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.”