With Two Strokes of a Pen, Trump Begins Unwinding Financial Regulations

By Casey C. Sullivan, Esq. on February 06, 2017 | Last updated on March 21, 2019

President Trump met with Wall Street executives on Friday, then emerged to sign an executive order that could be used to roll back Dodd-Frank regulations. The president also signed a memorandum instructing the Treasury Department to reexamine the new retirement broker fiduciary rule.

Taken together, the two directives could mark the beginning of the end for some signature Obama-era financial reforms. But they are just the beginning, the start of a process that could take months or longer to play out.

Taking on Dodd-Frank, Though Not Quite Dismantling It (Yet)

That Trump would act against the Dodd-Frank Wall Street Reform and Consumer Protection Act is no surprise. His transition website, for example, promised to "dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation." But Trump has been light on the specifics.

This executive order doesn't change that. Described by the New York Times as "vague in its wording and expansive in its reach," the EO does not even mention Dodd-Frank by name. Instead, it establishes "core principles for regulating the United States financial system."

It sets out six such principles, including empowering Americans "to make independent financial decisions and informed choices," keeping American businesses competitive internationally, and restoring "public accountability" to federal financial regulatory agencies.

The EO then orders the Secretary of the Treasury to begin consultation and report to the president within 120 days on laws and regulations that would promote those principles. As benign as that sounds, however, it is the first step toward restructuring major provisions of Dodd-Frank.

Starting to Finish the Fiduciary Rule

Regarding the fiduciary rule, the president's memo was more straightforward. The fiduciary rule was finalized in April of last year and requires financial advisors handling retirement accounts to go beyond recommending just "suitable" investments to putting their clients' best interests first.

In the memo, Trump instructs the Department of Labor to review whether the rule "may adversely affect the ability of Americans to gain access to retirement information and financial advice." That includes whether the rule will harm investors, whether it will disrupt the retirement services industry, and whether it is likely to increase litigation.

If the answer is yes, the DOL is instructed to being rescinding or revising the rule. That would necessitate new notice-and-comment rulemaking, a process that can take months or years.

Thus, while the president's orders begin the process of rolling back regulations, the actual work will take some time to accomplish.

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