Will Dodd-Frank Be Repealed? Will Congress Starve the SEC?

If no agreement is reached, we may see a repeat of the 1995-1996 government shutdown that occurred after Newt Gingrich and his colleagues failed to reach a compromise with President Bill Clinton. Some believe Republicans can avoid the backlash that occurred the last time the national parks closed and passport applications weren’t processed. They argue that Clinton got the best of the situation because of his success in spinning the story as ‘Republicans shutting down the government,’ when Republicans could/should have had the upper hand in the rhetorical battlefield by pointing out that the shutdown was caused by Clinton’s refusal to sign bills with lower spending levels.     

Even if a government shutdown is avoided, criticism for Dodd-Frank is mounting.  Last week, all Republicans who serve on the Senate Banking Committee signed a letter to SEC chairman Mary Schapiro and other regulators that basically says, “Slow down!” As the debate over Dodd-Frank continues, it’s possible that legislation could be considered to simply extend the timeframe for rulemakings and other requirements under the massive new law.

Where does this leave investment advisors? My bet is that provisions in Dodd-Frank that affect all investment advisory firms – for example, whether broker-dealer and investment adviser regulations should be ‘harmonized,’ including whether FINRA’s reach should extend to all or some advisory firms – will be considered later this year.  It’s likely that hearings will be held in both the House and the Senate. It’s essential for the investment advisory community to stand up now and to be actively engaged when these issues are debated. Unless investment advisors are willing and able to express their concerns to their elected officials, it is likely that FINRA and its allies will be successful in their efforts.      

As always, I welcome your thoughts and feedback on these important matters.