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Stories of Interest
- Banca IMI Securities to Pay $35Mn for Improper Handling of ADRs in Continuing SEC Crackdown
- Members of White House ‘Arts Panel’ Resign En Masse in Protest of Trump
- FINRA Whiffs on Disciplinary Sanction: Bill Singer's 'Negligent Market Manipulation in OTC Stock Promotion'
- Heather Heyer’s Mother Says, ‘I’m Not Talking to the President’
- Goldman Sachs May Have Lost $100Mn on Energy Bet Gone Wrong
- SEC Drops Case Against Ex-JPMorgan Traders Over 'London Whale'
- Financial Advisers That Invest in Technology Need to Accomplish These Two Things
- FINRA Amends Codes Regarding Expedited Arbitrator List Selection
- FINRA July 2017 Quarterly Disciplinary Review (Podcast)
- Senior Exec in Citigroup's Equities Unit Has Left
- Prudential Plotting its Escape From Fed's Tough Oversight
- Why CEOs Spurned Trump's Business Councils, in Their Own Words
- A Stockbroker, Her LLC, and Her Customers' Loans (Or Investment?) - Bill Singer
- Brian Quintenz Sworn In as CFTC Commissioner
- A Gary Cohn Resignation Would 'Crash the Markets' – Mgmt Guru Jeffrey Sonnenfeld
- Trading Firm DRW to Buy RGM Advisors - As Low Volatility Forces Out Weak HFT Players (subsc reqd)
- Reputational Damage - Rajat Gupta on Hard Road to Recovery
- 7th Circuit Affirms Spoofing Conviction - Bill Singer
- Wells Fargo Announces Board Changes
- Judge Rules Against Ex-Goldman Employee in Fed Leak Case
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NEWSLETTERS & ALERTS
Rules & Regulations
The State of Financial Regulation Under the Trump Administration
[Photo of Paul Volcker]
by Howard Haykin
So, the Trump administration released a report that recommends a dialing back of banking rules. To the surprise of some, the report did not seek to eliminate Dodd-Frank’s Volcker Rule, which forbids proprietary trading at big banks. And it's interesting to note that the release came one business day after the Department of Labor’s fiduciary rule for retirement advisers went into effect (Friday, 6/9). All in all, a mixed bag that disappoints some people on both sides of the aisle.
BloombergView columnist Matt Levine offers logical rationale for why things went down as they did.
- Like it or not, there was significant support for provisions of the rules that addressed public concerns:
► retirement brokers were too conflicted, and their commission-based economic model encouraged them to recommend bad expensive products that paid them kickbacks.
► banks had become too risk-loving, and they were dominated by traders who got outsized rewards for taking on big risks
- Banks and brokerage firms had already changed their business models in response to the rules:
► Most brokerage firms have changed their business models largely away from commission-based compensation.
► Big banks have largely transitioned away from proprietary trading, though some indications of prop trading appear now and then.
- While no one in the Trump administration seems to have wanted the rule, this administration failed to appoint senior officials to the Labor Department who might have been capable of unwinding a major regulation so close to its implementation.
- Eventually these rules are can be repealed or their overly restrictive provisions can be dialed down - though that may be more easily said than done, for the following reasons:
► Both rules are aimed at changing the culture of the industries that they cover – and this appears to have been happened at brokerage firms and big banks.
► The longer these financial institutions operate within the bounds of such new cultures, the harder it will be for them to revert to the old business models.
Buckle up - it looks like we're in for a bumpy ride!