President Trump took a key step toward his long-promised goal of reining in financial services regulation, signing an executive order and a memorandum on Feb. 3, both aimed at reducing compliance obligations for financial institutions—and likely signaling structural regulatory changes to come.
The executive order directs the U.S. Secretary of the Treasury to meet with other top regulatory leaders and deliver a report on existing financial regulations, including the Dodd-Frank Act—one of the main targets of criticism by Trump over what he has deemed overly restrictive financial regulation that has been a drag on the economy. The report, which is due by early June, is required to identify any aspects of the existing regulatory framework that contradict the “core principles” Trump has laid out for financial regulation. Among those principles are empowering consumers to make independent financial decisions; fostering economic growth; enabling American companies to compete with foreign firms; and making regulation “efficient, effective and appropriately tailored.”
Large-scale changes to Dodd-Frank would require the assistance of Congress. But such cooperation likely won’t be lacking—at least on the part of the Republican majorities in both houses, who have previously put forth efforts to significantly alter aspects of the law, including a House bid to enact a sweeping overhaul of the CFPB. Democrats in both houses have indicated they would strongly oppose any major changes to Dodd-Frank or the CFPB. However, the consumer watchdog also currently is facing a court challenge over its leadership structure. And Trump himself can unilaterally affect regulation by filling key regulatory positions with his own picks, as well as via executive orders like the one he signed in late January that would require two existing regulations to be removed for every new regulation adopted by an executive agency (though it remains unclear if that order will affect the CFPB, which is considered an independent agency, rather than an executive agency).
Meanwhile, Trump signed on Feb. 3 delays to implement a rule that would require retirement investment advisers to act solely for the benefit of their clients. Finalized last summer by the Obama administration and set to take effect in April 2017, the so-called Fiduciary Duty Rule has been criticized by many in the financial planning industry as being overly burdensome and too broad. Trump’s order delays implementation of the rule until it’s further reviewed by the Labor Department.
- CFPB Fights Court’s Ruling that Its Structure Is Unconstitutional
- Trump Order Calls for ‘1 In, 2 Out’ Rule on Regulations
- Trump Administration Names CFPB Transition Team