The implications of ‘doing a number’ on investment governance in the U.S.

With investment regulation and governance increasingly being tightened in UK with the advent of MiFID II less than one year ahead, it is interesting to see that financial regulation in the US is set to go in an opposite direction with an unravelling of regulations perceived to be constrictive to business growth – the victim of Donald Trump’s latest round of quick-fire finger pointing.

In light of Mr Trump’s assertion last week that ‘we’re going to do a big number on Dodd-Frank’ one wonders whether the benefits of allowing greater investment risk/freedoms for US financial institutions by dismantling key elements of the 2010 Act will outweigh the potential threats which the Act was intended to protect against. (Frank-Dodd was introduced in response to the 2008/9 financial crisis, to curb excessive risk taking on the part of banks and thereby protect consumers from the impact of major losses)

Also within the spotlight is the basic freedom of consumer choice: FCA Regulators’ jaws must be agape at the news that US regulators are looking at the prospect of scrapping the forthcoming fiduciary ruling which would require Advisers to offer retirement advice that is the best interests of their clients, leaving the choice – and accountability – in the hands of consumers.

In the rush to dismantle existing legislation and remove the obstacles in the way of US domestic Corporate growth, there seems to be woeful lack of far sightedness of the potential consequences to be faced by the innocents in all this – the general populace.  My father would have phrased an uncomforting maxim at times like this; ‘you’ve made your bed, now lie on it.’   If we apply the analogy to investment processes and purchases in the UK, they may be very firm but we can be confident they are well made and tested thoroughly with good quality control processes to ensure we buy fairly.  Let’s hope that Mr Trump’s voters don’t find their beds too lumpy in years to come.