04 Jan 2017

Post-Trump Predictions For D&O Liability Insurance

Public companies’ D&O Liability insurance policies are designed to protect directors and officers from securities claims. On the surface, that sounds straightforward. In reality, though, the question of what constitutes a “securities claim” isn’t so cut-and-dry. Muddying the waters further is the question of how the Trump administration’s policies will affect securities claims.

How Will Trump’s Election Affect Securities?

According to an article in the D&O Diary, an air of uncertainty exists due in large part to the fact that during his campaign, Donald Trump stated repeatedly that he would repeal the Dodd-Frank Act if elected. The Dodd-Frank Act is the most sweeping Wall Street reform legislation in history and includes safeguards to protect consumers against excess risk taking and exploitation.

Trump’s rhetoric has softened since the election. Analysts believe his Dodd-Frank efforts will focus on deregulating financial institutions and perhaps reintroducing the Financial Choice Act (FCA). The FCA doesn’t remove key Dodd-Frank features but revises them to be more business-friendly. With Trump in office, it seems certain that the U.S. Securities and Exchange Commission (SEC) regulatory powers will be watered down. The question of “To what degree will oversight be relaxed?” remains to be seen.

Specific Post-Trump SEC Changes Some Experts Predict

Experts cited in an article in Fortune predicted sweeping changes at the SEC once president-elect Trump is in office. Specifically, they predicted that one of the first orders of business will be eliminating an Obama-administration proposal requiring companies to publicize the pay gap between CEOs and employees. Additionally, under the Trump administration, the SEC is expected to avoid passing a restrictive fiduciary rule being considered for financial advisors. Additional expected SEC-related changes on the horizon include:

  • Looser corporate auditing rules,
  • Reduced corporate penalties (replaced by penalties for individuals who profited from bad behaviors),
  • Changes to stock market trading rules,
  • A more challenging atmosphere for would-be whistleblowers, and
  • SEC policies that are more receptive to small companies seeking to raise capital.

About Euclid Exec

Euclid Executive Liability Managers is a managing general agency offering directors and officers liability for public, private, and non-profit companies; employment practices liability; and fiduciary liability insurance. To learn how we can help you manage your business risks, contact us at 630.238.1900.