Thursday, January 21, 2021

Biden inauguration heralds regulatory reset

By Mark S. Nelson, J.D.

Wolters Kluwer legal analysts take a look ahead at the Biden Administration’s expected focus on securities and commodities regulations and on the emerging topic of ESG investing.

"Democracy has prevailed." Those were the words of Joseph R. Biden, Jr. upon being sworn in as America’s 46th president on the same platform that was overrun by insurrectionists inspired by former President Trump on January 6, 2021. In his inaugural address, President Biden emphasized several themes, chief among them unity. He acknowledged that the forces that divide Americans are deep and real but asked all Americans to join in the cause of uniting America. President Biden also emphasized the primacy of facts and truth and he declared, in reference to racial injustice, that justice for all will be delayed no longer. President Biden also said that, among the many crises America faces simultaneously, Americans will face the ongoing COVID-19 pandemic as one nation and that we will get through the pandemic together.

The themes woven into President Biden’s inaugural address are consistent with his overarching centrist approach to governing. He hinted at the bold initiatives to come, for example on climate change. However, although the president’s incoming chairs at federal financial regulators may be expected to echo some of the Biden Administration’s bolder initiatives, they also will be pressed, in many instances, to evolve federal financial regulations in more subtle and incremental directions.

Rulemakings under President Biden’s nominee to lead the SEC, Gary Gensler, may address:
  • retail investors;
  • shareholders and proxies;
  • the Volcker rule;
  • disclosures of corporate political donations; and
  • environmental, social, and corporate governance (ESG) issues.
Likewise, CFTC rulemakings may address a variety of topics:
  • incremental changes to existing derivatives reforms;
  • continued enforcement of spoofing laws; and
  • new enforcement initiatives related to foreign corruption, a topic of recent interest for the CFTC but which historically has been limited to enforcement by the SEC and DOJ.
Moreover, the Biden Administration’s legislative agenda for the SEC, CFTC, and other financial regulators may be tempered by Democrats' narrow majorities in the House and Senate, and perhaps tempered even further by the prospect of a Senate power-sharing agreement akin to the one that prevailed in the 107th Congress from 2001-2003. With respect to the CFTC, it is at least possible that lawmakers will seek to enact the CFTC reauthorization legislation that had eluded several prior Congresses.

For a more comprehensive look at what to expect from the new administration, spanning multiple subject areas, see Biden inauguration heralds regulatory reset.