Hillary Clinton victory fortifies DOL fiduciary rule, portends staying the course on adviser regulation

In the new administration, the regulatory agenda could be largely shaped by the officials she puts in charge of the agencies.
NOV 08, 2016
Hillary Clinton's victory over Donald Trump Tuesday night in the presidential election fortifies a Labor Department investment advice rule and promises a regulatory agenda that resembles her predecessor's. Ms. Clinton, who will be the first female U.S. president, embraced the DOL measure on the campaign trail, even as it was buffeted by opposition from the financial industry and Capitol Hill Republicans. Her supporters hope she will prod the Securities and Exchange Commission to advance its own rule to raise advice standards. “In a Clinton administration, we would expect to see the DOL rule maintained and finally have a chance to see progress at the SEC on this and other related investor-protection issues,” said Barbara Roper, director of investor protection at the Consumer Federation of America. Ms. Clinton offered financial reform proposals during her run for the White House that echoed those President Barack Obama has pursued. “More or less, it would be staying the course of the Obama administration,” said Dan Barry, owner of Atlantic Policy Solutions, a policy analysis and consulting firm. In a Clinton administration, the regulatory agenda could be largely shaped by the officials in charge of the agencies. “Clinton is very comfortable leaving those decisions to the regulators,” Mr. Barry said. Choosing whom to appoint to those positions could be complicated for Ms. Clinton. During her political career, which includes eight years as a New York senator, she has been a Wall Street ally. In her quest for the Democratic presidential nomination, she had to overcome independent Vermont Sen. Bernie Sanders and win the support of liberal Massachusetts Sen. Elizabeth Warren, who is a fierce antagonist of the SEC when she perceives it to fall short on investor protection. “At the end of the day, it's a matter of which faction dominates the decision-making,” said Knut Rostad, president of the Institute for the Fiduciary Standard. “Who is she going to be listening to?” One way Ms. Clinton has given a nod to the left is in calling for the SEC to end mandatory arbitration in brokerage and advisory contracts. Ms. Warren is likely to keep the pressure on Ms. Clinton from the outside rather than the inside, according to Ms. Roper, who doesn't foresee her getting an administration appointment. “I can't imagine there are many administration jobs where she'd have as much influence as she will in the Senate,” Ms. Roper said. One adviser anticipates that Ms. Clinton will not be pulled as far left as Ms. Warren and Mr. Sanders would like her to go. “She will move to the center fairly quickly,” said Paul Auslander, who is director of financial planning at ProVise Management Group and active in Florida Democratic politics. “She's going to be more pragmatic on financial regulation. If she sees her friends on Wall Street don't like something, she won't support it.” But Ms. Clinton also is likely to foster an aggressive SEC, according to Andrew Melnick, partner at Murphy & McGonigle. “Under a Clinton administration, you'll see more robust funding for SEC enforcement,” Mr. Melnick said. “Greater accountability for individuals [in SEC disciplinary actions] ought to be one area where there is some common agreement among Republicans and Democrats.” The degree to which the SEC will crack down will be influenced by who has her ear, according to Andrew Friedman, principal at The Washington Update. “It depends on how much she gives in to the demands of Elizabeth Warren,” he said. Having Ms. Clinton in the White House also will affect the prospects for financial industry litigation. “The justices Hillary puts in the courts are likely to be more investor friendly than the ones Trump would have appointed,” said Joseph Peiffer, a member of the board of the Public Investors Arbitration Bar Association. How much Ms. Clinton will focus on adviser issues depends in part on whether the country can overcome its deep political divisions. “The adviser oversight issues don't rise to the level where they get attention in a heated political environment, which will continue,” Mr. Barry said.

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