Major news outlets are talking about President Donald Trump’s executive order to scale back the Dodd-Frank Act of 2010. While it is anticipated that this change will remove some of the statute’s restrictions on banks, it could have a potentially negative impact to the categories of consumers who took a financial hit in 2008.
With so much hype surrounding Trump’s plans to revise regulations on financial institutions, it is important to recall the history of Dodd-Frank and why it was enacted in the first place.
Throughout 2008, rumors swirled as to whether the stock market had hit rock bottom after the market crash in September of that year. As a result, in 2009, President Obama introduced financial reform to help mitigate those risks, and that legislation ultimately came to fruition as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. With its passage the Dodd-Frank Act had major impacts for banks and the general counsel alike.
Many firms subject to the law found themselves having to build out additional risk management and compliance regimes to comply with the new regulations, many of which came at additional cost.
Not only did risk management costs skyrocket, but document retention regulations required financial institutions to reassess how they were storing their data for the long term. Intralinks customers like Huron Capital Partners immediately recognized a need for improved tracking of their investor communications. David Reynolds, CFO and Chief Compliance Officer at Huron Capital Partners, said:
The changes brought by Dodd-Frank led us to become a registered investment advisor (RIA) in March 2012. This led to new requirements in terms of document retention and the tracking of investor communications. For example, we have to be able to demonstrate that certain notices and other documents have been distributed to our limited partners. Intralinks creates an environment that very thoroughly demonstrates that the information was both sent and received.
But, now that the Trump administration is talking about potentially loosening the Dodd-Frank Act’s regulations, what does that mean for your role in risk management?
House Financial Services Committee Chairman Congressman Jeb Hensarling is expected to submit changes to the law within the next few weeks, but until then, the future is unclear. Revisions to the Dodd-Frank Act could require regulated institutions to implement changes to how data is stored, shared and accessed. If that happens, these changes will likely come with additional costs and may require firms to scramble to put preventative measures in place. If, instead, the regulations are simply loosened, we expect that organizations will still want to ensure their documents are encrypted, stored, and easily shared or unshared with their business partners so they are at-the-ready for future audits.
The way to manage ever changing regulatory landscape is to simplify reporting and maintain a clear audit trail of all workflows. You can see our vision for the future of compliance here.