During a briefing for reporters in New York, SIFMA CEO and President Ken Bentsen outlined the issues the organization will be focused on in the new year. These included cybersecurity, senior investor protection, support for a uniform fiduciary standard set by the Securities and Exchange Commission (SEC), support for the US Treasury Department’s market structure review, tax reform and infrastructure finance.1 As market participants assess how the incoming Trump administration is expected to approach
regulations in US Capital Markets, SIFMA believes that now is a good time for the industry and the relevant regulators to evaluate what is and isn’t working well.2 “We need to have regulatory balance,” Timothy Scheve, SIFMA Chair and CEO of Janney Montgomery Scott stated at a press briefing in New York on December 6, and continued, “We need to review the industry regulations to ensure that they are working as they were intended and not creating unintended consequences that inhibit economic growth in capital formation.”3
What this means
Ken Bentsen highlighted four of the advocacy issues as key for the organization in 2017, with a uniform fiduciary standard continuing to be at the top of the list. In addition we find the review of Treasury Market structure, tax reform, and infrastructure finance.4
Together with the US Chamber of Commerce and a number of other interest groups, SIFMA has filed a legal challenge to the Department of Labor’s (DoL) fiduciary standard of conduct rule for brokers and registered investment advisors.5 SIFMA feels that the DoL rule, due to be phased in starting April 2017, could result in less investor choice and greater cost. The organization has also long supported an action by the SEC to establish a uniform best interest standard for financial professionals.6 The trade group believes that the DoL rule is an over-reaching Federal regulation that should be struck down, and that the SEC is the appropriate regulatory agency to monitor retirement advice and planning services. Many Republicans in Congress have also expressed opposition to the DoL rule, and have said that they will work with President Trump to overturn it.7
SIFMA and its members have been very involved in the agency review of Treasury market structure, led by the Treasury Department, as many market participants have expressed concern about diminished liquidity in the fixed income markets.8 Regulatory reforms under Basel III and the Dodd-Frank Act, including the Volker Rule, instituted greater capital and liquidity requirements for banks, and prohibited proprietary trading, resulting in reductions in dealer inventories, and the limiting of their ability to act as effective market makers, and so contributing to lower liquidity.9 Market makers and regulators continue to debate the appropriate level of liquidity in fixed income markets in order to strike a balance between financial stability and efficient capital flow.10 This is particularly important “because the Treasury market, in many respects, provides a different function than any other fixed income and equity markets” said Bentsen.11 The Treasury market, Bentsen said at the briefing, is not just an investment instrument, “It is an instrument of monetary policy, it’s an instrument of financial regulation, it’s a benchmark,”12 and so “Something that our members feel very strongly has to be handled very carefully.”13 As such SIFMA will remain “deeply engaged” in the process.
Tax reform has been high on the agenda throughout the Trump campaign, and also on that of the new Congress.14 It has been something that SIFMA has focused on over the years, and should remain a priority, as international, corporate and individual tax policy affects financial services firms, and how they serve their clients. SIFMA is committed to promoting policies that both grow the economy while remaining fair and competitive.15
SIFMA placed infrastructure financing on its list of key advocacy priorities, and this was a key part of the Trump campaign platform. “Infrastructure financing is something that this industry is focused on a great deal,”16 Bentsen said. SIFMA will work with a network of specialists to explore ways of making investment dollars go further for infrastructure projects, including the use of public-private partnerships; preserving tax-exempt status for municipal bonds; and using innovative approaches such as “design-build” procurement.17
Cybersecurity and Senior Investor Protection are a continuing focus for SIFMA, and largely uncontroversial. Cybersecurity is a top priority in the financial services industry given the need to protect customer assets, and the efficient, reliable execution of market transactions. SIFMA has strongly supported bipartisan legislative measures that provide the private sector with laws to better protect clients and to avoid any reputational risk for financial services firms.18 Bentsen emphasized that SIFMA will continue to work with industry and government leaders to identify and communicate cybersecurity preferred practices for all firms of all sizes and capabilities, and educate the industry as to the continually evolving threats and appropriate responses.19
SIFMA is committed to finding solutions that help protect senior investors from exploitation and fraudulent practices, and would continue to work with industry members, academics, and state and federal lawmakers to advance policies, practices, rules, regulations and statutes which enhance senior investor protections.20
Key Observations and Take-aways
It is likely that many of these initiatives will align with the incoming Trump administration and the Republican majority in Congress. “We will continue to advocate where rules can be improved and where there could be better coordination. It would be good for the regulators to stop and look at whether the regulations are doing what they should,”21 said Bentsen, and SIFMA is committed to working with a Trump administration to eradicate conflicting guidance, and to advocate for a complete overturn of the fiduciary rule.22 They may find a partner in the new president as he has said that the repeal of Dodd-Frank is a priority, although SIFMA representatives have not yet met with Trump or any of his advisors.
