December 20, 2016

Trump Transition: Rolling Back Rules Harder Than It Might Seem…

Here’s the intro from this great WSJ article:

President-elect Donald Trump’s promise to eliminate regulations on U.S. businesses will likely take years to fulfill given the complex steps involved in reversing them and political and legal challenges from Democratic lawmakers and state attorneys general. Mr. Trump has said his administration will take aim at regulations across industries, and he will be backed by congressional Republicans eager to undo some of the more controversial Obama administration initiatives. Big targets include power-plant regulations and regulatory rules imposed on banks and financial institutions after the financial crisis of 2008, though the effort will also reach deep into the federal bureaucracy to include rules involving labor, telecommunications and health care.

Mr. Trump has a handful of ways to reach his goal, but they mostly point to a slow death of attrition for the Obama rules rather than an immediate elimination. He can opt not to defend rules currently tied up in court. His federal agencies can write new rules to justify revoking the ones he wants to eliminate. He can work with the GOP-controlled Congress to nullify recently completed regulations and restrict funding to certain parts of departments as a de facto way to hamstring a rule’s force.

In some cases, replacing rules will be as arduous as making them in the first place, particularly in the financial sector where some regulations have been issued by multiple agencies. The Volcker rule, which bans banks from making hedge-fund-like wagers, was adopted by five financial regulatory agencies. All five agencies would need to agree to changes for them to apply broadly. The Trump administration could loosen its enforcement of rules promulgated under Mr. Obama. That could make a difference where rules can be interpreted subjectively, such as in the case of the Volcker rule.

But where explicit rules are on the books, companies would be taking a risk by not complying, and there is no guarantee that career government staffers would agree to simply drop their enforcement actions.

Experience shows the difficulty of unraveling rules. Eight years ago the incoming Obama team pledged to review rules from the George W. Bush administration, including many so-called “midnight regulations” that were pushed through as Mr. Bush was preparing to leave office.

But of the more than 4,500 proposed or final regulatory actions cleared by the Bush White House, Mr. Obama repealed just 74 in his first nine months in office, when rules are most-often revisited, according to a 2009 presentation by a former official of the White House Office of Management and Budget. Of those, only 34 were final rules.

Whistleblowers: New SEC Enforcement Action Over Severance Agreements

Yesterday, the SEC announced that Neustar had settled whistleblower charges for routinely entering into severance agreements that contained a broad non-disparagement clause forbidding former employees from engaging with the SEC and other regulators “in any communication that disparages, denigrates, maligns or impugns” the company. Former employees could be compelled to forfeit all but $100 of their severance pay for breaching the clause.

Just one more enforcement case as the SEC continues to hammer home the need to modify agreements that contain anti-retaliation leanings. Tune in next year to our webcast – “Whistleblowers: What Companies Should Be Doing Now“…

Cybersecurity: Bankers Scared to Give Regulators Data

Here’s the intro from this WSJ article:

In the wake of the financial crisis, federal regulators are demanding a vast trove of private data to help them better monitor markets. But in the age of routine, sophisticated hacks, many in the financial industry worry the government will be unable to keep that sensitive information secure.
Investment firms cite numerous breaches at federal agencies, most recently the late-October admission by the national bank overseer that a former employee had downloaded 10,000 records with two thumb drives and took them home.

Industry trade groups also fret about what they consider insufficiently specific assurances that regulators are beefing up cybersecurity commensurate with new demands. The Commodity Futures Trading Commission has drawn industry ire with a project to crack down on rapid-fire trading firms, which includes a provision that would require the firms grant the CFTC access to their confidential computer source code without a subpoena. Last month, the SEC completed new rules to increase significantly the volume of data mutual funds report about their holdings, including derivatives instruments and securities-lending activities, to better track risks across the industry. “We remain concerned about the SEC’s ability to safeguard confidential information, as they provide precious little detail about their plans,” David Blass, general counsel for the Investment Company Institute, a mutual-fund lobbying group, said following the rule’s completion.

Broc Romanek