Harvard Law Professor John Coates on the SEC under Paul Atkins

Harvard Law Professor John Coates is a founding member of the Shadow SEC (Securities and Exchange Commission). 

The Shadow SEC is a group of securities law professors, including Professors Coates, John C. Coffee, Jr. (Columbia Law), James Cox (Duke Law), Merritt Fox (Columbia Law) and Joel Seligman (University of Washington Law).

The Shadow SEC has been critical of the Trump administration’s push to deregulate the capital markets. They have put out eleven statements over the past year or so – including four new ones since the beginning of June 2026, including comments on:

The SEC Proposal to Allow Semiannual Reports (6/1/26)

The SEC Proposal to Simplify Filer Status (6/26/26)

The SEC Proposal to Rescind Climate Disclosure Rules (6/30/26)

The SEC Offering Reform Proposals (7/20/26)

(And after we went to press on the print edition — The SEC’s Retreat from Enforcement (8/11/206)

Coates was general counsel of the SEC, as well as acting director at the Division of Corporation Finance at the SEC. 

Before joining Harvard, he was a partner at Wachtell, Lipton, Rosen & Katz, specializing in financial institutions and M&A. At the Harvard Law School and the Harvard Business School, Coates teaches corporate governance, M&A, finance, and related topics. 

He has testified before Congress, advised the U.S. Department of Justice, the Department of Treasury, and the New York Stock Exchange, and served as the Chair of the Investor-as-Owner Subcommittee of the Investor Advisory Committee of the SEC.

He is the author of – The Problem of Twelve: When a Few Financial Institutions Control Everything (Columbia Global Reports, 2023).

Since you launched, the Shadow SEC has put out eleven critical statements on SEC policy under Chair Atkins. Give us the overview.

“I would put this in four big categories,” Professor Coates told the Corporate Crime Reporter in an interview last week. 

“First, the SEC has been much more politicized. I would grant that there has been an increase in the political influence of the political parties over the SEC over the past thirty years. There has always been some political influence both through the President’s choices and Congressional oversight. Obviously the President and Congress are political. But the SEC is also meant to be somewhat independent of political influences.” 

“And by design, in the statute that created the SEC, it’s only supposed to have three of the five commissioners be from one party. Traditionally, there was the view that the independent agencies like the SEC were not supposed to be taking direct orders from the White House. Often, it would be Congress that would have the more powerful influence over the agency than the President. That was in the past.”

“Staffing at the Commissioner level has become more partisan over the past couple of decades. There are more commissioners drawn from staff of Congressional committees than used to be true. There are fewer from industry and fewer from other sources.” 

“So, there is just a trend toward politicization. I say that by way of background — but yet, the current SEC is just a whole order of magnitude more politicized. And that’s illustrated by the fact that there are no Democratic Commissioners at the SEC since the beginning of the year.” 

“They have staffed it fully with Republicans. They are adhering to the statute – there are no more than three commissioners. But they just haven’t filled the other two slots. That’s one example of politicization.”

“Another is that Chair Atkins has been embracing – whatever you want to call them –  requests, commands, directives – from the White House. There were commands about staffing. There were commands about cooperating with the Elon Musk DOGE operation. There were commands about crypto. And some of the most recent rulemakings tracked some of the White House’s own publicly announced priorities in this space.”

“That is unusual. I don’t think there are previous presidents who tried to directly form the agenda of the SEC. And yet Atkins is taking all of that onboard as if it were his own agenda. And maybe it is. I’m not claiming he doesn’t agree with it. But it’s unusual for it to be overtly and explicitly coming out of the White House in a public forum through press releases and executive orders and then be taken on by an independent agency like the SEC, the way that this SEC has taken them on.”

“The third thing is the dramatic cuts to the people who work at the SEC, most of whom have been life long civil servants and have not really had a particular partisan bent, but they have just been pushed out. And of course, there are political appointees who are brought in with every President. But when you get rid of a large number of long-time civil servants, and you have new political appointees, the political influence becomes more clear.”

“That’s category one. Category two follows from the reduction in staff. Those cuts have hampered the work of the SEC – processing IPOs, reviewing registration statements. The speed with which documents were reviewed and processed and commented on fell last year as the number of staff fell. I have not seen any data to suggest that they have improved the pace in the interim period.” 

“To be fair, some of these companies like SpaceX for example take a lot longer to process under any administration. I’m not claiming that you can necessarily draw any strong conclusions from this data. But it is common sense that if you cut twenty percent of the staff, it’s going to slow things down.” 

“Many people frame the SEC’s role as protecting investors, which gets in the way of capital raising. That would be a standard, simple minded take. But it’s wrong. Protecting investors actually enhances capital formation. And part of what the SEC does to protect investors is to actually improve the way in which companies go about raising capital.”

