In the latest move to reduce financial regulatory burden, President Trump has signed an executive order to begin the process of scaling back financial regulations implemented as a result of the Dodd-Frank Act
The executive order, issed on 3 February, instructs direct federal agencies to evaluate Dodd-Frank regulatory actions that are burdensome and report back to the President within 120 days to outline proposed reforms.
In addition, new fiduciary rules for retirement advisers that were scheduled to come into effect in April 2017 will be delayed.
The plan, as set out in the executive order, is to introduce rules to regulate the US financial system in a manner consistent with the following principles of regulation, which shall be known as the ‘core principles’:
(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
(b) prevent taxpayer-funded bailouts;
(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;
(e) advance American interests in international financial regulatory negotiations and meetings;
(g) restore public accountability within federal financial regulatory agencies and rationalise the federal financial regulatory framework.
The Dodd-Frank Act was signed into federal law by President Barack Obama in July 2010 in response to the financial crash of 2008 and included significant changes to financial regulation to tighten up the rules for banking and the financial services sector.
The Securities and Exchange Commission (SEC) and other federal agencies have adopted significant regulations and guidance to implement the requirements of Dodd-Frank, including rules on executive compensation, specialised disclosures on conflict minerals and resource extraction issuers, and asset-backed securities.
Dodd-Frank is a wide-reach act, affecting UK foreign private issuers (FPIs) fall within the broad reach of this law and as a result UK accountants need to take into account the provisions affecting their companies. The key points affecting UK companies include the Public Company Accounting Oversight Board’s (PCAOB) access to foreign audit firms’ work papers, Sarbox 404(b) exemption for smaller public companies, corporate governance and compensation, whistleblower bounty and controls on conflict minerals.