During President Donald Trump’s campaign he promised to shake up business by streamlining the regulatory system. The financial sector, still adapting to the changes imposed by The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173) (“Dodd-Frank”), has had mixed reactions to the possibility of yet another regulatory scheme. While many would welcome a less complicated regulatory scheme, most recognize that rapid changes can be more detrimental than the current structures. Thus, many have spent the first weeks of the Trump Administration monitoring Trump’s Executive actions. The good news for the financial sector is that many of the agencies are beyond the reach of the Executive Branch acting alone. Like the Dodd-Frank Act, future changes to financial regulations will take an act of Congress.
On January 31, 2017 President Trump issued an Executive Order aimed at streamlining regulations to promote business. Relying in part on the authority found in the Budget and Accounting Act of 1921 (31 U.S.C. § 1101 et. seq.), Executive Order 13771 mandates that agencies cut two existing regulations for every new regulation introduced. It also will set an annual cap on regulation costs. The Order does not require that the repeals be made simultaneously.
However, the Order is limited to agencies that fall under the oversight of the Executive Branch. It also does not impact any rules mandated by a statute. Independent agencies created by Congress outside of the oversight of a Cabinet Secretary are outside of the orders reach. These independent agencies include the Securities and Exchange Commission (SEC), Commodities Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA), Federal Trade Commission (FTC), and even the Small Business Administration (SBA). This means every agency impacted by the Dodd-Frank Act cannot be impacted by President Trump’s actions alone.
The independence of these agencies serves the intended purpose—to stabilize the financial markets. Financial markets depend on the ability to forecast and are made stronger by predictability. In a time when much of the Executive Branch is in a state of unpredictability, these agencies can rely on the deliberative process of the Legislature. They will have time to plan for change in a way that agencies under the control of the Executive Branch do not. Under the current system of regulatory proposal combined with statutory changes in Congress, industry leaders and experts are given the opportunity to educate regulators and legislators on the impact of changes before they happen.
Thus far, President Trump has not tested the limits of his power as an Executive to regulate the independent federal agencies. In addition, there has been little discussion of directly impacting regulations that relate to the financial industry or the stock market. While Executive Order No. 13771 may create a culture of conservative regulation in the independent agencies, it cannot mandate a change in behavior. In addition, citizens may continue to challenge the administration in the courts, making it difficult if not impossible to predict what regulations and Executive Orders will remain. Companies in all industries are best served by maintaining the status quo for compliance.
This post was written by Carliss Chatman for Jurispect. Carliss joined Stetson University College of Law in in 2015 as a Visiting Assistant Professor. She teaches in the areas of business law and ethics. Her scholarship is intersectional with a focus on issues at the heart of commercial litigation: the interplay of business entities, government, and natural persons.