Change is coming to the Securities and Exchange Commission (SEC) under the leadership of proposed Chair Paul Atkins, and wealth managers must prepare. Reforms mooted in the press and Atkins’ writings signal a fundamental change in how the Commission approaches investigations.1 Financial advisors should expect immediate action in the areas of cybersecurity, evidence handling, and enforcement.
Cybersecurity
Say goodbye to panic-driven cyber compliance. Atkins is likely to scale back aggressive enforcement and repeal the rushed four-day disclosure rule. This means more time to assess and respond to incidents, with enforcement focusing on fraud versus technical violations. Wealth managers will still need robust cyber defenses, but minor incidents won’t trigger automatic enforcement.
Evidence and Privacy
Two game-changing reforms are taking place here. First, the adoption of a full-disclosure policy will require the SEC to share all evidence with potential defendants before embarking upon enforcement. Second, attorney-client privilege will receive stronger protection, and the SEC will stop demanding access to phones and laptops.
For advisors facing SEC scrutiny, this means a better ability to mount a defense and protect privileged communications. Wealth managers will have access to the SEC’s evidence against them before having to respond to enforcement actions, and communications with counsel will receive stronger protection. This makes maintaining clear, specific documentation more crucial than ever, as firms won’t be able to rely on broad device access to unearth relevant materials later.
Enforcement and Accountability
The proposed shift away from statistics-based enforcement could transform how examinations work. Examiners won’t be pressured to find violations just to meet quotas. However, when violations are found, the consequences could be severe. And here’s the twist: Corporate penalties may decrease, but individual accountability is about to increase dramatically. The new chair is expected to pursue actual wrongdoers rather than punishing shareholders through corporate fines. The message is clear: Maintain impeccable personal standards, as individual advisors will face greater scrutiny.
What Now?
Advisors and the firms they work for should start preparing for SEC reforms today. Wealth managers’ focus must shift from box-checking to meaningful compliance. Compliance counsel can serve as a guide and internal advocate on this journey.
From a technology standpoint, document management systems with robust tagging and search capabilities will be crucial for accessing records, as will archiving tools that distinguish privileged attorney communications from regular business communications. Cloud-based backup systems with granular access controls can help maintain cybersecurity while enabling quick responses to targeted information requests from regulators. The key is choosing solutions that support precise documentation and individual accountability rather than just broad data collection.
Interested in exploring further the changes shaping wealth management this year and the ways technology can help you realize your strategic objectives? Join me and the Datos Insights Wealth Management team for our Top Trends in Wealth Management, 2025 webinar on January 14, 2025.
- Paul S. Atkins and Bradley J. Bondi, “Evaluating the Mission: A Critical Review of the History and Evolution of the SEC Enforcement Program,” Fordham Journal of Corporate and Financial Law, Vol. 13, Issue 3 (2008), https://ir.lawnet.fordham.edu/jcfl/vol13/iss3/1/. ↩︎
