Thursday, November 10, 2016

Eleven Corporate Governance and Compliance Questions for President-Elect Trump

I have been on hiatus for a few weeks, and had planned to post today about the compliance and corporate governance issues related to Wells Fargo. However, I have decided to delay posting on that topic in light of the unexpected election results and how it affects my research and work.

I am serving as a panelist and a moderator at the ABA's annual Labor and Employment meeting tomorrow. Our topic is Advising Clients in Whistleblower Investigations. In our discussions and emails prior to the conference, we never raised the election in part because, based on the polls, no one expected Donald Trump to win. Now, of course, we have to address this unexpected development in light of the President-elect's public statements that he plans to dismantle much of President Obama's legacy, including a number of his executive orders.

President-elect Trump's plan for his first 100 days includes, among other things: a hiring freeze on all federal employees to reduce federal workforce though attrition (exempting military, public safety, and public health); a requirement that for every new federal regulation, two existing regulations must be eliminated; renegotiation or withdrawal from NAFTA; withdrawal from the Trans-Pacific Partnership; canceling "every unconstitutional executive action, memorandum and order issued by President Obama; and a number of rules related to lobbyists and special interests.

Plaintiffs' lawyers I have spoken to at this conference so far are pessimistic that standards will become even more pro-business and thus more difficult to bring cases. That's probably true. However,  I have the following broader business-law related questions:

  1. What will happen to Dodd-Frank? There are already a number of house bills pending to repeal parts of Dodd-Frank, but will President Trump actually try to repeal all of it, particularly the Dodd-Frank whistleblower rule? How would that look optically? Former SEC Commissioner Paul Atkins, a prominent critic of Dodd-Frank and the whistleblower program in particular, is part of Trump's transition team on economic issues, so perhaps a revision, at a minumum, may not be out of the question.
    2. What will happen with the two SEC commissioner vacancies? How will this president and Congress fund the agency?
    3. Will SEC Chair Mary Jo White stay or go and how might that affect the work of the agency to look at disclosure reform?
    4. How will the vow to freeze the federal workforce affect OSHA, which enforces Sarbanes-Oxley?
    5. In addition to the issues that Trump has with TPP and NAFTA, how will his administration and the Congress deal with the Export-Import (Ex-IM) bank, which cannot function properly as it is due to resistance from some in Congress. Ex-Im provides financing, export credit insurance, loans, and other products to companies (including many small businesses) that wish to do business in politically-risky countries.
    6. How will a more conservative Supreme Court deal with the business cases that will appear before it?
    7. Who will be the Attorney General and how might that affect criminal prosecution of companies and individuals? Should we expect a new memo or revision of policies for Assistant US Attorneys that might undo some of the work of the Yates Memo, which focuses on corporate cooperation and culpable individuals?
    8. What will happen with the Consumer Financial Protection Bureau, which the DC Circuit recently ruled was unconstitutional in terms of its structure and power?
    9. What will happen with the Obama administration's executive orders on Cuba, which have chipped away at much of the embargo? The business community has lobbied hard on ending the embargo and eliminating restrictions, but Trump has pledged to require more from the Cuban government. Would he also cancel the executive orders as well?
    10. What happens to the Public Company Accounting Board, which has had an interim director for several months?
    11. Jeb Henserling, who has adamantly opposed Ex-Im, the CFPB, and Dodd-Frank is under consideration for Treasury Secretary. What does this say about President-elect Trump's economic vision?

Of course, there are many more questions and I have no answers but I will be interested to see how future announcements affect the world financial markets, which as of the time of this writing appear to have calmed down.

Compliance, Corporate Governance, Corporations, Current Affairs, Financial Markets, International Law, Legislation, Marcia Narine Weldon, Securities Regulation, White Collar Crime | Permalink


Although you ask specific questions, I think we can only speculate at this point. I can only speculate as to a few of these questions.

I think that Dodd-Frank may only be reformed rather than wholesale repealed. Clearly, the President-elect and a majority in Congress show a preference for adopting the Financial Choice Act. In the absence of adoption, the Bureau will be “dialed back” administratively.

In light of the recent decision in PHH Corporation et al. v. CFPB, reshuffling the structure of the CFPB and establishing that the sitting President the power to “remove at will” the Director of the Consumer Financial Protection Bureau, I would anticipate that in February, 2016, the Director of this Bureau may be asked to resign. Thus, the over-reach for which the Bureau has become known will be tempered before reformed. If the Financial Choice Act is adopted, the Director would be replaced by a committee.

In light of the overall challenges and constitutional scrutiny of the structure of the CFPB, Congress may move to “moot” by restructure purported constitutional infirmities by altering the CFPB funding mechanism.

It has been opined that the DOL Fiduciary Rule would be halted in 2017 and the SEC reconstituted (two vacancies). Such a shift at the SEC would certainly delay rulemaking pursuant to Dodd-Frank.

In addition, the prognosticators (who certainly should be “hat in hand” at this point) believe Mary Jo White will leave and there will be a “new face” installed.

I think there is little doubt that the incoming Administration is “trial ballooning” Rudy Giuliani as the next US Attorney General.

The President-elect campaigned heavily in Florida in the Cuban community on the roll-back of the Executive Orders on the “Cuban thaw.” This community turned out heavily for Trump and as this was by Executive Order I suspect that they will be moot the day after inauguration.

All speculation I’ve seen has been that Henserling may be able to accomplish more where he is.

Well, that’s all the inclinations I have to share.

Posted by: Tom N. | Nov 11, 2016 7:00:45 AM

Thanks Tom for your thoughtful comments. This will be a very interesting time and I will continue to post on the developments.

Posted by: Marcia Narine Weldon | Nov 11, 2016 7:42:26 AM

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