As we’ve noted, President Trump didn’t wait long after the election to make a seeming down payment on his promise to attack the sheer volume and scope of federal regulation. He aims to reduce the number of civil servants throughout the federal government, plus the volume of regulations flowing through it.

What do the executive orders, promises and proclamations mean for compliance?

Honestly, not much yet. But let’s look at a few of the initiatives and consider the compliance officer’s role in times of uncertainty, managing risks while safeguarding their organization’s brand and human capital.

A new administration – The CRA

It is widely expected that the current Congress, with both chambers now under Republican control and unlikely to face Trump vetoes, will use the Congressional Review Act (CRA) to prevent major regulations issued in the last months of the Biden administration from going into effect. The CRA enables Congress to review and prevent major rules from becoming law if both Congressional chambers object within a specified number of so-called “session days” – usually 60 – from the issuance of a final major rule.

Most likely on the chopping block include the bevy of consumer finance laws rushed through the Consumer Financial Protection Bureau in the final couple of months of the Biden Administration – like the one protecting personal financial data – and an Environmental Protection Agency rule regulating methane emissions and creating an incentive program for petroleum waste reduction.

The CRA can be a weapon for an administration, but it can also mean headaches for its own administrative agencies and for industry compliance and legal teams. This is because the CRA instructs agencies not to issue a rule that is “substantially the same” as a repealed rule – but it fails to define what “substantially the same” means.

And the CRA gives Congress the ability to take the name of the regulation to be abolished and list the agency that issued it, vote on it with limited debate and without a filibuster, and then send it to the president. This leaves the public and agencies looking for answers on what could come next, and for companies, to what extent they should stop complying, especially if such compliance has proven beneficial for the business overall.

Paring back regs

In terms of what to expect financial services firms – or more specifically, their lobbying arms and associative trade groups – to focus their attention on paring back, the list is long, but certain ones rise to the top.

Beginning May 28, 2024, the new T+1 settlement cycle applied to most routine securities transactions, which means that the settlement period for most securities issuances and trades shortened from two business days after the trade date to one business day after the trade date.

The pause order, common for incoming presidents, will cancel a flurry of 11th hour rules proposed under Biden’s watch and throw some finalized rules into limbo.

Although most trades do occur in this short timeframe – and even much more quickly than that – industry participants and SEC Commissioner Hester Peirce have questioned the need for the change, especially when foreign markets needed time to transition to the shorter timeframe and operational challenges regarding pre- and post-trade processes and securities lending could be more challenging as a result.

Another set of mandates that could be derailed or just delayed are the US Treasury central clearing ones. The amendments concerning changes to covered clearing agencies’ “risk management practices, protection of customer assets, and access to clearance and settlement services” have a compliance date of March 31, 2025. The current deadline for the central clearing of eligible cash secondary market transactions is currently 31 December, 2025 and that for eligible Treasury repo transactions is 30 June, 2026. (currently US Treasury transactions are settled bilaterally or cleared centrally through the Fixed Income Clearing Corporation (FICC))

It seemed as if the criticism of these rule changes was mainly centered on the tight timelines, given the operational lift for the firms involved and the complexity of implementing these rules, especially in the critical and risky repo space.

Then there are the capital and liquidity banking rules; banks and their trade group allies pushed back on them as too extreme and not needed this far out from the 2008 global financial crisis.

Efforts under the Biden administration to advance heightened capital requirements under the so-called “Basel III endgame” proposal stalled in 2024. Under the Trump administration, it is likely that the proposal will be scrapped or revised substantially to be capital-neutral, and outgoing Federal Reserve officials signaled just that late last year.

In addition, the prospects for the surcharge proposal for global systemically important banks and potential rules on long-term debt and liquidity requirements are uncertain, and they were a source of consternation to industry membership groups, such as the Securities Industry and Financial Markets Association (SIFMA).

Executive orders

The regulatory pause

The Trump administration has placed a freeze on all new regulations proposed during the last few months of Biden’s presidency.

The order prevents agencies from finalizing or proposing new rules without approval by a Trump-appointed agency head. Rules submitted to the Federal Register, that have not gone into effect, are to be withdrawn.

