Presidential Directives to the Financial Industry: The Start of Regulation Roll-back?

February 16, 2017

On February 3, 2017, President Trump issued two directives affecting the U.S. financial industry:  A “Presidential Memorandum on Fiduciary Duty Rule” and an Executive Order addressing “Core Principles for Regulating the United States Financial System.”  These directives, though broad and general in nature, may be the first indication that the new administration is taking a hard look at regulations impacting the financial industry.  Community bankers should note two items:

  1. The Department of Labor’s Fiduciary Rule,  which fundamentally changes the way banks make available and deliver retirement services to customers, will be delayed as the agency reviews the regulation consistent with the Presidential Memorandum; and
  2. Any regulatory change, providing relief or otherwise, will take time.

First, it’s important to understand the directives themselves.  The President’s Memorandum on the Fiduciary Duty Rule (“Memorandum”) directs the Department of Labor (“DOL”) to examine the Fiduciary Duty Rule (“Rule”) and issue an economic and legal analysis concerning its impact.  Specifically, the DOL will examine the impact of the Rule on Americans’ ability to gain access to retirement information and financial advice, while considering several different criteria, including adverse impacts and increased costs to investors and retirees.  If the DOL concludes that the Rule is inconsistent with the priorities or criteria delineated in the Memorandum, the Rule must be rescinded or revised appropriately.

In the interim, the Rule, scheduled to take effect beginning April 10, 2017, has been delayed by the DOL.  Thus, banks should delay compliance with the Rule until further notice.  

Additionally, the President issued an Executive Order (“Order”) entitled “Core Principles for Regulating the United States Financial System.”  The Order, which sets forth broad principles regarding the regulation of the financial system, directs the Secretary of the Treasury to review existing regulations, among other things, to determine whether or not those regulations are consistent with the defined core principles.  The Secretary’s first periodic report is due to the President within 120 days. 

Though broad, it appears as though the Order is this administration’s first step to amend certain banking laws and regulations, including those under the Dodd-Frank Act, such as TRID and HMDA.  Based on these actions, I can surmise that there will be little “financial regulation roll-back” discussion coming out of the administration until the Secretary’s first report is issued in June.  Irrespective of the much-anticipated report, however, any substantive changes to financial laws or implementing regulations, including those within the Dodd-Frank Act, will require Congressional and/or agency action.  The President is unable to unilaterally act.  Importantly, these actions take time…possibly years…and community banks should be prepared to wait to see such changes.  All that said, there is certainly a unique opportunity to influence these changes.  Though individual involvement is important, advocacy via your local trade association, the Wisconsin Bankers Association, is a great place to start.  Here are some upcoming advocacy opportunities.

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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