're against, right?

On the securities markets, yes.

Okay. I'll just say this didn't go the way I thought it was going to go because I thought these were sort of like basic like all of us agree insider trading is bad and wrong. As a matter of fact, even the case that I referenced that you did the complaint against, this was like guy a guy giving his friends tips and then them passing him envelopes of cash. So to me what what I think for our committee is going to be important as we look at something as consequential as market structure is that we're also paying attention to make sure that people don't have this self-dealing or insider trading. And so I'm going to yield back to the chairman and thank you for your presence here and I look forward to the continued work.

Thank you, ma'am. Senator Ricketts.

Thank you, Chairman Atkins, for being here today. The United States has the strongest and most trusted capital markets in the world, and that didn't happen by accident. It happened because we have a system that relies on clear rules, reliable disclosures, and enforcement that is predictable and grounded in law. This is near and dear to my heart as I worked in a regulated industry. Fair and transparent regulations allow our country to have the most transparent liquid markets in the world. And those standards are even more important in a time of strategic competition, especially when we're talking about Communist China. Communist China is not an ordinary foreign market participant. They are the biggest existential threat to our country, largest external threat to our country. They are a strategic competitor with a state-directed economy. Communist China operates with no transparency, imposes restrictions that prevent U.S. regulators from having the same inspection and enforcement access that we would expect here at home. Chairman Atkins, do you agree that these differences limit the SEC's ability to provide the same level of oversight and investor protection for China-based companies as it does for domestic issuers?

Yeah, well thank you, Senator. There are a number of issues to work out. I agree with respect to, you know, the various the various markets and where these, you know, securities are from. So.

Well, you have an agreement through the PCAOB with the Chinese regulators established in 2022 that allows us inspection access to Chinese-based audit firms. And despite existing law requiring foreign firms to open up their audits for our inspectors, Chinese companies have been shielding their books and used auditors under their control to provide dishonest information and withhold data. All the while, we cannot audit Chinese companies directly to get to the bottom of the truth. And we have not taken action to delist non-compliant Chinese companies from our or I'm sorry from our stock exchange because of this. Given that, you know, the PCAOB inspections have identified significant audit deficiencies at Chinese firms serving China-based issuers, do you believe it creates an uneven playing field for U.S. companies when those issuers can access our markets without being subject to the same level of oversight and inspections?

Well, yes sir. I think well so a couple things. One is, you know, just this week we swore in some new members, new chairman and new members for the Public Accounting Oversight Board. And so that is one of the things that the the new board will be focused on, you know, with respect to China-related companies and then and how actually, you know, that the ones that are listed here in the United States whether or not, you know, there is a robust access by, you know, competent auditors operating, you know, under our rules, um, you know, are working with those particular companies. Um, and then secondly, we put out a release back in the summer asking questions regarding foreign private issuers and especially those companies that are, you know, maybe based in another country, incorporated say in the Caribbean, but then their primary listing is here in the United States such as on Nasdaq and whether or not that the accommodations generally given to foreign private issuers which are predicated on the a robust regulatory scheme, you know, in the home country, you know, is actually also the case in some cases like with with Chinese companies that are listed here. So we are out to address this and and so I agree with your issues there.

Great. Well, I'm glad you brought this topic up because there's about 286 Chinese companies that are listed on our exchanges as of March of last year. 151 of them are these variable interest entities, VIEs, and they have the arrangement you're talking about, they're taking advantage rather of the arrangement you're talking about, and they represent over a trillion dollars. That's a trillion dollars of Americans' tax of American citizens' savings that are going into these firms. And they use these structures because Chinese law restricts foreign ownership in key sectors so they can't sell the equity in operating companies directly to U.S. investors. So they set up these companies, as you've said, say in the Cayman Islands or whatever it is, and instead investors buy shares in an offshore holding company that relies on these contracts but not ownership to have economic interest in the business. Chairman Atkins, do you believe the average American retail investor understands that difference today?

Yeah, well I fear that maybe they don't. And so we are looking at, you know, the disclosures around these sorts of entities and and, you know, how that is actually, you know, being accomplished now or not.

Well, thank you. I appreciate that. I think you need to look very closely at these disclosure requirements and take action against any Chinese firm that is not complying with U.S. law. And if we cannot get the same sort of comfort from a Chinese company, they should be delisted from our exchanges and we should not allow Americans to fund our chief adversary in the world. With that, thank you, Mr. Chairman.

Thank you, sir. That concludes our hearing portion of this hearing. And we'll say for senators who wish to submit questions for the hearing record, those questions are due one week from today, Thursday, February 19th. Chair Atkins will have 45 days from that date to submit your responses in writing. Thank you so much. Committee adjourned. [Gavel sounds.]