Significant Regulatory Changes Likely for the Financial Services Industry

By Christopher L. Wallace, CPA, Partner

Significant Regulatory Changes Likely for the Financial Services Industry

Increased Business and Regulatory Compliance Expected for Financial Services Firms under Biden Administration

As the Biden Administration begins to come together, financial services companies should expect significant changes to the regulatory environment that may have a direct impact on their business and regulatory compliance initiatives. Some expectations include a renewed emphasis by the Biden Administration on consumer protection as well as the impact of other bigger picture Biden Administration goals such as racial equality and climate concerns.

Consumer Protection and the Financial Services Industry

With regard to consumer protection, Biden has nominated Rohit Chopra to serve as the Director of the Consumer Financial Protection Bureau (CFPB). During the Obama years, the CFPB collected billions of dollars in fines. That practice slowed to almost non-existent under the Trump Administration. In addition, numerous provisions included in the recently passed Consolidated Appropriations Act 2021, will fall to the CFPB to administer, including monitoring mortgage lenders’ compliance with rules allowing certain borrowers to skip payments and enforcing foreclosure bans on certain properties. Biden also campaigned on using the CFPB to create a federal credit reporting agency that all lenders who participate in federally insured lending would be required to use. Also being discussed is a regulatory change through the Federal Reserve known as “real time payment systems” to give consumers quicker access to deposited funds rather than requiring a window for those deposits to clear. While giving consumers quicker access to deposited funds, the concern with this type of policy is that it will make it much more difficult for banks to reverse fraudulent transactions that are typically detected during this clearing period.

Environmental, Social and Governance Regulation Considerations for the Financial Services Industry

As has been widely publicized, the Biden administration will be focused on economic inequality, racial justice, and climate change. These concerns are commonly referred to as “environmental, social and governance” or “ESG”. The Trump administration minimized ESG in evaluating financial regulation and required disclosures, while a Biden administration is widely expected to emphasize ESG at numerous levels. The SEC is considering requirements for public companies to disclose their stance on climate change, thus making public company strategies for climate change subject to regulatory review. The Federal Reserve is considering requirements that entities under its regulatory control address the effect on racial equality of proposed mergers and acquisitions. The Labor Department is evaluating requirements that pension funds invest their assets only in companies that meet regulator approved ESG criteria.

The common themes that I expect many financial services companies will encounter under a Biden Administration:  1) Enhanced regulatory requirements across many platforms, 2) Enhanced monitoring and examination by federal regulatory agencies, and 3) fines for those that do not comply.

Our Financial Services Industry team will closely monitor these and other new regulation changes as they are announced. We will keep you informed of changes that may impact your company so you can make timely and strategic business, compliance, and tax decisions.

Questions? Contact your Keiter Opportunity Advisor | Email | Call 804.747.0000.

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About the Author


Christopher L. Wallace

Christopher L. Wallace, CPA, Partner

Chris is a member of the Firm’s Financial Services Industry Team, and specializes in serving the Firm’s broker dealer, hedge fund, private equity fund, real estate fund, and other financial service clients. Chris has over 20 years of experience in public accounting providing audit and consulting services to clients in various industries. He is the Practice Leader of Keiter’s Business Assurance and Advisory Services Group.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

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