With President-elect Donald Trump about to enter a second (non-consecutive) term as president, federal regulation of the financial services industry is in for another shake-up. 

To get a better understanding of what’s in store for 2025, WealthManagement.com spoke with Carlo di Florio, president of the compliance consulting firm the ACA Group and former director of the SEC’s Examinations Division.

Related: How Paul Atkins Could Move SEC’s Enforcement Spotlight from Firms to Individuals

The following has been edited for length and clarity.

WealthManagement.com: What are some of the things the SEC may emphasize or de-emphasize in the coming year? How will the SEC balance the changes made under Gary Gensler’s tenure as SEC chair with this new tenure of Paul Atkins (President-elect Trump’s SEC Chair nominee)?

Related: What Will Financial Services Regulation Look Like Under Trump?

Carlo di Florio: The way that clarity will come into focus is Gensler will step back Jan. 21, and there will be an interim chair appointed, a Republican appointee. It’s likely going to be Commissioner Pierce or Commissioner Uyeda, the two Republican commissioners today. Both of them worked with Paul Atkins when he was a commissioner. They were a counsel to him. 

So there are very close relationships across the board, and they will just keep the ship steady until his confirmation is voted on. And I think generally, folks are expecting that Atkins is not a particularly controversial nomination and that could go through sooner rather than later, so maybe in the first quarter of 2025 that might come to pass. 

And then Atkins will come into the SEC. The question then becomes, who are the directors that he will want to appoint to head each of the main divisions and offices? I’m sure he’s already giving thought to this. And the first, and perhaps most important, will be the director of the Investment Management Division and the director of Trading and Markets Division.

He’ll do the same thing with regard to the Divisions of Enforcement and Examinations. With Enforcement, just like with policy, he could have a significant impact. So he’ll want to make sure that he puts in place somebody who is going to refocus that division in a way that he wants to have it refocused. 

The Exams Division (which is the division that I led) tends to be a little less of a focus because the core inspection program, where they go in and look for compliance with the securities laws and regulations, tends to be very similar to administration to administration. In other words, both chairs from either administration typically support those teams going in and looking for conflicts of interest and looking for insider trading and looking for market abuse because it’s really a health check of the firm and ensuring compliance. 

WealthManagement.com: What would you expect Atkins’ signature rule or a signature area of his tenure to be, and what kind of development might we see on that in the coming year?

CD: I think one of the most important legacies he’ll leave is clarity on the regulatory framework for digital assets. And I say that for several reasons. 

He’s been very outspoken about how unhelpful the current regulatory framework is for people who are trying to innovate around digital assets. 

Under the current framework, you had a Gensler administration that effectively took the position that ‘we don’t need new laws and regulations. Our existing securities laws protect any new product, and this is just a new product, and so we can just apply our existing securities laws to digital assets.’ 

The second part of the current approach is that there’s no clarity on whether a digital asset is a security or something different like a commodity, and which jurisdiction, the SEC or the Commodities Future Trading Commission, or neither, might have jurisdiction depending on how you approach that. 

And then another big source of frustration has been that under the Gensler administration, there’s been a very aggressive enforcement action posture toward digital asset companies like Binance and Coinbase, particularly around the digital asset exchanges. And people with Atkins’ background view that as rulemaking by enforcement, which is not due process. 

WealthManagement.com: If part of the issue is clarity or lack thereof, is it possible that the framework here may be one of excising digital assets from the SEC’s purview? 

CD: I think under the current rules of the road, if I have to operate in what currently exists, I would go into the SEC and say, stop rulemaking by enforcement. Stop bringing cases where the issues aren’t clear and where different parties can differ. That’s not appropriate. 

He wants to come in and support capital formation innovation and economic growth. And he’ll bring that philosophy to digital assets. He wants rules to be principles-based, not prescriptive, so firms have more space in which to interpret and operate in ways that can support economic growth and innovation and capital coordination. I think he’ll bring those philosophies to digital assets and say, ‘OK, let’s be supportive under the existing framework. Let’s let more of that innovation happen.’ So those are things he can do under the existing framework.

Then, I think he will either work with Congress or help implement potentially new legislation around digital assets that makes it a more innovative and supportive environment that provides some clarity about what are digital assets, when do they need to register with the SEC, if at all, when do they need to register with the CFTC, if at all, and when are they not regulated?

WealthManagement.com: It can be pretty tricky getting much of anything passed in Congress, particularly with tight margins. How likely do you think it would be that we will see some kind of Congressional movement on digital assets?

CD: First and foremost, Republicans will control all three elements of the White House, the House and the Senate. That’s the ideal environment for trying to get something through. 

The second reason is that there is already drafted legislation that has bipartisan support, called the FIT Act, about regulating digital assets. It stands for Financial Innovation and Technology, that has successfully passed the House. So they could advance that to the Senate and that increases the likelihood that something does come through Congress, as it’s already underway.

WealthManagement.com: What would a bill like that mean for the SEC’s role in the regulation of digital assets would? 

CD: I think the SEC would continue to play an important role. I don’t think it envisions an entirely new regulator for digital assets. I think it’s more about establishing clear guidelines for the classification, the trading and the regulation of digital assets while preserving and strengthening consumer protection. 

It’s going to be more about when and what digital assets fall under the CFTC, which and what digital assets fall under the SEC, and how do they tailor their regulation in a way that establishes very clear guidelines? 

WealthManagement.com: What about regulations at the state level?

CD: They’re very focused on consumer protection issues, but the issues that they’re focused on are very similar to the issues that the SEC and FINRA focus on. But the difference is under Dodd/Frank, investment advisors under $100 million are with the states, right? The states have smaller advisors, but they’re looking for the same issues. Is the advisor acting in the best interest of the consumer, are there conflicts of interest, are there Ponzi schemes, are there frauds? Are there deceptions? Is there inappropriate marketing happening? 

WealthManagement.com: To wrap up, what are the main thoughts we haven’t touched on that advisors should consider?

CD: When Atkins gets in, he’ll put together his regulatory agenda and publish that. That’ll be the next moment for everyone to say, ‘OK, we don’t have to read between the tea leaves anymore. He’s defined where he wants to focus and how he wants to focus, and what’ll be the priority areas.’

Our advice is to stay very focused on continuing to operate your compliance programs diligently. Exams are going to continue; enforcements are going to continue; and the rule book will continue to exist. It’s not the time to take your foot off the gas.