“When I was in practice at Wachtell, long before I came to Harvard, I ran documents through the SEC. It was an annoying process in the sense that it was purely bureaucratic and you had to comply with the SEC’s procedures. But I will tell you that every time we got comments from the staff, they would improve the documents. And that feedback tended to reduce the risk of private unhappiness and lawsuits down the road. The investor protection there is complementary to the capital raising process.”

“You have a process you have to run. And if you dramatically cut staff, that just means they are going to do it less effectively and more slowly.”

“I would think the same thing has to be true on the enforcement side – although there it is harder to know because the SEC doesn’t publicly report on investigations per se. You can only observe the enforcement output with a big lag because it takes a while to run an investigation and produce an action that will then become public. But I’m betting when all is said and done, when people look back five years from now, I also think enforcement will have dramatically fallen off as well.”

“That’s just common sense. When you make cuts the way the SEC did, enforcement is going to fall off. That’s true even if you were to rehire, because it takes time for those people to get up to speed. And the onboarding process for the federal government is not fast. You have to get people through security clearances and all of the other things you need to do to hire someone. If you lay somebody off in September and then start the job search to fill the position, you will be lucky to get someone new on board – even if you do it at lightning speed – within six to nine months. So there has been a big hit to the ability of the agency to carry out its normal functions over the past year and a half.”

“The third thing is that the SEC has done a whole lot of rule proposals. I worked under Gary Gensler when he was Chair of the SEC. And there were a whole lot of complaints about Gary’s rule making. But the pace at which they are going right now is significantly faster. They are doing these bundled proposals. If you look at them, it’s not just one rule change that they are proposing, it’s like forty in one overall category. There’s a massive amount of proposed regulatory changes on the table. That covers each of the major areas they work in – the 1933 Act, the capital formation process, the reporting framework, the 1934 reporting process, which companies have to comply with, and the kind of assurances the company has to get from audit firms. Huge and pretty dramatic rule making proposals.”

“The fourth category I would throw out is that the Chair has been giving opinions about all types of subjects that are really out of the SEC’s lane. He’s been in Delaware giving opinions to the Delaware legislature about how to rewrite corporate law in Delaware. He’s been giving companies encouragement to go down to Texas and follow Elon Musk and incorporate in Texas. He has opinions about all kinds of things that are not traditionally within the SEC’s framework. You put all of that together and it’s a much more unconstrained SEC across the board – not playing traditional roles, not mostly focused on capital formation, mostly trying to tick off political boxes and adding to the political boxes beyond anything that any prior SEC has taken on at least since the 1970s.”

I’ve seen some reporting that staffing has been cut by twenty percent. Do you have any indication of the nature and extent of the staffing cuts?

“There were buyouts offered, which is in keeping with the way the Musk team operated across the agencies. Many people took early retirement packages. Other people were just fired. Anybody who was thinking about leaving they were told – here’s the money to make it more attractive for you to leave.”

“Just to be clear, there is always turnover with any incoming Presidential administration. It’s a natural moment for people to reconsider their future paths at the agency, with outside options and the like. And they may disagree with the incoming Chair and the policies. But this was at least double or triple the normal.” 

We haven’t talked about enforcement – but enforcement was down 27 percent in the last year. And that combined with the policy changes, the deregulation and the staffing cuts – what impact will this have on the markets?

“It will increase fraud. It will shift the calculus that people engage in every day between complying with the law and not complying with the law. It will shift toward more lawbreaking. That will possibly in the short run produce what looks like more investment, more capital formation because if you can cheat and lie in trying to attract investment, you probably are going to do better in the short run than if somebody has to tell you the whole truth about their business.” 

‘But over a fairly short time frame – maybe a year or two – those fraudulent encounters are going to get discovered at some level, and that’s going to start pulling down the willingness of investors to invest at the same price. So capital costs will go up and capital formation will fall.”

“That’s what I was alluding to earlier. Protecting investors will actually help non-fraudulent companies raise capital. By protecting investors you make it easier for them to invest safely. If they do that, they are going to charge less for their capital. And if you are non fraudulent, it makes it easier for you to raise money.”

“So, you will have a predictable surge in scandals that will emerge over time. It would not at all surprise me if we don’t see something similar to the lead up to Enron or the pre-2008 lead up, where people are going to start seeing patterns in what’s happening. And that’s going to have a big impact. It’s not going to be just individual companies and individual investors. It’s going to be the market as a whole.”

Another possible source of resistance to this are SEC alums, many of whom are now working for these large corporate law firms. And you would think that all of those former enforcement people, who love the agency, no matter where they are now, would speak out. Why aren’t we hearing from them now when it counts?

“It’s a good question. You probably know a few of them and you should ask them. I was there. And I’m part of the Shadow SEC speaking out about what I’m seeing. I’m not at a law firm. I don’t have to navigate that. I do a lot of consulting work. But most of my consulting clients don’t care that I’m taking a public policy position on something unrelated to the work I’m doing for them. There is some room for individual lawyers to do this.”

