by Jeanne Gee

As federal regulatory priorities narrow under the Trump administration, state attorneys general and financial regulators are preparing to take on a more active role in white collar and securities enforcement. With the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) recalibrating their focus, states such as New York and California are asserting their authority to fill gaps in corporate oversight.

Federal Enforcement Realignment

The DOJ is undergoing significant structural and strategic changes. As an example, many prosecutors are being reassigned from white collar units to immigration enforcement. Several specialized units have been dissolved, including the National Security Division’s Corporate Enforcement Unit, the Foreign Influence Task Force, and Task Force KleptoCapture.[1] In May 2025, Matthew Galeotti (“Galeotti”), Head of the Criminal Division, issued a memorandum to DOJ Criminal Division personnel outlining new priorities in white collar crime enforcement, where he noted the priority would be on “focused, fair, and efficient white-collar enforcement” as it “promotes American economic and national security interests while protecting American taxpayers, investors, consumers, and businesses.”[2]

At the SEC, leadership under Chair Paul Atkins has signaled a shift toward a more constrained regulatory posture. Atkins has emphasized a return to the agency’s core mission, which includes investor protection, efficient markets, and capital formation, while scaling back enforcement activity in areas such as internal accounting controls.[3] The SEC is also placing less emphasis on enforcement statistics, instead focusing on impact and efficiency. Notably, the Commission has reinstated a requirement that formal orders of investigation be approved by the full Commission, rather than delegated to the Division of Enforcement.[4]

These changes represent a marked retreat from the more expansive enforcement approach seen in recent years, particularly in areas involving national security, corruption, and environmental disclosures. As Galeotti noted in his May 2025 memorandum, “overbroad and unchecked corporate and white-collar enforcement burdens U.S. businesses and harms U.S. interests.”[5]

New York Increases Enforcement Activity

In response to the shifting federal landscape, New York enforcement officials have expressed a clear intent to expand their oversight role to address some gaps in federal enforcement. The Martin Act grants both the New York Attorney General and District Attorney sweeping powers to investigate and prosecute financial fraud without having to prove intent. Attorney General Letitia James has stated that her office will continue to investigate and prosecute crimes regardless of federal policy direction.[6] She has reaffirmed the office’s responsibility to enforce state laws independently. Manhattan District Attorney Alvin Bragg has emphasized that local prosecutors are well equipped to handle complex financial crimes and may, in some instances, be best positioned to do so. His office also relies on the Martin Act to pursue corporate misconduct aggressively.

The New York Department of Financial Services (DFS) is also preparing for a greater enforcement role. Superintendent Adrienne Harris has said that a rollback in federal regulation will likely increase the volume of consumer protection cases brought by her office. She has noted that while the DFS is not ideological, it will act where new gaps emerge due to diminished federal partnership.[7]

California’s Enforcement Focus

California’s enforcement strategy is expected to differ in focus, but not in intensity. California Attorney General Robert Bonta (Bonta) has aligned with multistate coalitions challenging federal rollbacks and is prioritizing action in three areas: climate enforcement, antitrust scrutiny of mergers, and artificial intelligence regulation. In the area of corporate fraud, in April 2025 he issued a legal advisory reminding businesses operating in California that the FCPA remains binding federal law and violations are actionable under California’s Unfair Competition Law.[8] Attorney General Bonta has warned companies to be prepared for continued enforcement of anti-corruption laws in California.

In its most recent strategic plan, the California Department of Financial Protection and Innovation (DFPI) has stated its priorities are grounded in three core values: safety and soundness, responsible innovation and economic mobility.[9] As such, DFPI will continue its oversight over the financial services ecosystem, expand its reach, modernize its approach to regulating high risk investments, and strengthen its partnership with the California Attorney General through its Crypto Scam Tracker.[10]

SEC Under Paul Atkins

SEC Chair Paul Atkins has taken steps to reduce the regulatory burden on public companies and streamline oversight in emerging sectors such as digital assets. He has stated his commitment to a more coherent and principles-based approach to crypto regulation and has expressed skepticism about what he views as politicization in financial markets.[11] [12]

Atkins has publicly opposed the SEC’s climate disclosure rule and has suggested that the agency’s use of staff guidance has been inconsistent with proper rulemaking procedures.[13] He has proposed revisiting the structure of the Enforcement Division and cutting post-financial-crisis units such as the Asset Management Unit and the Market Abuse Unit. Additionally, he has championed the creation of a Wells-like advisory committee to review SEC enforcement policies and procedures.[14]

These changes reflect a broader shift away from expansive rulemaking and aggressive enforcement, in favor of narrower and more traditional regulatory objectives consistent with the Commission’s core objective of protecting individual investors.

