When President-elect Donald J. Trump is sworn into office for the second time in January, it should come as no surprise that he’s likely to take a significantly different approach to financial services regulation than the current Biden administration.
For one, the Labor Department’s fiduciary rule released this past spring seems likely to meet the same fate as the previous iteration passed during Barack Obama’s presidency.
Though Trump wouldn’t be able to immediately rescind the rule upon taking office, a Texas district court judge temporarily halted it. If the Fifth Circuit Court of Appeals eventually rules against it (as it did with the Obama-era version), a Trump-era Justice Department can opt not to defend the rule and let it die, according to Mark Quinn, the director of regulatory affairs with Cetera Financial.
“Even if the court upholds it, I think that the Trump administration could say, ‘Hey, we think this is misguided. We’re going to pull back from this,” he said. “We’re going to re-propose it in a different form.”
Altruist Chief Operating Officer Mazi Bahadori agreed that a Trump administration would effectively end the fiduciary rule by refusing to appeal if the court challenge is successful.
While Bahadori didn’t expect a complete halt to enforcement actions, he expects we could see less aggressive ones during a Trump administration, particularly when the violation isn’t “rooted in a black-and-white rule.”
He also expected a rulemaking shift, with less focus on payment for order flow, how firms safeguard digital assets, changes in equity market trading, broker/dealer interest payments on cash balances, and advisors’ use of AI, all of which would “likely be more favorable to industry participants.”
Trump has been largely quiet about potential nominees for significant regulatory posts like chair of the Securities and Exchange Commission. Still, Quinn expected an about-face on the commission’s approach to crypto enforcement, expecting the crypto industry to get “a much better hearing” during Trump’s tenure than under current Chair Gary Gensler’s SEC.
“This is something that really cries out for a legislative solution,” Quinn said. “(But) in this political environment, trying to get any kind of legislation passed is extraordinarily difficult. And so the rules around things like crypto are going to be made through enforcement activity at the SEC or other agencies because there does not seem to be any appetite at the federal level to adopt comprehensive legislation governing crypto.”
Quinn also pointed out that the proposed rule concerning digital engagement practices and predictive data analytics may end up in a drawer during the Trump administration. According to Quinn, the SEC delayed adopting the rules after a “firestorm” of industry criticism.
“If Trump is the president and he appoints the SEC chair, I think it would be pretty safe to assume that more radical initiatives like those two things would vanish quickly,” he said. “I don’t think you would see a Trump administration pursuing things like that.”
