SEC Proposes Rolling Back the Volcker Rule

June 15, 2018

Weeks after President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act, a bill to roll back systemic risk regulations under the Dodd-Frank Act, the Securities and Exchange Commission (“SEC”) is taking aim at reversing another Dodd-Frank rule. In a 3-2 vote on June 5, the SEC issued a proposal to amend the Dodd-Frank Act’s Volcker Rule, which limits banks’ proprietary trading and prohibits them from owning hedge funds and private equity funds.

The proposal would create new requirements centered on a bank’s trading activities, with an aim to alleviate the burden small- and mid-sized companies face in complying with the Volcker rule. It would also revise the exemptions for the rule’s proprietary trading limits.

Opponents of the proposal said it would diminish a significant component of the reforms put in place after the 2008 financial crisis. SEC commissioner Kara Stein remarked that the proposal kills the Volcker rule. Stein warned that the new exemptions under the proposal will boost proprietary trading and conflicts of interest. Commissioner Robert Jackson backed Stein’s claims and questioned why the SEC is prioritizing easing the Volcker Rule before addressing established rulemaking mandates like Dodd-Frank rules regulating bank executive pay.