The incoming administration, led by President-elect Donald Trump, will take office in January 2025. As with any transition of power, the industry anticipates policy changes to follow.  At InvestorCOM’s recent webinar, wealth industry experts explored anticipated changes to regulatory frameworks, enforcement strategies, and compliance best practices under the new administration. Below are the key takeaways:

 

1. Key Regulatory Changes and Trends:

• SEC Leadership Transition: Paul Atkins is expected to lead significant reforms at the SEC, focusing on transparency, reducing regulatory complexity, and shifting away from enforcement-led rulemaking. Proposed rules from the previous administration, such as those on predictive analytics and custody, may be revisited or modified.
• Deregulation Emphasis: The incoming administration is likely to push for smaller government, less regulatory burden, and a lighter enforcement touch.
• Technology-Driven Focus Areas: Cybersecurity, Cryptocurrency, AI and Machine Learning will likely draw regulatory scrutiny.

 

2. Industry Impacts:

• Shifts in Enforcement Priorities: A move toward enforcing clear cases of investor harm while scaling back on technical violations.
• State-Level Regulation: With potential gaps in federal oversight, states may step in with stricter rules, leading to a fragmented regulatory environment.
• AML Rules: Recently finalized anti-money laundering (AML) rules for RIAs are likely to remain intact due to bipartisan support, but further proposals like the Customer Identification Program may face delays.

 

3. Practical Compliance Advice for Firms:

• Refocus on Fundamentals: This is an opportunity for firms to revisit foundational compliance processes, such as testing, surveillance, and Day Two items from prior implementations.
• Adopt Technology to Reduce External Risk Factors like a Regime Change: Investment in configurable, adaptable platforms is critical for managing rapid regulatory and technological changes. While the industry may be looking at an era of less regulation, the pendulum will swing back at some time in future.
• Stay Ahead of Enforcement Trends: Monitoring exam priorities and enforcement actions can help firms align their practices with emerging regulatory focuses.

 

4. Predictions for the Next Four Years:

• Regulatory Slowdown: A decrease in new regulations but continued focus on investor protection through targeted enforcement.
• Emerging Focus Areas:
  • Capital formation for small businesses and democratization of wealth management.
  • Simplified, principles-based regulatory approaches over prescriptive rules.
  • Addressing cybersecurity, AI risks, and crypto clarity as top priorities.

 

As the financial industry adapts to this new reality, it must do so with both caution and optimism, embracing the chance to modernize while safeguarding the principles that underpin trust in our markets.