The Lay of the Land. The 2024 election has ushered in a seismic shift in Washington. Republicans have scored a trifecta of sorts, gaining control of all three elected branches of government. Here's what we're looking at:

• A 3-seat Republican margin in the Senate
• A slim 3-4 seat Republican majority in the House
• President-elect Trump back at the helm

As Trump moves swiftly to fill cabinet and administration roles, both parties are gearing up for his first 100 days in office.

Timeline: Now through January 2

Lame Duck Drama: What's on the Menu? Before we dive into the future, let's talk about the present. The current 118^th Congress has some unfinished business to attend to:

1. Government Funding: The clock is ticking: FY2025 spending bills expire on December 20th.
2. National Defense Authorization Act (NDAA): National security is important.
3. Farm Bill: Because we all gotta eat, right?

These aren't exactly issues where bipartisan kumbaya moments are common, but they need to be settled ASAP. Why? To avoid throwing a wrench in President-elect Trump's plans for his first 100 days.

The Funding Conundrum. Here's where it gets spicy. Speaker Mike Johnson is caught between a rock and a hard place: 

• Option A: Cut a deal with Democrats (gasp!)
• Option B: Push for another continuing resolution to extend funding into early 2025

Johnson tried Option B in September, but it flopped. Now, he's under pressure from the conservative wing to give it another go. But here's the twist: House Majority Leader Steve Scalise wants to pass a reconciliation bill within 100 days. A funding deadline during that period potentially throws a big monkey wrench into the mix. Remember, though, Biden and Senate Democrats are still running the show for now. They'll be itching to lock in some of their spending priorities before handing over the keys.

House GOP Leadership. House GOP leadership elections are today (Wednesday). While Speaker Johnson's grip on power is a bit shaky, with some conservatives talking about a rebellion, major shake-ups appear unlikely.

House Financial Services Committee. With Chair Patrick McHenry (R-NC) riding off into the sunset, we've got a four-way race for the gavel:

1. Andy Barr (R-KY): Current frontrunner. He's all about reining in the Fed, tackling ESG investing, and defanging the CFPB. Trump's kind of guy.
2. French Hill (R-AR): Early favorite, and strong supporter of deregulation, but perhaps not as closely aligned with the President-elect.
3. Frank Lucas (R-OK): A seasoned veteran.
4. Bill Huizenga (R-MI): Deregulation's biggest fan.

Meanwhile, Maxine Waters (D-CA) is expected to keep her spot as Ranking Member.

Senate Leadership Shake-up. With McConnell stepping down, it's a three-way race for Majority Leader:

• Senate Minority Whip John Thune (R-SD)
• John Cornyn (R-TX)
• Rick Scott (R-FL)

Scott appears to be the Trump favorite, but with a secret ballot, anything could happen.

House GOP Conference Chair. With Elise Stefanik (R-NY) off to the UN, we've got some fresh faces vying for the #4 spot:

• Kat Cammack (R-FL)
• Lisa McClain (R-MI)

Timeline: The First 100 Days & Trump's To-Do List

The President-elect’s agenda is long. Here's a taste:

• Renewing the 2017 tax cuts that expire at the end of 2025
• Overhauling energy policies
• Tackling border security
• Shaking up trade and tariffs
• Cryptocurrency regulations
• Healthcare reform (ACA and prescription drugs, anyone?)
• Foreign policy makeover (Paris Accord, NATO, among others)

But here's the kicker: while the political winds have shifted right, many Americans (including Republicans) haven't moved as far on issues like healthcare and taxes. It's a tightrope walk between seizing the moment and avoiding overreach.

The Regulatory Revolution: A Seismic Shift in Financial Services. The return of Donald Trump to the White House assisted by Elon Musk, coupled with Republican control of both the House and Senate, signals a tectonic shift in the regulatory landscape.

