SEC Expected to Dial Back Corporate Penalties in 2025

• The U.S. Securities and Exchange Commission is expected to move away from large corporate penalties under the new direction of the President-elect Donald Trump administration.
• A possible reduction in large penalties has raised concerns among some experts on how to incentivize companies to self-report violations.
• The crypto industry has celebrated the appointment of Paul Atkins as the SEC’s new chair.

As President-elect Donald Trump looks to reverse the stricter measures implemented during the Biden administration, the SEC is expected to lessen the impact of corporate penalties in 2025.

Former SEC enforcement officer Jessica Magee told Bloomberg Law to expect “less appetite for corporate penalties and lower penalty amounts.”

The prediction correlates with Trump’s hiring of pro-crypto advocate Paul Atkins, a former SEC commissioner who Trump described as a “proven leader for common-sense regulations.”

Pull Back on SEC Corporate Penalties

A possible reduction in the severity of penalties imposed on companies would be a stark move away from the direction of the SEC under Gary Gensler’s leadership.

Gensler’s controversial leadership saw the agency pursue much larger civil penalties for companies, arguing that significant fines would help deter corporate wrongdoing.

This approach drew criticism from some who believed the penalties were disproportionate.

During Gensler’s time as SEC head, two current Republican Commissioners, Hester Peirce and Mark Uyeda, have dissented in over 200 enforcement cases, Mondaq reported .

The two commissioners, who also spoke out against the agency’s crypto approach, regularly criticized the size of penalties on companies without clear regulatory guidance.

Self Reporting Incentives

If corporate penalties are dialed back in the newly led agency, Magee raised concerns that it could remove companies’ incentives to self-report violations.

Historically, the SEC has relied on the prospect of significant fines and penalties to encourage companies to report misconduct voluntarily.

The larger the penalty, the more compelling the reason for a company to self-report to reduce the severity of potential consequences.

If the SEC does decide to stop imposing hefty penalties, it may reduce some companies’ willingness to self-report violations, as the potential rewards of cooperation may not seem as substantial.

This could lead to fewer companies coming forward and a less transparent regulatory environment.

A Pro-Crypto SEC

Partner at Belknap Webb & Tyler LLP Gregory Baker, who worked at the SEC during the transition to Trump’s first administration, told  Bloomberg Law the new SEC would not bring any cases to crypto or other pro-innovation areas.

Under Gensler, the SEC has aggressively pursued crypto firms, issuing Wells notices and bringing lawsuits against companies across the industry.

Commissioner Peirce, appointed by Trump in 2018, has long criticized  the SEC’s approach to crypto under Gensler.

Along with Commissioner Uyeda, she called for the SEC to work alongside the industry in order “to craft sensible, timely, and achievable regulatory paths.”

The news of Atkins’s takeover from Gensler on Jan. 20, 2025, was celebrated by the crypto industry and some SEC commissioners.

Peirce said she was “delighted” at Atkins’s selection to head the agency.

“We have a lot of work to do at the SEC to advance free markets, capital formation, investor choice, and innovation,” Peirce said. “Having worked for [Atkins] during his last stint at the agency, I cannot think of a better person for the job.”

Meanwhile, Ripple CEO Brad Garlinghouse said choosing Atkins was an “outstanding choice” that will “bring common sense” back to the agency.

“Along with Hester Peirce and Mark Uyeda, it’s time to swiftly and definitively end the prohibition era on crypto, restoring freedom of choice, economic growth, and innovation,” the Ripple chief wrote  on X.