“I do think working at a firm is more complicated because what any one lawyer says can complicate other lawyer client relations. There is a tendency for people not to take on public facing issues, especially as the firms have gotten bigger over the years. If we see anything like what you are asking about, I suspect it will come out of smaller firms where the leadership includes some of the people you are talking about.” 

“During the very first week of the second Trump administration, Trump illegally and unconstitutionally attacked law firms. That was the first thing he did – straight out of Shakespeare – first thing we do, kill all the lawyers. Not because lawyers are bad, but because lawyers get in the way of tyranny.  And the current administration fully understands that. And the attacks on the law firms have been struck down as illegal. And yet the administration is persisting by appealing those rulings. The firms that settled have been getting blowback from all sides. So the bigger firms are probably thinking, first let’s fight this battle and then maybe we’ll think about the effects on the agencies.”

“As much as I love the SEC for the time that I was there and my life and career studying it, the Department of Justice is more important. And so if you are going to prioritize doing something, if you were WilmerHale or one of the other big firms, it would be a first priority to defend the firm, then maybe selectively defend the rule of law and then maybe eventually you would get to the SEC.”

The administration is slowly undermining the SEC. But it’s not like how they dealt with the Consumer Financial Protection Bureau (CFPB) – which they effectively shut down.  Why didn’t they just say – let’s shut down the SEC, the way we did with the CFPB?

“At a deep level, Atkins and some Republicans get that capital formation depends on investor protection. If you were to shut down the SEC the way the CFPB was shut down, investors would stop investing at the level they are now.” 

“Investor protection is a core capitalist need. And the last I checked, Republicans are still capitalists. There is some confusion about that with the Trump administration taking ownership of more and more companies. But I still think Atkins and the bulk of Republicans are still in the camp of capitalism as a good thing and we need capital and we need capital investment.” 

“That’s why the differential treatment. Atkins has some views about the trade off between investor protection and capital formation that we disagree with. And that’s a legitimate public policy debate. That’s normal. But he’s also doing some things that are purely political in nature, that have nothing to do with how to balance those things. They have to do with placating his boss and checking off certain boxes to perform in a political way.”

I find it hard to believe that for the average American, this will become a political issue, saying – I’m pissed off that instead of quarterly reports, the SEC is now requiring only semi-annual reports.

“Nothing direct like that. But here is what has happened repeatedly in our history. When deregulation or lack of enforcement has produced a concentrated series of frauds and then the markets react by collapsing as it did in the George Bush years following Enron, then it becomes a political issue. Everybody forgets that Sarbanes Oxley was passed unanimously. The entire Republican Party embraced massive regulation in the Sarbanes Oxley Act. Why? Because the public was outraged that their 401k accounts had collapsed. And they appropriately blamed the lack of good auditing and the lack of any serious effort by the then SEC under George Bush to intervene.” 

“The public will care at the moment it hits their pocketbooks. Maybe I’m wrong. Maybe everything that’s going on will not produce a single example of fraud and it will all be just fine. Or maybe it will be a modest effect and the public won’t notice. I tend to think not. I think over the next two and a half years you are going to see more fraud, more difficulty raising capital, more recognition that those two things are linked. And at some point the public will care.” 

“If you compare that to the tariffs and the wars, maybe it won’t be quite as important.”

Atkins is not ignorant of what has happened in the past. He must be doing a balancing act in his head, saying to himself – how much deregulation can I get away with without triggering a Sarbanes Oxley kind of response?

“He might believe that the proposals he has put on the table are not such a big deal. But I don’t know how he could think that a dramatic fall off in enforcement would not be a big deal. If he were being better served by his staff, he might see that in fact what he has on the table is a big deal.”

“One of the things that he had to do was cooperate with the DOGE efforts. But once you decimate the staff, there are unintended consequences. You lose skilled people who can warn about what the consequences are of what you are doing. And remember, there are no Democrats on the top floor. The normal push back you would get from them is not happening. And all of their staffers. That’s twenty smart, dedicated people who would have told you what you are doing is wrong in fifteen different ways. And you can disagree with them. But at least there would be pushback and discussion and debate. That debate is not happening inside the agency right now.”

The Shadow SEC has put out eleven statements on enforcement. The only one that touched on enforcement was number three – the SEC’s FCPA Books and Records Provision Must be Vigorously Enforced. Are you planning something more broadly on enforcement?

“Enforcement is hard to second guess from the outside. I believe you when you say the number of enforcement actions are way down, but it’s very difficult to know from the outside what they may be about to do. Unlike rule changes, which are public, enforcement activity remains non public until a fair amount of time has passed. I don’t think we can honestly claim to know what they may be doing in enforcement right now.”

[For the complete q/a transcript Interview with John Coates, 40 Corporate Crime Reporter 31(12), August 3, 2026, print edition only.]