Editor’s note: This article first appeared in Human Capital, a newsletter by Washington Bureau Chief Melanie Waddell about the people who shape the financial regulatory space.
While the industry is weighing in on — and in many cases still digesting — the Securities and Exchange Commission’s advice standards package, academics are reviewing the upside and downside of the now-defunct Labor Department fiduciary rule.
Four professors — Cliff Moll, Robert Kunkel and Bruce Niendorf of the University of Wisconsin-Oshkosh, and Kristine Beck of California State University in Northridge — unpacked in a recent paper the Labor rule’s effect on firms’ market capitalization under President Barack Obama, when the rule was in ascendance, and President Donald Trump, when it died a slow, inevitable death.
“The paper shows how public policy — and even election results — affect the financial markets (and financial firms, in this particular case),” Moll relayed to me via email.
The paper, “How Do Investment Companies Fare Under Obama and Trump Fiduciary Rules?” is set to be published in the Journal of Accounting and Finance.
The Obama Effect
According to the paper, investment companies, on average, experienced “a large decrease in market capitalization” under Obama, when the rule took hold.
Conversely, after the 2016 election of Trump, which signaled a future of deregulation and the continuation of pre-Labor rule business models, investment companies, on average, “experienced an astounding increase in market capitalization.”