(Washington)

In a new bill to help small US banks, some of the biggest beneficiaries are exactly the opposite. The new bill is set to raise the threshold for strict oversight from regulators to $250bn in assets (up from $50 bn). However, three huge custody banks—BNY Mellon, State Street, and Northern Trust—will also see a major benefit. Because of their custodial structure they will be able to exclude some deposits, pushing their total deposits down under the $250 bn threshold. This development seems likely to boost earnings per share at the custodial banks by 8%.

FINSUM: Talk about regulation going right for these banks.

(Washington)

The ruling against the DOL’s fiduciary rule last week threw a monkey wrench into everyone’s assessment of the future of the rule. While the DOL looked less likely to ultimately implement it, the big worry was that the ruling might dissuade the SEC from getting involved in the space. Well, it appears there is no immediate reason for concern, as SEC head Jay Clayton went on the record yesterday to clarify his agency’s position. Clayton said the ruling “hasn’t affected the way I’m approaching this … I haven’t had any discussions with DOL about what it means from a broader perspective of administrative law. But, as far as I’m concerned, we’re moving forward”. Speaking about the timing of issuing a new rule, Clayton said “the sooner the better”.

FINSUM: This is good news. Whether or not you want any fiduciary rule, one needs to be happy the SEC is stepping in because it lowers the likelihood that each state creates its own rule.

(New York)

Advisors large and small need to worry about this next bear market, as the latter may not survive, according to Barron’s. The reality is that there are many small RIAs who have kept their business alive because of the long bull market. However, “The smaller you are, the more vulnerable you are, because if the market goes down 15%, it gets harder and harder to run a business”, says Fidelity’s clearing division. Margins are already quite slim for small RIAs and lower AUM from market losses would likely kill many businesses. “When the stock market drops, revenues drop, and no expenses immediately come out of the system”.

FINSUM: The big question is whether RIAs who feel vulnerable should perhaps try to sell to larger players now instead of risking a bear market.

(New York)

Markets have been falling in aggregate, but the real damage has been to the tech sector (and utilities to a lesser extent). Facebook, for instance, fell a whopping 6.8% yesterday on fears of fallout over its data breach. But Amazon, Netflix, and Google, all tumbled as well. Tech stocks have been such a leader for markets, and now amount to such a major percentage of indexes ($2.2 tn), that some are worried tech losses could rattle the whole market. Mounting fears over regulations seem to be weighing on the sector.

FINSUM: The odd thing is that it is not fears over tech businesses that are causing losses, but rather fears of regulation. We do absolutely believe big losses in tech could shake the confidence of the market as a whole.

(New York)

Many investors might be thinking that small caps look like a good buy at the moment. Between trade tariffs, the new tax package, and the president’s general focus on economic nationalism, small caps seem to have a lot of wind in their sails. But the big question for investors should be whether they are overvalued. The Wall Street Journal says the asset class is overvalued, as the market has gotten overly optimistic about small cap growth prospects and is valuing the stocks too richly versus their current earnings, especially given rising interest rate risk in the economy.

FINSUM: The WSJ used an unusual valuation metric to assess the sector (EV/EBITDA), but overall the sector looks richly valued. So is every other asset class.