Key Takeaways
- •Witness Atkins outlined the SEC's new direction, focusing on investor protection, market efficiency, and capital formation, including efforts to clarify digital asset regulation and "make IPOs great again."
- •Witness Atkins emphasized modernizing disclosure rules to reduce corporate costs and facilitate more IPOs, while also supporting congressional efforts like the Clarity Act for crypto markets.
- •Senator Warren (D-MA) pressed Witness Atkins on declining SEC enforcement actions and dropped cases against companies linked to President Trump, which Atkins largely disputed.
- •Republicans praised Witness Atkins for refocusing the SEC on core missions and reducing regulatory burdens, while Democrats accused him of weakening investor protections and enforcement.
- •Congress continues bipartisan work on the Clarity Act and the Empowering Main Street in America Act, while the SEC plans to implement a token taxonomy and review proxy advisory firms.
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Hearing Analysis
Overview
On February 12, 2026, the Senate Banking, Housing, and Urban Affairs Committee held an oversight hearing to examine the activities and strategic shift of the Securities and Exchange Commission (SEC) under its new Chairman, Paul S. Atkins. The hearing served as a platform for the new administration to outline a "pro-growth" regulatory agenda while facing sharp criticism from Democratic members regarding the perceived relaxation of enforcement and investor protections.
Chairman Tim Scott (R-SC) opened the hearing by praising the SEC’s shift away from what he characterized as the "regulation by enforcement" approach of the previous administration. He emphasized the need for common-sense regulation that fosters innovation, particularly in the digital asset space. Chairman Scott highlighted the importance of the "Clarity Act" and his own "Empowering Main Street in America Act" (IMSA Act), which aims to expand the "accredited investor" definition to include individuals based on their financial knowledge rather than just their net worth.
Key Testimony
In his testimony, SEC Chairman Paul S. Atkins outlined a mandate to return the agency to its core mission of protecting investors, maintaining fair markets, and facilitating capital formation. Atkins introduced his plan to "make IPOs great again," noting that the number of U.S. listed companies has fallen by 40% since the 1990s. His strategy rests on three pillars: re-anchoring disclosures in "materiality" to prevent information overload, depoliticizing shareholder meetings, and providing litigation alternatives to protect innovators from frivolous lawsuits. Atkins also discussed "Project Crypto," a joint initiative with CFTC Chairman Mike Selig to create a token taxonomy and provide a regulatory bridge until Congress passes comprehensive market structure legislation.
Overview
The hearing featured a sharp partisan divide. Ranking Member Elizabeth Warren (D-MA) accused Chairman Atkins of presiding over a "golden age of fraud." She cited data suggesting that the SEC has brought fewer enforcement actions in the past year than at any point in the last decade. Sen. Warren specifically named companies such as Kraken, Coinbase, and Gemini, alleging that the SEC dropped cases against them because they were major donors to President Trump. She further criticized the SEC for dropping civil charges against individuals who received presidential clemency, such as Trevor Milton and Devon Archer. Sen. Jack Reed (D-RI) echoed these concerns, noting that the enforcement budget had been cut nearly in half and that staffing had dropped by 17%, which he attributed to the influence of the Department of Government Efficiency (DOGE).
Industry Impact
Chairman Atkins defended the agency’s enforcement record, stating that "fraud is fraud" regardless of the sector. He attributed the delay in publishing the FY 2025 enforcement report to a 43-day government shutdown that disrupted agency operations. He argued that the reduction in staff was partly due to voluntary retirements and buyouts that occurred before his arrival, which he suggested allowed younger staff to rise through the ranks.
Overview
Several policy proposals and legislative efforts were discussed throughout the session. Beyond the Clarity Act and the IMSA Act, Sen. Mike Rounds (R-SD) discussed his bipartisan legislation regarding AI regulatory sandboxes, which would allow firms to test AI tools under structured oversight. Chairman Atkins expressed support for an "innovation exemption" to allow for such testing. Sen. Mark R. Warner (D-VA) raised concerns about the risks of "agentic AI" in retail trading and the need for decentralized finance (DeFi) to comply with Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) rules.
National security and the influence of the Chinese Communist Party (CCP) were also prominent themes. Sen. Jim Banks (R-IN) and Sen. Pete Ricketts (R-NE) questioned Atkins on the risks posed by Chinese broker-dealers like Webull and the use of Variable Interest Entities (VIEs) by companies like Alibaba. Sen. Ricketts expressed concern that American retail investors do not understand that they do not actually own equity in Chinese operating companies when buying these offshore holding structures. Atkins confirmed that the SEC is reviewing disclosures for these entities and that the newly sworn-in Public Company Accounting Oversight Board (PCAOB) would focus on the transparency of Chinese audits.
Policy Proposals
Other notable exchanges included Sen. Bill Hagerty (R-TN) criticizing the "duopoly" of foreign-owned proxy advisory firms, which he claimed act as de facto regulators. Sen. Chris Van Hollen (D-MD) questioned the lack of a full five-member commission, noting the current 3-0 Republican split and urging the White House to follow the tradition of nominating Democratic commissioners to ensure a bipartisan perspective. Sen. Lisa Blunt Rochester (D-DE) pressed Atkins on whether insider trading rules should apply equally to crypto assets, leading to a technical discussion on the "nexus with securities markets" required for SEC jurisdiction.
Overview
The hearing concluded with Chairman Scott setting a deadline of February 19, 2026, for senators to submit questions for the record. Chairman Atkins was given 45 days from that date to provide written responses. The proceedings underscored a fundamental shift in the SEC’s philosophy, moving toward a disclosure-heavy, enforcement-light model intended to revitalize public markets and integrate digital assets into the traditional financial system.
Transcript
[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.
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