Pub. 6 2016-2017 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2017 7 The State of Compliance Under Trump VICTORIA E. STEPHEN ASSOCIATE GENERAL COUNSEL COMPLIANCE ALLIANCE T he short answer is: nobody knows. What we do know, though, is that compliance certainly isn’t going any- where tomorrow. With regard to the financial services sector, the Trump campaign widely focused on increased economic growth and lending through deregulation. While it has yet to detail exactly how it will go about that, it has generally criticized and vowed to reform several key players. Dodd-Frank Act We should start with the sweeping regulatory reform that is the Dodd-Frank Act. Despite pledging to “dismantle” the 2,300-page law, President-elect Trump is unlikely to be wholly successful in doing so. The administration would face opposition not only from congressional Democrats, but likely also from some Republicans. The implementation of the Act since 2010 has been an expensive and burdensome task to say the least, but the time andmoney have largely been spent at this point, and even those who initially opposed it are not all eager to destroy the work of the past six years. A complete repeal is unlikely, and even partial repeal would require reg- ulatory amendments that themselves would require renewed compliance efforts. Consumer Financial Protection Bureau Part of Dodd-Frank was the creation of the Consumer Financial Protection Bureau (CFPB) which, as we know all too well, is the independent government agency tasked with protecting consumers from abusive banking practices. The main reason Trump is unlikely to directly interfere with the CFPB anytime soon is the PHH Corporation v. CFPB case that’s currently pending rehearing. In October of last year, the D.C. Court of Appeals ruled in part that the structure of the CFPB violates Article II of the Constitution because it provides for a single director that may only be removed by the President for cause. As expected, the CFPB has filed an appeal for rehearing, so it’s less likely the administration will make a big move on this until the case is resolved. Indirectly, Trump could focus on underfunding the Bureau to temper its aggressive enforcement agenda. Glass-Steagall Act In a less expected move, the Trump campaign suggested it would work toward reinstating Glass-Steagall. If you don’t recall what that is, you’re not alone. The Glass-Steagall Act was legislation implemented back in 1933 in response to the Great Depression in an effort to separate commercial and investment banks. It was effectively repealed in 1999, which some credit as the cause of the ensuing financial crisis in 2008. It’s unclear whether the push for “a 21st century Glass-Steagall” has any legs, or whether the Trump camp was ever even serious about it to begin with, but it is sure to be a tremendous compliance hurdle if any version of the prior law ends up being revived. Those who say compliance is going away under a Trump presidency could not be further from the mark. Unwinding the existing mass of regulation will only task compliance departments with new requirements to interpret and im- plement. Any regulatory reform that does come about would not be immediate and it’s questionable how much could be reversed in four years. Even if federal enforcement of current regulation were diminished, private litigation still exists and would be apt to increase as a result. Finally, deregulation generally means less government backing, so rather than relaxing, compliance focus should be shifting from con- forming to regulation to independent de-risking. In sum, the uncertainty of the current regulatory environment is likely to bring the role of compliance to the forefront rather than diminish it. n Victoria E. Stephen serves as Associate General Counsel for Compliance Alliance. While receiving her Bachelor of Business Administration in Banking Finance from the McCombs School of Business, Victoria worked in both deposit and lending services. She continued her interest in financial services at the University of Texas School of Lawby focusing on secured transactions, taxation, contracts, and corporate governance. Victoria has since worked in corporate tax law, mergers and acquisitions, and performed legal research on a range of regulatory issues. As one of our hotline advisors, Victoria helps Compliance Alliance members with a variety of compliance and regulatory questions.