With 868 enforcement actions brought by the SEC, 2016 was a year of increased regulations and record enforcement actions against Investment Advisors/Investment Companies and Broker Dealers. More than $4 billion in disgorgement and penalties were assessed by the SEC and $145 million in fines and $41 million in restitution by FINRA. Promises of deregulation and a new administration in the White House raises the question: What will 2017 bring?
From the Regulators
On January 5, 2017, FINRA released its Regulatory and Examination Priorities letter highlighting areas FINRA will focus on in 2017. The focus areas are:
The SEC has not released their official priorities as of this post; however, Deputy Director of the Division of Enforcement, Stephanie Avakian, offered some predictions in November 2016 during the Securities Industry and Financial Markets Association C&L New York Regional Seminar. Ms. Avakian, highlighted the following five areas, among others, that the SEC might focus on in 2017:
From the Administration
During his campaign, Trump promised to “get rid of” Dodd-Frank — the sweeping legislation passed in 2010 to address problems underlying the 2008-2009 financial crisis. In an interview with Fox News last October, Trump said:
We have to get rid of Dodd-Frank. The banks are not loaning [sic] money to people that need it. The banks will give me all the money I need, because I don’t need the money. Anybody that doesn’t need money is a great candidate to get money. But if you need money to create jobs or build something, whether it’s buildings or a company, the banks aren’t there. The regulators are running the banks, and that is why people can’t borrow money in our country today.
In what looks like a step to fulfill that promise, President-elect Trump announced the nomination of Jay Clayton, a mergers and acquisition lawyer, to replace Mary Jo White as SEC chair. The nomination of Clayton signals a major shift in policy, as experts say the M&A attorney is likely to turn the agency’s focus from enforcement, both domestically and internationally, to cutting the rules companies find most irksome.
Department of Labor (DOL) Fiduciary Rule
One of the biggest regulations that was finalized in 2016 and expected to take effect in 2017 is the DOL’s Fiduciary Rule. The Rule requires financial advisors to act in the best interest of their clients with respect to their retirement accounts. It is unclear whether a Trump administration would seek to block or delay the Rule. It has not been directly addressed by the campaign, but an advisor to President-elect Trump has indicated that there would be efforts to reverse it and Republicans in Congress have previously indicated a desire to do so.
It is worth noting that in assessing what the new president and Republican Congress can or will do to implement financial deregulation in 2017, the Senate will have 52 Republicans and 60 votes are needed to defeat a filibuster. Republicans will need at least 8 Senate Democrats to join them in enacting their agenda. Thus, what exactly will be deregulated in 2017 and the years to come is still to be seen. For now, advisors and firms should update and fine-tune their compliance programs to become compliant with current and upcoming regulations and rules.
Whatever 2017 brings, ICSGroup is here to help you prepare and navigate the ever changing legal and compliance requirements facing your firm or organization.