Strategic Implications for Corporate Legal Teams

The growing role of state-level enforcement carries significant implications for companies, boards, and in-house legal departments. Effective response strategies should prioritize independence, credibility, and timely action. Internal investigations must be approached with objectivity and seriousness, particularly when allegations involve senior leadership.

In matters where multiple enforcement agencies may initiate parallel investigations—such as the SEC, DOJ, and state regulators—organizations must be prepared to navigate differing priorities, timelines, and legal requirements. This includes controlling the flow of factual information to management, preserving all relevant data including mobile and messaging communications, and ensuring coordinated efforts among internal and external legal teams.

Five Key Takeaways for Compliance and Legal Professionals

1. State-level enforcement is rising
   State attorneys general and financial regulators are stepping in to fill the void left by federal enforcement pullbacks. Organizations should monitor developments in jurisdictions such as New York and California, where agencies are expanding their reach.
2. Credible internal investigations are essential
   Investigations must be led by independent counsel and supported by forensic experts with relevant experience. Boards and audit committees should be prepared to act swiftly and with full transparency.
3. Multi-agency coordination requires discipline
   When facing parallel investigations, maintaining consistency across communications and disclosures is critical. Legal teams must manage timelines, protect attorney work product, and anticipate information-sharing constraints between agencies.
4. Preserve mobile and alternative communications data
   Evidence increasingly resides outside of email, including encrypted apps and messaging platforms. Early and comprehensive data preservation is a core expectation of regulators and auditors.
5. Engage proactively and strategically
   Offering joint presentations or proffers to agencies such as the SEC and DOJ can help avoid duplicative processes and reduce investigative risk. Defense counsel should prioritize agency coordination where possible and help guide discussions toward resolution.

Companies operating in this rapidly shifting environment should move quickly to strengthen their internal governance, prepare for dual-track enforcement, and stay informed as state and federal enforcement dynamics continue to evolve.

[1] https://news.bloomberglaw.com/us-law-week/bondi-scales-back-us-justice-department-white-collar-enforcement
[2] https://www.justice.gov/opa/media/1400141/dl?inline
[3] https://www.sec.gov/newsroom/speeches-statements/testimony-atkins-060325
[4] https://www.sec.gov/files/rules/final/2025/33-11366.pdf
[5] https://www.justice.gov/opa/media/1400141/dl?inline
[6] https://ag.ny.gov/press-release/2025/attorney-general-james-releases-joint-statement-10-state-attorneys-general-state
[7] https://www.ft.com/content/e7db351b-bd38-415a-87cd-a13aad2762a3
[8] https://www.skadden.com/insights/publications/2025/04/california-attorney-general-warns
[9] https://dfpi.ca.gov/about/what-we-do/strategic-plan/
[10] https://dfpi.ca.gov/press_release/dfpi-strengthens-partnership-with-ca-department-of-justice-to-stop-crypto-scams-and-prevent-consumer-financial-loss/
[11] https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125
[12] https://www.regulatoryandcompliance.com/2025/04/the-sec-under-paul-atkins-what-to-expect-for-registered-and-private-offerings-climate-related-disclosure-consolidated-audit-trail-digital-assets-and-agency-re-organization
[13] https://www.daypitney.com/Update-US-SEC-Votes-to-Drop-Defense-of-Climate-Disclosure-Rules
[14] https://www.cov.com/-/media/files/corporate/publications/2025/03/paul-atkins-past-speeches-offer-a-glimpse-into-secs-future.pdf