Hear the discussion in our latest “Talking Markets” podcast.
The 2023 US Congress will shift global investment policies from both the Democratic-ruled Senate and the Republican-ruled House. With a 51-49 Senate, the Democrats hold a true majority and can lead more aggressively. To discuss the US regulatory landscape, Drew Carrington facilitated a policy discussion with Dean Sackett of Polaris Capital, and Dan Murphy and Andy Lewin of BGR Group. I wanted to share their outlook for financial services policy in the year ahead:
- More oversight throughout the investment industry for Environmental, Social and Governance (ESG); Diversity, Equity and Inclusion (DEI); and other high-profile, cultural investments, as part of Republican policy. The Investor Democracy is Expected (INDEX) Act will receive new light. They think Senate Democrats will likely push back, while asset managers appear whipsawed between the two political parties.
- Senate Democrats will try to hold financial institutions, asset managers and others to any NetZero emissions pledges that they previously made. Democratic states (e.g., New York, Illinois, and California) have started pushing back against ending the NetZero pledges.
- Regulators will issue rules, executive actions, and resistance against existing policies and laws. The increasing regulatory environment with relevant agencies will likely exercise and possibly exceed their maximum authority, including the Federal Communications Commission, the Department of Labor, Consumer Financial Protection Bureau, Department of Labor, Department of Treasury, and the Securities and Exchange Commission (SEC).
- Cryptocurrency (crypto), digital assets, and housing will likely rank top of the agenda for the Senate Banking Committee. The SEC will likely finalize rules pertaining to crypto, cyber notification, and climate disclosure in 2023. The Financial Stability Oversight Council could designate crypto-exchange chairs and others as systemically important and subject these entities to greater regulation and requirements.
- Opportunities will arise in alternative and retail investments, and in the capital formation space. The Equal Opportunity for All Investors Act of 2021 will help expand who can qualify to invest in certain private offerings and securities.
From the farm bill to raising the federal debt limit, the group expects Senate Democrats to largely align with President Joe Biden. Divided government requires bipartisan agreement to progress policies and fund legislation. This power dynamic last occurred in 2011 when we experienced the 2011 Debt Ceiling Crisis and its financial and macroeconomic impacts. The 2023 outlook includes increasing monitoring for possible legislative and regulatory changes that guide how we serve our clients, invest in portfolios, and respond to regulatory situations.
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Investments in alternative investment strategies are complex and speculative investments, entail significant risk and should not be considered a complete investment program. Depending on the product invested in, an investment in alternative investments may provide for only limited liquidity and is suitable only for persons who can afford to lose the entire amount of their investment.
Buying and using blockchain-enabled digital currency carries risks, including the loss of principal. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk. Among other risks, interactions with companies claiming to offer cryptocurrency payment platforms or other cryptocurrency-related products and services may expose users to fraud. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. Investing in cryptocurrencies and ICOs is highly speculative and an investor can lose the entire amount of their investment. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.
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