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How Does Trump’s Regulation Freeze Affect Asset Management?

The freeze puts increased focus on asset managers, their systemic risks, and the Department of Labor’s fiduciary rule.

President Trump’s immediate freeze on all pending government regulations has industry experts wondering how it might affect asset managers’ strategies, the fate of the Dodd-Frank Act, and the Department of Labor’s (DOL) new fiduciary rule.

“It may change some of their specific tactics, depending on the types of managers they’ve hired, or are planning to hire, or their internal forecasts,” said James Allen, head of capital markets policy at CFA Institute. “But there are myriad possibilities here, and this shouldn’t affect strategies.”

And while the freeze isn’t unprecedented—President Obama also froze all pending regulations when he first took office—Allen says there are a few differences to consider.

“First, the freeze will apply to the long list of legislative mandates from Dodd-Frank and the JOBS [Jumpstart Our Business Startups] Act that haven’t yet been fully implemented,” he said.

In addition, more recent regulatory focus has been directed at asset managers and at ways to address perceived systemic risks. “The level of focus on asset managers has certainly been different relative to the recent past,” Allan said.

The temporary freeze doesn’t affect the DOL’s fiduciary rule, which legally binds financial professionals working with retirement plans as fiduciaries. Although the rule isn’t slated to be fully implemented until April, it was made effective last June, and therefore isn’t subject to the freeze. 

However, the fiduciary rule is not yet safe from the Trump administration’s anti-regulation movement. For example, the new secretary of labor can overturn the rule, said John Coffee Jr., director of Columbia Law School’s Center on Corporate Governance.

“The Department of Labor may not really enforce it, and I’m not sure if there are any legal remedies,” said Coffee. “The president and secretary of labor could wind up in court, although frankly that generally doesn’t happen.”

Although Trump would have less control over deregulation at agencies such as the Securities and Exchange Commission, which is not subject to presidential direction, Coffee argued the president is not without recourse.

“The president can reduce their budgetary appropriations if he found them uncooperative, or if they oppose him,” said Coffee. “It’s one hell of a deterrent.”

Michael Katz