The Great Regulatory Rollback. Remember Trump's first term? Get ready for a more orderly sequel:

• A freeze on new regulations faster than you can say "executive order."
• A greatest hits tour of rolling back Biden-era regulations, particularly those affecting financial services and consumer protections.
• A return to "traditional" Republican policies (read: less red tape)

Agency Makeover. Picture this: new faces at the Treasury, CFPB, OCC, SEC, and CFTC. Their mission? Trim the regulatory fat and focus on reducing regulatory burdens. Here's a sneak peek:

• CFPB: From watchdog to lapdog? Expect a more "business-friendly" approach.
• FHFA: Affordable housing initiatives might be on the chopping block.
• SEC: Climate-related reporting requirements, ESG and others likely to go the way of the dodo.

Congress: The Fast and the Furious. With Republicans in the driver's seat, expect:

• Swift legislative action (Congressional Review Act, anyone?)
• A balancing act between partisan priorities and bipartisan necessities. Areas such as national security, trade policy, and energy independence could see bipartisan support. However, achieving filibuster-proof consensus will require navigating intraparty tensions.
• A potential merger and acquisition bonanza as antitrust enforcement takes a backseat
• A tech-friendly approach to financial innovation (Crypto bros, rejoice!)

The Plot Twist.

• Increased state-level regulation. As federal oversight shrinks, states are likely (as they did in 2016) to flex their muscles. Get ready for a regulatory patchwork quilt across the nation.

In a nutshell, we're looking at a massive shift towards deregulation in financial services. It's all about economic growth, with some balancing of consumer protections.

What It All Means for ADISA

The seismic shift in Washington's political landscape signals a dramatic change for ADISA's members. Here's what to expect:

1. Aligned Legislative and Regulatory Efforts: With Congress and regulatory agencies moving towards a more united and cohesive approach, ADISA's stance is likely to pivot. While issues won't magically disappear, we now have an opportunity to proactively shape policy rather than merely reacting to it.
2. Deregulation Opportunities: The expected freeze on new regulations and potential rollback of Biden-era policies could create a more favorable environment to advocate for smart deregulation that benefits our industry while maintaining necessary protections.
3. Focus on Innovation: The new administration likely will prioritize financial technologies and cryptocurrency acceptance.
4. State-Level Vigilance: As federal oversight potentially decreases, we must stay alert to increased state-level enforcement and regulatory activities. ADISA may need to expand its focus to navigate and influence the continuing and perhaps expanding patchwork of state regulations and regulators with different priorities than found in DC.
5. Balancing Act: While the regulatory pendulum swings towards deregulation, we must be mindful of potential public and political backlash against perceived overreach. ADISA will advocate for balanced approaches that promote growth while maintaining public confidence in financial markets.
6. Engagement with New Leadership: With new faces in key positions at agencies like the SEC, DOL and [FHFA? FTC?], ADISA has a fresh opportunity to build relationships and educate policymakers about our industry's needs and contributions.

A Close(r) Look at the SEC During a Second Trump Administration:
Issues that Matter to ADISA Members

The most immediate element is tenure of SEC Chair Gary Gensler. Chair Gensler was appointed to his position by President Biden and was confirmed to a five-year term through 2026. It is unlikely that Chair Gensler will stay on following the inauguration of President Trump – SEC Chairs typically resign in advance of the transition of power.

That said, if Chair Gensler declines to resign, President Trump (who has promised to “fire” Gensler on “day one”) has the authority to name a new Acting SEC Chair among the five sitting Commissioners and presumably would name one of the current Republican SEC Commissioners as Chair.  Whether the President can remove an existing Commissioner from service before the end of that Commissioner’s term is untested.  However, given the likelihood that Chair Gensler steps down ahead of the January 2025 inauguration of President Trump, we can assume that the President will appoint (and the Senate will confirm) a new Chair in 2025.

The election and inauguration of President Trump is perhaps less likely to immediately affect the leadership in the staff of the SEC’s Division of Investment Management (“IM”), which oversees investment advisers, and its Divisions of Trading and Markets (broker-dealers) and Corporation Finance (public offerings). Historically, such positions do not have the election-related turnover applicable to SEC Chairs. 

