Is the new Congress financial industry friendly?

The SEC closed out 2016 with a bang
January 4, 2017
FINRA is on a roll and it’s only the middle of the month!
January 18, 2017

Is the new Congress financial industry friendly? Hard to say. While it looks that way on the surface, don’t expect the regulators to go anywhere soon. In reality, regulatory compliance looks to be here for the foreseeable future.

Writing in a recent issue of Investment News, Reporter Mark Schoeff, Jr. discussed the newly installed House of Representatives’ plans to reassert Congressional control over regulation and the regulatory agencies. Foremost is the proposed SEC Regulatory Accountability Act which the House expects will amend the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC) to be more specific in its issuance of regulations.

Ensure the ends justify the regulation.

The proposed Act is expected to require the SEC to:

  • Identify the nature and source of a problem that the proposed regulation is to address “before issuing a regulation under the securities laws;”
  • Ensure an appropriate cost/benefit analysis by adopting “a regulation only upon a reasoned determination that its benefits justify its costs;”
  • Avoid duplication by identifying and assessing “available alternatives to any regulation;” and
  • “Ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.”

Regulatory cost/benefit analysis

Written by Rep. Ann Wagner, R-Mo., the measure would require that the SEC consider the impact on investor choice, market liquidity, and small businesses in determining the costs and benefits of a proposed regulation.

It would require the SEC to:

  • periodically review its existing regulations to determine if they are outmoded, ineffective, insufficient, or excessively burdensome; and
  • (2) in accordance with such review, modify, streamline, expand, or repeal them.

Moreover, whenever it adopts or amends a rule that is “major” (in terms of economic impact), the SEC will be expected to state in its adopting release:

  • the regulation’s purposes and intended consequences;
  • metrics for measuring the regulation’s economic impact;
  • the assessment plan to be used to assess whether the regulation has achieved its stated purposes; and
  • any foreseeable unintended or negative consequences of the regulation.

Tempest in a teapot?

This most recent initiative was part of a flurry of activity on the part of the new Congress. However, it has been noted that versions of the bills were approved by the House of Representatives in prior sessions, but did not come to fruition, likely because it was thought that President Barack Obama would veto them.

With the new administration, Congress hopes to have an advocate in the White House. However, as is often the case with House initiatives, the legislation still has to make it through the Senate where Democrats, although a minority, do have 48 seats – enough to sustain a filibuster which requires 60 votes to overcome. However, it’s still too early for even the most clairvoyant to place bets on the regulatory outcome.

What’s this mean for the rest of us?

That the regulators are still coming. Will you be ready? No…the regulatory bodies are not just going to ride off into the sunset. So, all of us — Broker-Dealers, RIAs, Commodity Traders, Muni bond dealers, etc. are still in the regulator’s gun sights.

Be prepared. But don’t overpay!

Noncompliance can be costly — we talk about fines and jail sentences in this blog all the time. But, compliance doesn’t have to break the bank. Patrina is offering a 90-day, FREE trial of its comprehensive 8-module compliance solution. And that’s just the tip of our iceberg!

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliant data capture, file storage, and records archiving specifically designed for the financial services community.

Let’s talk.

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