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Client Alert: Treasury’s report on asset management and insurance – a positive direction, but questions and concerns remain

The Department of the Treasury recently released a 163-page report on regulation of the asset management and insurance industries (“Treasury Report” or “Report”) pursuant to President Trump’s February Executive Order regarding his “Core Principles” for financial regulation. The Report contains many recommendations that will help undo the damage to economic growth brought about by a deluge of costly financial regulations during the past eight years. Some of the policy reforms endorsed by Treasury, however, do not go far enough, are misguided, or send concerning signals regarding the direction of the forthcoming Treasury report on the Financial Stability Oversight Council (“FSOC”) – a multi-regulator council created by the Dodd-Frank Act (“Dodd-Frank”) – requested by President Trump in April.

Click through to read more of Paul Atkins's analysis.

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Client AlertIanthe Zabel
American Banker BankThink opinion, "Treasury must seize opportunity to rein in SIFI powers"

Manley Johnson and Paul Atkins write in a co-authored opinion piece in American Banker's BankThink:

"The Treasury Department recently released a new report endorsing numerous regulatory reforms for U.S. asset managers and insurance companies and is about to release another report next week assessing the Financial Stability Oversight Council, an unaccountable regulatory body created in 2010 by the Dodd-Frank Act.

During the past seven years, FSOC has threatened to use its sweeping powers to subject asset managers and insurers to cumbersome, inappropriate bank-style regulation by the Federal Reserve, whose leadership lobbied for and embraced these nonbank regulatory powers. Treasury’s recent report endorses some policies that will undo the damage of this regulatory framework, but it can do much more. Fortunately, the upcoming Treasury report on FSOC and the pending ascension of a new Fed chair provide perfect opportunities to abandon Dodd-Frank-inspired regulatory hubris and begin improving economic growth and financial access..."

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Ianthe Zabel
Morning Consult: Labor Department Needs to Re-Examine Its Analysis of Fiduciary Rule

Patomak Senior Advisor Craig Lewis writes:

As my students are back in lecture halls this fall, they are being reminded that it is more important to complete their assignments properly, rather than quickly.  Mistakes at the beginning invariably lead to disappointing conclusions. That’s a lesson worth repeating to regulators in Washington too.

Take, for example, the Department of Labor’s fiduciary rule, which went into partial effect in June with the objective of improving the efficiencies in the market for retirement services upon which Americans rely. The rule’s regulatory impact analysis, produced in April 2016, found that imposing a fiduciary standard on brokers would save Americans billions.

However, as my new white paper shows, the Labor Department’s projections were based on incorrect interpretations of academic research.

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Opinion, In the NewsIanthe Zabel
Patomak CEO’s take on the Treasury capital markets report: a positive step toward reform, some weaknesses still need to be addressed

Today, Patomak Global Partners CEO Paul Atkins released a review of the Department of Treasury’s recently-released report on capital markets regulation. After eight years of anemic economic growth, due largely to increased barriers to small business financing and accelerating regulatory complexity, Treasury’s report sets forth a pragmatic approach to improving capital formation, expanding investor choice, and simplifying regulations. The report was issued in response to a February Executive Order that requires Treasury to identify policies that could advance, or conflict with, the President’s “Core Principles” on financial regulation. These Principles include making regulation efficient, empowering American investors, ending taxpayer-funded bailouts, and improving the regulatory process.  

Overall, the Report should give investors, consumers, workers, small businesses, and the financial industry alike reason for optimism. Its recommendations on expanding access to capital, securitization, and regulatory processes, Atkins writes, neatly align with the President’s objectives. The report’s recommendations on derivatives and equity market structure also largely go in the right direction.

Atkins notes, however, that the report’s section on so-called financial market utilities accepts failed regulatory approaches that are antithetical to the Core Principles. He also writes that some of the report’s recommendations related to derivatives and equity market structure are weak or misguided.

