The U.S. election is now behind us, and the financial services industry is trying to understand the implications, and potential regulatory changes, that will follow.

Historically, presidential elections have signaled potential shifts in regulation to come, and a change in the administration will have significant impact on the regulatory ecosystem, including developments in technology, globalization, and federal agency rulemaking.

Five forces are set to challenge legal and compliance processes in the next few years. Here’s what our experts say is on the horizon.

1. Overturning the “Chevron Deference Doctrine” — SEC and other regulators get ready

One of the most significant conversations affecting the regulatory landscape is the Supreme Court decision in Loper Bright Enterprises v. Raimondo, a case that called into question the extent to which a federal court may defer to the judgment of an administrative agency.¹ Since 1984, following a Supreme Court ruling in Chevron v. National Resources Defense Council, federal courts have been compelled to defer to an administrative agency’s interpretation of an ambiguous or unclear statute that Congress delegated to the agency to administer. This came to be known as “Chevron deference,” and for nearly 40 years, the Chevron deference doctrine governed thousands of cases involving challenges to agency interpretations of statutes. The Loper case overturned Chevron.

“By overturning Chevron this summer, the Court signaled that going forward, federal agencies – including the SEC – will need to hew more closely to the plain language of any enacting legislation. Agencies that interpret statutory language in an aggressive way will face a greater risk of being overruled by the Courts,” says Hope Jarkowski, Chief Legal Officer at Broadridge.

As Congressional legislators and federal agencies adjust to a post-Chevron doctrine world, businesses should brace for more prescriptive regulations and potentially higher compliance costs.

“By overturning Chevron this summer, the Court signaled that going forward, federal agencies – including the SEC – will need to hew more closely to the plain language of any enacting legislation.”
- Hope Jarkowski, Chief Legal Officer at Broadridge

2. Regulatory borders — and more disclosure — for “borderless assets”

Cryptocurrency benefits from being decentralized and global; and, for the first few years of its existence, crypto remained unregulated. As crypto went mainstream, regulators took notice: now there’s a tangle of regulation — but there’s also opportunity to better inform investors.

If you’re a U.S.-based or North American-based financial institution with clients worldwide, you face more regulatory hurdles and uncertainty. There’s a good chance you’ll also need to tailor your disclosure agreements to your client to meet their geography, too.

“In Canada, for example, the regulatory landscape has evolved such that crypto trading platforms are providing crypto disclosure to their customers,” says Germán Soto Sanchez, Chief Product and Strategy Officer at Broadridge. “In the U.S., the market structure for crypto issuance and trading remains undefined, including disclosure requirements. Europe is on its way toward disclosure requirements. Disclosures are fundamentally good, but you have to ask what disclosure should look like.”

The industry, Soto Sanchez says, has “recognized the need for change.” Financial institutions and tech companies are adopting private ordering solutions to address transparency, consumer protection, standardization, financial literacy, and market integrity before formal regulations are introduced.

“The UK is launching a tokenization regulatory sandbox,” he adds. “This allows firms to pilot new technologies under regulatory supervision, which helps shape future regulations based on practical insights.”

The EU is taking more concrete regulatory actions. Markets in Crypto Assets Regulation (MiCA),² expected to be implemented by December 2024, introduces a harmonized regulatory framework for crypto assets and related services. Australia, Brazil, South Korea, UAE, Singapore, the UK, and others have implemented or are likely to implement disclosure requirements in the future.

Disclosures can include how the cryptocurrency is governed, by whom, other “tokenomics” that describe the digital asset’s performance, its carbon footprint, and more. Given the absence of a traditional issuer within crypto assets, firms offering digital assets will need to consider the right path forward for their Digital Assets Disclosure and anticipate more regulation across more borders.

3. Expect Washington to observe — rather than regulate — AI breakthroughs

Entrepreneurs often unveil sudden, seismic shifts. Regulators then look to catch up. That’s been the story of technological advancements in the 21st Century. With the Biden administration’s AI executive order, the SEC and FINRA quickly recognized the opportunities and risks associated with Artificial Intelligence (AI). They have yet to adopt rules specifically tailored to the use of AI. In sharp contrast, the European Union’s European Artificial Intelligence Act (AI Act) – which aims to foster responsible artificial intelligence development and deployment in the EU – entered into force on August 1, 2024 and represents the world’s first comprehensive AI regulation.³

The U.S. approach works for many firms; in fact, half of all surveyed firms believe they should be permitted to self-regulate their adoption of AI, according to a recent Broadridge study

In financial services, AI has shown its effectiveness in enhancing various areas, such as process automation, advanced data analytics, and everyday associate productivity. These improvements, while substantial, do not fundamentally alter the core tasks being performed. The industry has demonstrated its ability to self-regulate in these domains effectively.