In conclusion, Bentsen said that SIFMA intends to say the same things to the Trump administration as it has been saying to the Obama administration for the last several years.23 The regulatory environment under a new administration however, should be more open to repealing or changing some of the existing regulations, but it is unlikely that anything will happen very quickly. The timetable would “encourage” financial services firms to keep their policies and procedures compliant with existing regulations.
Visit www.accenture.com/RegulatoryCompliance for latest insights on regulatory remediation and compliance transformation.
1. “SIFMA outlines 2017 priorities,” SIFMA SmartBrief,” Securities Industry and Financial Markets Association, December 9, 2016. Access at: http://www2.smartbrief.com/servlet/ArchiveServlet?issueid=A9E5C027-0906-4B5F-A087-B054EE885D77&lmid=archives
2.“Sifma Eyes Regulatory Review,” Markets Media, December 8, 2016. Access at: http://marketsmedia.com/sifma-briefing/
4. “4 Advocacy Issues SIFMA Will Tackle in 2017,” ThinkAdvisor, December 7, 2016. Access at: http://www.thinkadvisor.com/2016/12/07/4-advocacy-issues-sifma-will-tackle-in-2017?slreturn=1482289939
5. “DOL Fiduciary Standard Resource Center,” Securities Industry and Financial Markets Association. Access at: http://www.sifma.org/issues/savings-and-retirement/dol-fiduciary-standard/overview/
7. “SIFMA keen to work with Trump on overturning fiduciary rule,” OnWallStreet, December 8, 2016. Access at: http://www.onwallstreet.com/news/sifma-keen-to-work-with-trump-on-overturning-fiduciary-rule
8. “4 Advocacy Issues SIFMA Will Tackle in 2017,” ThinkAdvisor, December 7, 2016. Access at: http://www.thinkadvisor.com/2016/12/07/4-advocacy-issues-sifma-will-tackle-in-2017?slreturn=1482289939
9. “Liquidity Resource Center,” Securities Industry and Financial Markets Association. Access at: http://www.sifma.org/issues/capital-markets/fixed-income/liquidity/overview/
11. “4 Advocacy Issues SIFMA Will Tackle in 2017,” ThinkAdvisor, December 7, 2016. Access at: http://www.thinkadvisor.com/2016/12/07/4-advocacy-issues-sifma-will-tackle-in-2017?slreturn=1482289939
18. “Cybersecurity Resource Center,” Securities Industry and Financial Markets Association. Access at:
20. “Senior Investor Protection Resource Center,” Securities Industry and Financial Markets Association. Access at: http://www.sifma.org/issues/savings-and-retirement/senior-investor-protection/overview/
21. “SIFMA keen to work with Trump on overturning fiduciary rule,” OnWallStreet, December 8, 2016. Access at: http://www.onwallstreet.com/news/sifma-keen-to-work-with-trump-on-overturning-fiduciary-rule
23. “Sifma Eyes Regulatory Review,” Markets Media, December 8, 2016. Access at: http://marketsmedia.com/sifma-briefing/
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