In the quickly evolving political and business climate, each week, professionals come to Bastien Advisory Group and ask questions about potential financial services regulatory changes to understand the impacts on their businesses.
As we all chart the course, Bastien Advisory Group looks to proactively share the latest information with you. Below is a brief summary of recent information that we glean from our discussions in Washington, D.C., and from dialogue with leaders at notable Financial Services institutions, based largely in NYC.
Proactive discussion on anticipated regulatory changes and, the ability to plan for potential impacts, seems beneficial to most in the financial services industry.
Think of this note as context on a story that is expected to unfold further.
Dodd-Frank’s Impact on Financial Services
As many of us know, Dodd-Frank is a complex piece of legislation that affords significant discretionary authority to the agencies expected to interpret and enforce it.
The President will have influence over financial rules and regulations that have not yet been written or are still in progress. Those regulations that are already on the books will remain, at least, for the time being.
The President’s January 30, 2017 Executive Order requires that for every one new regulation, two existing regulations must be scrapped. Clearly, the intent of the current administration, with the support of Congress, is to roll back much of the current regulatory framework.
Dodd–Frank is a bill enacted to mitigate certain business activities that contributed to the 2008 crisis. A principal component, the Volcker Rule, puts restrictions on banks engaging in proprietary trading by limiting ownership of private hedge funds or private equity funds.
Regarding the operation of hedge funds, specifically, Dodd–Frank Act, requires that funds:
Provide extensive records about investment choices and practices and, hire a Chief Compliance Officer for funds over $150 million in holdings to build and oversee the compliance program
One must assume that modification of some, if not much, of Dodd-Frank is on the table.
We will share more, as details emerge that are relevant to our industry. If your organization is looking for additional information on this topic, we are happy to share it with you.
Sources: Bastien Advisory Group primary source discussions; Bastien Advisory Group analysis; “Hedge Funds and Dodd-Frank Reform,” Managed Funds Association, March 2017; “Regulation of Investment Advisers by the U.S. Securities and Exchange Commission,” Securities and Exchange Commission, March 2013.