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Financial Reformers, Beware the DC Circuit Court of Appeals!

By Tanya Roth, Esq. on September 26, 2012 | Last updated on March 21, 2019

Watch out, Elizabeth Warren! Wall Street has a powerful ally in the fight against financial reform. The D.C. Circuit Court of Appeals is turning out to be a banker's best friend.

While many cases involving Wall Street banks are heard in the Second Circuit Court of Appeals, the D.C. Circuit serves as the second-to-last stop for all regulatory agency related appeals. This would include appeals to regulations promulgated by the Securities and Exchange Commission.

And financial reform has become D.C. Circuit territory over the past few years, reports The New York Times.

The Dodd-Frank Act has been a hot topic in the D.C. Circuit, with the court shooting down the proxy-access rule which would essentially allow minority shareholders to gain access to proxies and propose corporate board members.

But that's not the only rule subject to D.C. Circuit scrutiny. In fact, due to the favorable decisions against financial reform, the court has become a haven for bank lobbyists.

The court focuses on the cost-benefit analysis when it reviews these regulations. As such, the S.E.C. is now taking caution to ensure that its cost-benefit analysis is sound when adopting new rules.

The court may be hearing other financial reform related cases soon, including an attack on the Volcker Rule. The Volcker Rule would place a restriction on risky trades and hedge fund investment by banks. Essentially, under the Volcker Rule, banks would be prevented from "proprietary trading," the practice of making bets with their own money.

One potential problem for the SEC is that the court has the appearance of being Republican-centric. Nine of the thirteen members were appointed by a Republican president. And from the looks of it, the court might stay that way. President Barack Obama has been unsuccessful as of yet in nominating anyone to the court.

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