President Trump issues orders on financial services regulation

On February 3, President Trump addressed the financial regulatory system.  He issued an Executive Order addressing his “Core Principles for Regulating the U.S. Financial System” and a Presidential Memorandum on the Department of Labor’s Fiduciary Duty Rule, which is set to go into effect on April 10, 2017.

In his Executive Order, the president laid out his seven “core principles”:

(a)  empower Americans to make their own financial decisions and facilitate their ability to have choice in the marketplace, save for retirement, and build individual wealth;

(b)  prevent taxpayer-funded bailouts;

(c)  foster economic growth and vibrant financial markets, while mitigating systemic risk;

(d)  enable American companies to be competitive with foreign firms in U.S. markets and abroad;

(e)  advance American interests in international financial regulatory negotiations and meetings;

(f)  make regulation efficient, effective, and appropriately tailored; and

(g)  restore public accountability for U.S. federal financial regulatory agencies and rationalize the U.S. federal financial regulatory framework.

 

The Executive Order requires Treasury Secretary to report to President Trump within 120 days with information on the review by federal financial agency heads of regulations, guidance, or policies to determine if any are inconsistent with the stated principles. The principles are relatively vague, which will allow Steven Mnuchin, if confirmed, leeway in his consultations with agency heads and determination of which rules and regulations do not comply. 

The Presidential Memorandum requires the Department of Labor to conduct a review of the Fiduciary Duty Rule’s impact and determine whether it is consistent with his core principles, specifically to “empower Americans to make their own financial decisions and facilitate their ability to have choice in the marketplace, save for retirement, and build individual wealth.”  The Department is instructed to consider whether the rule:

(i) is likely to harm investors by restricting consumer access to various retirement products that covered brokers believe outside the scope of their fiduciary duty;

(ii) has “resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and

(iii) is “likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.”

 

If it determines that the Fiduciary Duty Rule would have the above results, or if it considers some other aspect and finds the rule otherwise inconsistent with the core principles, the Department of Labor is instructed to either rescind or revise the rule.  The Chamber of Commerce is spearheading a case in Texas to overturn the rule and the judge has stated she will issue her opinion by February 10.  If she does overturn the rule, the Department of Labor is unlikely to appeal the decision.  If she does not, this presidentially mandated review may spell the end of the Fiduciary Duty rule anyway.

For a more detailed review of the Executive Order and Presidential Memorandum, please read our Client Alert.

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