Moving forward, Atkins encourages Treasury to embrace needed reforms to financial market policies that conflict with the President’s Core Principles in its future reports on asset management, insurance, the Financial Stability Oversight Council, and OLA. Treasury should announce that it will drop its ongoing appeal of the strong March 2016 MetLife v. FSOC court ruling that limits one of FSOC’s sweeping powers to designate firms “systemically important” – an anti-competitive and costly “too-big-to-fail” label that brings about moral hazard and adds next to nothing to make the financial system more “stable.” Treasury should also endorse Congress’s effort to rein in FSOC’s full suite of designation powers and end taxpayer-funded OLA bailouts.

Click through to read the full analysis.

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Client AlertIanthe Zabel
The Hill: Trump's Wall Street cop will clean up Obama's financial regulatory mess

In a guest column in The Hill, Paul Atkins explains that “between 2009 and 2016, critical operational issues and infrastructure problems were ignored as the SEC strayed from its tripartite mission of protecting investors, facilitating capital formation, and ensuring efficient capital markets.”

Atkins cites the suite of investment management-focused rulemakings advanced at the SEC in 2015 and 2016 as a prime example of the agency’s previously misguided agenda. The solution? Atkins writes that “the SEC should re-examine, modify, and potentially rescind overly-complex mutual fund regulations, such as its fund data reporting and liquidity risk management rules.”

Atkins argues the agency should address its well-documented organizational deficiencies and prioritize its statutory mandate to protect and enhance our capital markets. He says SEC Chairman Jay Clayton is the right person to do the job as his response to the recent discovery of the SEC’s 2016 cybersecurity breach shows.

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Ianthe Zabel
Forbes: Token Alliance Launches To Promote Best Practices For ICOs

Forbes reporter Laura Shin writes:

Monday, the Chamber of Digital Commerce, a trade association for the digital asset and blockchain industry, launches the Token Alliance, which aims to educate, promote and shape the world of crypto assets and token sales.

Its co-chairs have backgrounds that will be of great interest to token issuers: Dr. Jim Newsome, the former Chairman of the Commodity Futures Trading Commission, and Paul Atkins, a former Securities and Exchange Commissioner.

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In the NewsIanthe Zabel
Chamber of Digital Commerce: Blockchain Industry and Regulatory Leaders Launch Token Alliance

The Chamber of Digital Commerce is pleased to announce the Token Alliance, an industry-led initiative to educate, promote and help shape the responsible growth of token and digital asset issuances. The Token Alliance is co-chaired by former Chairman of the U.S. Commodity Futures Trading Commission, Dr. Jim Newsome, and former U.S. Securities and Exchange Commissioner, Paul Atkins.

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News ReleaseIanthe Zabel
The Washington Examiner: Trump, GOP Want Regulators Out of Boardrooms

...But the push to rein in regulators is about more than a specific rule or law. The effort also includes changing the relationship between banks and government regulators, giving less discretion to government representatives and more latitude to bankers...

The Fed's mandate to ensure the safety of banks "justifies all sorts of secret, behind the scenes arm-twisting," said Paul Atkins, head of the financial consulting firm Patomak Global Partners and former transition adviser to Trump. The regulators' involvement "provides challenges for people trying to operate," he said.

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CNBC.com: To Reform the Housing Market, Get Rid of These Two Bloated Behemoths

By Paul Atkins

News of a bipartisan effort underway in the U.S. Senate to reform the housing finance industry is a welcome development, but the devil is in the details.

Almost a decade after the financial crisis, in addition to repairing damage caused by the flawed Dodd-Frank law, policymakers must work swiftly to wind-down Fannie Mae and Freddie Mac, the two institutions at the heart of the last financial crisis.

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The Hill: Trump's labor chief has a chance to set the fiduciary rule straight

By Paul Atkins

This week, the U.S. Department of Labor’s highly controversial fiduciary rule — crafted during the Obama administration — is slated to go into effect. Fortunately, it is not too late for Labor Secretary Alexander Acosta to take decisive corrective action in light of recently changed circumstances to put the entire flawed rule on hold, but time is running out.

 

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