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Trump’s win clears way for reshaping financial regulation and compliance

Republican Donald Trump's upset victory in Tuesday's U.S. presidential election and the party's retained control of Congress pave the way for a reshaping of the financial regulatory landscape that for the past eight years has been governed by Democratic President Barack Obama and the post­-financial crisis Dodd-­Frank Act.

Here are some issues on which the Trump administration, to take office Jan. 20, and Congress could have an impact, based on campaign statements by Trump and the efforts of Congressional Republicans.

Dodd­-Frank

Trump has vowed to repeal or substantially change the 2010 Dodd-­Frank Wall Street regulatory overhaul passed in the wake of the financial crisis. His economic plan released Aug. 8 included a vow to “cut regulations massively.” Republicans in Congress have also vowed to revamp Dodd­-Frank, and past efforts have been checked by Obama’s veto threat. Democrats can still affect policy through their filibuster power to block legislation in the Senate, but that is far from absolute.

Bank structure

Trump has called for a reinstatement of the Glass-­Steagall separation of commercial banking from investment banking, as a way to break up big banks.

Fiduciary rule

The Labor Department rule requiring brokers handling retirement accounts to act in the best in interest of customers is due to take effect in April. Congressional Republicans have pushed for a repeal of the rule, which is opposed by many in the financial services industry. Trump has not taken a position on the fiduciary rule, but he said during the campaign that he would declare a temporary moratorium on all new federal regulations if he takes office in January.

Obamacare

Trump has voted to repeal Obama’s signature health care reform, which has made health insurance available to millions of Americans but has been strained in its implementation. Proposals to replace the Affordable Care Act include allowing insurers to sell coverage across state lines and providing tax breaks to buy coverage. Estimates of the number of people who could lose insurance coverage range in the neighborhood of 16 million to 25 million people.

International sanctions and financial crime

The focus of the U.S. sanctions regime could change under Trump. He has called for tougher sanctions on Iran and scrapping a nuclear deal with the country, but has said he would consider lifting sanctions on Russia. Trump has also vowed a tough line against international terrorism, another focus of financial crime enforcement.

Carried interest

Trump has proposed ending the “carried interest” tax break that private equity investors enjoy. This provision is likely to be addressed in the context of one of many tax­-cut proposals likely to be examined by the new administration.

Regulators

The Securities and Exchange Commission now has two open seats on the five­-member body. Trump will have the power to appoint a Republican majority and designate a chair. Likewise, he will be able to fill two vacant seats on the five­-member Commodity Futures Trading Commission, giving that body a Republican majority, and designate a chair.

Consumer Financial Protection Bureau

A U.S. Appeals Court ruling this year has made the director of the agency subject to dismissal by the president. The current director, Richard Cordray, has enjoyed Obama’s strong support and built the new agency into a tough enforcer. Its high-­profile role in the $185 million settlement with Wells Fargo over unauthorized account openings won the agency some broad support, but Republicans have introduced legislation to put a commission in charge of CFPB and have Congress appropriate its funding. Supporters say such changes could weaken its independence.

Marijuana banking

A wave of state-­level measures to legalize recreational or medical uses of marijuana passed in Tuesday’s election. With the drug still illegal under federal law, there is uncertainty over the enforcement policy of a Trump­-led U.S. Justice Department and what legal risks U.S. banks might still face in providing services to the industry.

Supreme Court

Trump will be able to appoint a new Supreme Court justice to fill the vacant seat left by the death of Antonin Scalia, since the Republican U.S. Senate has refused to consider Obama’s nominee in anticipation of a new president. The appointment of a conservative jurist could lead to more decisions limiting the scope of government regulatory authority.


About Thomson Reuters Regulatory Intelligence

This article was produced by Thomson Reuters Regulatory Intelligence, and initially posted on Nov. 9, 2016.

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