Corporate and Financial Regulation under a Trump Presidency
When Donald Trump takes office on January 20, 2017, a slew of financial regulations passed by the Obama administration will likely be revised or eliminated entirely. Additionally, if Trump utilizes 1996’s obscure Congressional Review Act to strike down a rule, the federal agency that issued that rule is prohibited from enacting a similar rule again in the future. According to an analysis by the George Washington University Regulatory Studies Center, over 150 rules adopted since late May 2016 are theoretically susceptible to the ax.
The fact that Trump is consulting with Paul Atkins, who served as a Republican member of the Securities and Exchange Commission (“SEC”) from 2002 to 2008, is reflective of how the president-elect will target certain regulations, as Atkins during his tenure spoke out against big fines for companies and frequently found fault with Dodd-Frank. Additionally, Mary Jo White’s November 14 announcement that she will step down as head of the SEC before Trump takes office and two years before the end of her term leaves vulnerable some of the most significant initiatives in the past few years and clears the way for Trump to reshape the way in which Wall Street is regulated.
Below is a summary of some of the regulations that are said to be susceptible to change:
Volcker Rule: Instead of completely repealing Dodd-Frank, the Trump administration and Congress would presumably target the portions of the law that aggravate the banks the most, including the Volcker Rule, which forbids banks from making risky bets with their own money.
CFPB: Trump could consider restricting the authority of the Consumer Financial Protection Bureau (“CFPB”), the watchdog agency that has pursued harsher rules governing debt collection, payday loans and overdraft fees and has also proposed banning mandatory arbitration clauses that limit class-action lawsuits from consumers. The CFPB recently scored a major victory when it fined Wells Fargo $100 million for allegedly opening fake accounts for its customers. Republicans have regularly criticized the CFPB, arguing that the financial services industry is already severely regulated.
Fiduciary Rule: Trump has vowed to stop or dismantle the Labor Department’s fiduciary rule, which aims to remove conflicts and guarantee that brokers put the interests of retirement savers first and is set to take effect in April 2017.
Disclosure of Executive Pay: Shortly after Trump takes the oath of office, he is expected to repeal the SEC’s pay disclosure rule, which requires companies to disclose pay ratios between their CEOs and employees.
Conflict Minerals Rule: Also on the chopping block could be the rule that would require companies to disclose whether their products contain conflict minerals, namely those that were mined in a war-torn region of Africa.
PCAOB: Republicans have recently criticized the Public Company Accounting Oversight Board (“PCAOB”), which was created to oversee and draft new rules for corporate auditors. At issue with Republicans are the agency’s proposal that companies rotate auditors to reduce conflicts, as well as the agency’s requirement that accounting firms disclose the name of individual partners who are working on company audits.
According to DealBook, the Trump administration will likely first focus on more politically charged issues such as the Affordable Care Act, immigration, environmental regulations, and the Supreme Court. As a result, the financial industry will likely dwell in uncertainty for several more years.