• Focusing on IM, it is possible that current IM Director Natasha Greiner stays under an Acting Chair and even under a new confirmed Chair. That said, the naming of a new SEC Chair is highly likely to change the regulatory focus of the IM Division.
• An approach adopted under a new Chair appointed by President Trump might lead to immediate changes in the SEC’s agenda of rulemaking actions. Rulemaking items impacting investment advisers that may be removed include:

• the SEC’s “Environmental, Social, and Governance Investment Practices” rulemaking;
• proposed rulemaking relating to Regulation D and Form D improvements;
• security-based swap large position reporting rulemaking; and
• the recently re-proposed “Open-End Fund Liquidity Risk Management Program” rulemaking.

At the same time, it is possible that some existing IM rulemakings may be adopted or reproposed in the new administration in a different form than originally proposed. Example include::

• the “Cybersecurity Risk Management” rulemaking applicable to investment advisers, among others; and
• the “Safeguarding Advisory Client Assets” rulemaking.

Both of these proposals may be adopted in alternative form during a second Trump administration.

Developments for Investment Advisers and Broker-Dealers

In light of the Fifth Circuit’s decision in National Association of Private Fund Managers, et al. v. SEC, which struck down the SEC’s private fund adviser rule, it seems likely that the second Trump administration would provide a period of regulatory “forbearance” for private fund managers.

• In particular, it seems likely that rules adopted relating to safeguarding of assets by advisers would be updated to reflect concerns addressed by commenters on the rule proposal. 
• It is also likely that the rulemaking relating to the use of “predictive data analytics” by broker-dealers and investment advisers will be adopted in a very different form than was proposed (it is also possible that the rulemaking will not be reproposed at all).

In terms of affirmative regulatory developments affecting private fund managers, it is possible that IM provides regulatory relief for (or relaxes) previously held positions that would facilitate the development of products that extend private market strategies to retail products.  In addition, IM may be more willing to provide regulatory guidance regarding recently adopted rules.

SEC Enforcement 

A new SEC Chair will almost certainly appoint a new Director of the SEC’s Division of Enforcement.  New leadership will likely bring some changes in priorities, both in terms of process and substance .  Once a newly confirmed Chair is in place along with a new Division Director, it is likely that asset managers can expect a less aggressive posture in terms of both proposed penalties and the use of novel legal theories by the Division.

A new SEC Chair and Director of Enforcement might also implement procedural changes that would have substantial impact over time. Different SEC Chairs and Directors of Enforcement have taken varied approaches to the procedural authority delegated to Enforcement Division staff. Changes in procedure could affect how potential litigants experience the enforcement process.  

That said, many potential enforcement-related changes could take some time to become felt - much of the Division’s work does not have the same partisan “resonance” that is associated with the rulemaking process Cases involving insider trading, financial fraud, offering fraud and straightforward violations of SEC rules have been brought under both Republican and Democratic administrations.  In other words, there are matters in the SEC’s enforcement pipeline that may not be significantly affected by the new Trump administration.

Developments Relating to Digital Assets

It seems likely that issuers of digital assets and asset managers interested in investing in digital assets will face a less draconian SEC.  President Trump has promised to make the U.S. the “world capital of crypto.”  In addition, the two current Republican Commissioners have criticized the SEC’s current approach to digital asset regulation.  It is possible that the SEC could go so far as to set up a regulatory framework for digital assets, perhaps working alongside the Commodity Futures Trading Commission, as envisioned by the Financial Innovation and Technology for the 21st Century Act (this bill that passed the House in May 2024 with some bipartisan support).

Even to the extent that a complete framework for digital assets is not developed, it seems relatively likely that the SEC and other financial regulators will work toward a regulatory framework for stablecoins. It is possible that this process will be accelerated and reinforced by legislation - bills have been drafted in both the House and Senate and could be signed into law early in the second Trump administration.  It is also quite possible that the SEC will reconsider Staff Accounting Bulletin No. 121, which requires certain entities involved in crypto custody activities to record digital assets as liabilities on their balance sheets.

In conclusion, the post-election landscape presents ADISA with significant opportunities to shape policy and regulation. By leveraging this new environment effectively, ADISA can play a pivotal role in fostering a regulatory framework that promotes innovation, growth, and stability in our industry.

*Drafted by ADISA's Legislative & Regulatory Committee Co-Chair John Grady, ABR Dynamic Funds, and ADISA's Governmental Relations Consultant Thomas Rosenfield, HillStaffer