Do You Know What A Repeal Of Dodd-Frank Would Mean For Securities Law?

On behalf of Wolf Popper LLP

The Dodd-Frank Act was passed in 2010 to address the problems that led to the 2008 economic meltdown. This sweeping piece of legislation has had far-reaching effects on matters relating to securities litigation and regulation. However, the newly elected president Trump has consistently reiterated his intention to repeal the law, and some members of Congress have been intent on at least altering it.

The Securities and Exchange Commission. 

In the Obama administration, the chairwoman of the SEC, Mary Jo White, has taken a prosecutorial role and enforced rules that required companies to admit wrongdoing with regards to SEC settlements. Trump has nominated Walter J. "Jay" Clayton replace her. With a career as a lawyer to Goldman Sachs and other Wall Street players, Clayton's focus will likely be on capital formation instead of enforcement. Dodd Frank also included additional incentives for whistleblowers to come forward and report misdeeds to the SEC without fear of retaliation by their employers. Many observers predict, however, that the Trump administration will require whistleblowers to report potential violations internally before they come to the SEC. It is also likely that several public company disclosure requirements, such as those related to executive compensation, will be weakened or removed. If the Trump administration makes good on the promises made during the campaign, we can expect a rollback in the rule-making process under the Act at the very least.

The potential for fraud

With limited regulation and supervision on banks, together with the gutting of the Consumer Financial Protection Bureau, this opens the door to fraud in the financial sector. With the recently revealed Wells Fargo scandal, there is ongoing need to enforce the necessary actions against abuses as well as enhance consumer protections.

The Supreme Court

The United States Supreme Court has played a major role in determining securities cases. The court has redefined the jurisdictional impact of securities laws, redefined the standards of pleading and class certification as well as addressed questions relating to causation, materiality, and the statute of limitations.

With one of the Supreme Court Justices having passed away, it will be the prerogative of the new president to choose a nominee to replace the Justice. Therefore, the next nominee is likely to increase the likelihood of limiting class actions and/or securities litigation.

Repealing Dodd-Frank is bound to affect securities litigation and consumer law in many ways. U.S. stock market investors need to understand and protect their rights, which in some cases requires working with a qualified securities litigation attorney

Consumer Financial Protection Bureau

Although the exact changes in store for the law may be difficult to predict, in the current political climate we might expect a significant decrease in restrictions on banks' investment and lending activities. Moreover, the rule-making process of the relevant agencies will likely be slowed down, with serious efforts aimed at controlling, defunding or completely doing away with the Consumer Financial Protection Bureau.