However, emerging AI systems are poised to take a transformative step forward. For example, new AI systems that can understand investor needs and execute personalized strategies, advice, and plans are on the horizon. In these areas, financial services firms are seeking regulatory guidance and clarity to navigate this next generation of AI capabilities effectively.

U.S. federal regulators are likely to continue to evaluate how the early days of AI play out well into 2025, even as states begin to pursue their own AI regulations.⁴

While the regulatory landscape for AI develops, the financial services industry has started to look for ways to implement AI into their operational processes, as well as new B2B tools.

“The market has been proactive in addressing ethical concerns and ensuring responsible AI use,” Soto Sanchez says. “Industry leaders that are developing high-risk AI systems are also implementing robust governance frameworks to ensure transparency, fairness, and accountability.”

Financial institutions must take note and invest in their own ethical AI practices. Implementing robust AI governance frameworks and conducting thorough impact assessments will be essential, regardless of regulatory moves.

“Industry leaders that are developing high-risk AI systems are also implementing robust governance frameworks to ensure transparency, fairness, and accountability.”
- Germán Soto Sanchez, Chief Product and Strategy Officer at Broadridge

4. SEC’s disclosure rules for ESG – Will they or won’t they?

The SEC’s landmark climate rules from March 2024 required registrants to provide climate disclosures within their annual reports and registration statements for the first time. The requirement, set to begin in 2026, was met almost immediately by lawsuits to block its enforcement. The SEC has paused implementation as a result.

“The SEC put out the final rule last March and, within a month, it was put on hold,” says Cathy Conlon, Senior Vice President and Head of Disclosure Solutions at Broadridge.

“Some companies will still disclose climate-related information because of investor pressure, and because they are subject to regulations in the EU and in states such as California,” Conlon says. “Not much may change for some issuers, but all of this could create some uncertainty.”

What is also unclear is whether the SEC will continue to pursue implementation of climate-related rules as a result of the upcoming election. And in a post-Chevron legal landscape, the agency may find it no longer has the same latitude to create this and other ESG-related disclosure rules.

Even if the SEC cannot implement its rule on climate disclosure, many businesses are likely to forge ahead on climate initiatives.  Whether for value creation or risk mitigation, companies recognize the need to pursue sustainable financial performance, and climate issues are now more a part of the business conversation than ever before.

5. Operational Resilience — Understanding DORA’s global reach

International businesses will have to think beyond U.S. election-cycle regulatory changes, especially as the EU enacts a new set of standards for operational resilience. The Digital Operational Resilience Act (DORA) seeks to strengthen security and operational resilience in the financial services sector. 

“DORA is far from the only regulatory regime change related to operational resilience on a global scale, though it is one of the most stringent,” says Maria Siano, Head of International Strategy at Broadridge. “It will impact firms outside of the boundaries of the European Union (EU) due to its extraterritorial nature.”

“DORA will impact firms outside of the boundaries of the European Union (EU) due to its extraterritorial nature.”
- Maria Siano, Head of International Strategy at Broadridge

Siano expects that, given the global nature of the operational resilience regulatory push, firms should look beyond compliance with individual regulatory regimes and strive to integrate their projects across multiple locations. By adopting a more centralized and coordinated approach, such as introducing operational resilience health assessments across their business lines, firms can reduce the costs and complexity of compliance in the long term.

What to Expect Next

Despite the often-polarized political climate, bipartisanship and the development of sound financial policies are still achievable when policy makers prioritize the common good over partisan agendas. 

The SEC’s adoption of Tailored Shareholder Reports, which require mutual funds and ETFs to provide retail friendly disclosures to their investors, may signal that both sides of the aisle can work toward sensible, beneficial regulation.

“Tailored Shareholder Reports is an example of an SEC rule that got bipartisan support. For a rule to be passed at the SEC, you need a majority,” Michael Donowitz, Vice President of Regulatory Affairs for Broadridge, explains. “This is an example of a 5–0 vote, where the vote was unanimous across the Republican and Democrat Commissioners. And that really is something to be proud of.”   

The landscape of financial regulation remains in flux, shaped by shifting political priorities and evolving economic challenges. As new leaders take office and policies take shape, the financial services sector should prepare for a range of regulatory developments that could redefine the contours of the markets for years to come.