The order also suggests that agencies postpone the compliance date of published regulations until March 21st, to give the agencies a window to review them. The pause order, common for incoming presidents, will cancel a flurry of 11th hour rules proposed under Biden’s watch and throw some finalized rules into limbo.

Trump has also directed health agencies (HHS, FDA, CDC, NIH) to pause all external communications, including scientific reports and health advisories. CNN reported that that directive would be in effect through February 1st.

Federal hiring changes – a freeze and WFH mandate

In line with his campaign promise to reduce federal bloat, Trump published a memorandum cracking down on federal hiring. The order will prevent federal agencies from filling vacant positions, or creating new ones, for 90 days.

The order exempts “positions related to immigration enforcement, national security, or public safety.”

A separate order will reinstate Schedule F, which will classify upwards of 50,000 federal employees as political appointees, making them easier to fire if they do not “faithfully implement administration policies to the best of their ability.”

Federal employees have been ordered to return to in-person work, with exceptions to be granted at agency discretion. That will affect the hundreds of thousands of federal employees who work fully remotely, estimated at between 10 and 30 percent of the workforce.

Trump and his allies have frequently referred to federal employees who work mostly or exclusively from home as unaccountable and unreliable. Senator Joni Ernst (R-Iowa) reported that only 6% of federal workers work in-person full time, leading to “Service backlogs… delays, [and] unanswered phone calls and emails.”

DEI policies slashed

CBS reported a memorandum issued by the US Office of Personnel Management, ordering employees with DEI portfolios to be placed on paid leave.

That will be the first step in a program to shutter federal offices and programs that exclusively focus on DEI policies, which the memorandum describes as “dangerous, demeaning and immoral.”  

Climate change

President Trump made clear that there will be vast pullback on climate change mandates, as he repealed all climate-focused executive orders from the Biden Administration.

This included a directive to the United Nations to remove the United States from the Paris Agreement, the international treaty to limit global greenhouse gas (GHG) emissions. Trump also called upon the US Environmental Protection Agency (EPA) to review key aspects of EPA regulatory policy on climate.

It might be just the time to ask for more resources, since any change can be operationally challenging – and the changes have just begun.

First, the EPA must submit a report on the “legality and continuing applicability” of its 2009 endangerment finding for GHGs under the Clean Air Act. And the EPA must issue guidance on the “social cost of carbon” – a metric used by agencies to quantify the climate impacts of regulations and permitting – that considers whether its use should be eliminated.

He also ordered the withdrawal of all areas within OCS from wind energy leasing. The withdrawal goes into effect on January 21, 2025, and remains in effect until the order is revoked.

President Trump’s order dubbed Unleashing American Energy directed agencies to immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act of 2022. Legal challenges to President Trump’s efforts to impound these funds are expected.

Managing risk in the face of uncertainty

Not overreacting seems like the best plan at this early stage. Especially as litigation, debate and further action by Congress are all likely forthcoming in at least some areas covered here and many of the others not detailed above.

Monitoring developments, in particular any rule and legislative changes with material impact on operations, through effective compliance processes and tools will be important though. And each business should evaluate its own risk appetite and exposure, because some businesses might believe stronger policies and procedures than what the federal agencies land on may be suitable for them and their stakeholders.

New presidents often issue orders to cancel the orders of their predecessors, as many of President Trump’s own orders did in recent days.

And these orders do not require congressional approval and can’t be directly overturned by lawmakers.

But Congress could block an order from being fulfilled by removing funding or creating other hurdles, and many of these will be opposed by every Democrat in Congress. And of course there are the courts to consider, with some litigation possibly hinging on the argument that the president exceeded his authority in certain areas.

Compliance officers would do well to arm themselves with as much information as possible about the changes. It would also be advisable to collaborate closely with stakeholders to assess what their organization’s priorities are, and to communicate clearly to such stakeholders any material changes the organization is making to policies and procedures in response to the orders. Communicating clearly and often will help ensure transparency and accountability as well as alignment between compliance and the business.

And, of course, it is important to keep in mind that regulatory change (even a paring back as opposed to a piling on) does not give compliance functions a sabbatical.

Indeed, it might be just the time to ask for more resources, since any change can be operationally challenging – and if the last few days are anything to go by such changes have only just begun.