United States: Dodd-Frank And Other Laws Facing Indefinite Future In 2017

As 2017 begins, financial markets and the regulators that oversee them are facing significant uncertainty. When President-elect Donald Trump assumes the Oval Office on Jan. 20, all indications suggest that it will mark a shift to an entirely disparate approach to market oversight from the outgoing administration. While President Obama and his cabinet have overseen an era of unprecedented growth in regulatory scope, the incoming executive has promised an economic regime focused on reducing restrictions and promoting growth.

The transition also comes as the U.S. economy appears to be showing some of the strongest signs yet of recovery. The final employment report of 2016 showed that the national unemployment rate had dropped to 4.6% – its lowest point in nine years. The Federal Reserve also raised short-term interest rates for only the second time since June 2006, another much-anticipated signal of restored confidence in the economy. In September, Fed officials suggested two quarter-percentage-point rate increases could be expected in 2017, although that was before the election. While markets responded with an overnight plunge in the initial aftermath of Trump's victory, they then rallied to post record highs for much of December.

Nevertheless, ambiguity remains over what specific changes can be expected in the year ahead, many of which will have a direct impact on fund managers and the environment in which they operate.

What Becomes of Dodd-Frank?

Foremost among the issues facing Wall Street is the future of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). Passed in 2010 and designed to prevent the kind of conditions that contributed to the financial crisis, the legislation was the cornerstone of the Obama administration's efforts to enhance market oversight. During the campaign, Trump said "Dodd-Frank has made it impossible for bankers to function" and "very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs." If elected, he said his plans would include a "close to dismantling of Dodd-Frank," a promise he appears set to keep after his transition team announced it "will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation."

What exactly those policies will entail remains unclear. They may draw upon a previous proposal from Rep. Jeb Hensarling, chairman of the House Financial Services Committee, which included repealing key aspects of Dodd-Frank – including the federal government's role in dismantling failed banks – canceling the Volcker Rule's restrictions on banks' trading and investments, and curtailing the role of the Consumer Financial Protection Bureau, which was created in the wake of the crisis. Hensarling's proposal would also exempt "private equity funds" (to be defined by the Securities and Exchange Commission (the "SEC")) registration and reporting requirements under the Investment Advisers Act of 1940. Hensarling was among the candidates considered for Treasury secretary, suggesting his previously outlined plans could match Trump's. The post ultimately went to former Goldman Sachs executive Steven Mnuchin, who has said he will "strip back" Dodd-Frank, which he indicated is "way too complicated and cuts back lending."

The transition team has also outlined several related policies, including a moratorium on new market rules until existing measures have undergone a review and changes to make taxes "lower, simpler, fairer and pro-growth." J. Christopher Giancarlo, the likely future head of the Commodity Futures Trading Commission, has also indicated the agency should move on from the 2010 reform law to address current trends facing the financial markets.

Despite the promised end of Dodd-Frank, the entire 2,300-page law won't be easily or quickly dismantled, making it more likely that some sections are either revoked or adjusted to address specific concerns. The law's negative effects on small community banks have received particular attention and could be a logical target for change.

Perhaps fearing the undoing of their recent efforts, some SEC officials have pre-emptively touted Dodd-Frank. For example, SEC investor advocate Rick Fleming emphasized many of the accomplishments of the outgoing regime, defended the need for robust market oversight and highlighted some of the remaining rules the commission has yet to complete. It remains to be seen which objectives it will be asked to complete as the new administration rolls out its priorities.

SEC Leadership Changes

The White House isn't the only place in Washington, D.C. coming under new management, as the SEC will also have a new leader. Chair Mary Jo White announced she will step down in January from the position she has held since 2013. Enforcement director Andrew J. Ceresney and Trading and Markets director Stephen Luparello also announced plans to leave the regulator. The vacancies provide an opportunity for a sharp change of course for the new administration to pursue its regulatory agenda.

With two SEC commissioner seats already vacant, the departure of White and others also means the commission is unlikely to launch any controversial rulemakings and enforcement cases until appointments can be made and a new legislative direction can be established – a process that could take several months.

In contrast, Fed chair Janet Yellen has publicly stated she intends to complete her term as chair, which runs until January 2018, despite being the target of criticism from Trump, who has openly discussed replacing her in the role.

Fiduciary Rule

Another significant piece of regulation facing an uncertain future is the Department of Labor's Fiduciary Rule, currently set to become effective on April 10, 2017. As with Dodd-Frank, the incoming government has said it will either halt or dismantle the rule, which introduces several new requirements for brokerages and asset managers managing retirement investments. The rule has received considerable criticism from the industry for its cost and potential impact on small investors, with Merrill Lynch deciding to end commission-based options for retirement savers altogether. Members of the Republican-led Congress have also promised to halt its implementation.

Although most observers expect its demise is a foregone conclusion, reversing the rule will be complicated. Brokerages have already spent millions to comply with its requirements and, while he's spoken out against it, some suspect it is low on the president-elect's list of priorities. In addition, delaying the rule is unlikely to happen before Senate confirmation of a new Labor secretary, which is far from certain to occur before the rule goes into effect on April 10. Once in effect, amending or repealing the rule would be an extended process, due to the need for a public comment period on a new rule and input from other federal agencies. As a result, the outcome may not be as straightforward as has been widely predicted.

Changes to Accredited Investor Definition

Finally, proposed changes to the "accredited investor" definition appear likely to be adopted at some point in 2017 after the House passed legislation broadening who could fall under the designation. Under the bill, which was strongly supported by a 391-2 vote, the definition would be expanded to include individuals with securities-related licenses and anyone with education or experience related to a specific investment. However, due to the significant time constraint as the lame-duck Congress prepared to adjourn, the widely supported reforms will likely be reintroduced in the new year.

The legislation followed an SEC staff report in December 2015 that recommended, among other options, that the definition be revised "to allow individuals to qualify as accredited investors based on other measures of sophistication" beyond the current measures of income and net worth. It suggested that individuals with a threshold level of investments or a professional certification could become eligible, as well as those with experience investing in exempt offerings, "knowledgeable employees of private funds" or anyone who passes a test.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions