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The Morning Risk Report: Coronavirus Creates an Epidemic of Scams
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Among the reported scams, selling needed items like hand sanitizer and toilet paper at inflated prices. PHOTO: DAVID GOLDMAN/ASSOCIATED PRESS
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Good morning. State and local authorities are being flooded with complaints as scammers try to cash in on the nation’s panic over the coronavirus by peddling fake cures, soliciting donations to phony charities and selling needed items like masks, hand sanitizer and toilet paper at jacked-up prices.
The Federal Trade Commission on Monday said it had received at least 7,283 complaints of coronavirus-related scams in the first three months of the year, with $4.6 million in reported losses.
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“I don’t think I have ever been as busy as I have been since early February,” said Colleen Tressler, a consumer education specialist with the FTC, who has been urging people to pause and consider offers of help or promises of treatment before opening their wallets or clicking unusual links.
The agency, whose mission is to protect people from fraud and deception, so far has sent warning letters to at least seven businesses that authorities said were hawking products that falsely claim to treat coronavirus, such as teas, essential oils and colloidal silver.
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SEC Awards $450,000 to Compliance Whistleblower
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The U.S. Securities and Exchange Commission awarded $450,000 to an unnamed compliance employee for providing information that led to a successful enforcement action.
The award announced Monday is the regulator’s third to an employee with audit or compliance responsibilities, the SEC said. The SEC generally doesn’t disclose the names or employers of whistleblower-award recipients.
The employee followed the required steps for individuals with compliance or audit responsibilities to participate in the whistleblower program, first reporting the misconduct internally and waiting 120 days before alerting the SEC, the agency said. Whistleblowers are eligible for awards of between 10% and 30% of monetary penalties on companies collected as a result of the information they provide.
“The whistleblower made reasonable efforts to work within the company’s compliance structure, suffered unique hardships as a result, and reported to the commission after the requisite time period had passed,” said Jane Norberg, head of the SEC’s whistleblower office.
—Kristin Broughton
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From Risk & Compliance Journal
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Barclays is the largest fossil-fuel financier in Europe and the sixth globally, according to the Rainforest Action Network. PHOTO: PAUL ELLIS/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Barclays said it would aim to be a net-zero bank by 2050 by aligning the emissions of the activities it finances across all sectors with the Paris Agreement on climate change.
The British bank, which has come under fire from investors for having a weaker climate policy than some of its European rivals, said it would start with the energy and power sectors and provide targets to measure its progress in 2021.
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Having employees outside the workplace due to the coronavirus has threatened the ability of banks and other firms to record their trading-related calls. Above, a portfolio manager’s home trading desk.
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As banks, asset managers and hedge-fund firms adjust to employees working from home, they are grappling with technological challenges such as dropped calls and shaky internet connections. But that doesn’t give them a pass for complying with one of the key financial regulations governing their conduct: recording all trading-related calls.
Regulators such as the U.K.’s Financial Conduct Authority, the European Securities and Markets Authority and the U.S. Commodity Futures Trading Commission require firms to record telephone conversations when conducting trades. Recordings are used as evidence to resolve disputes over trade terms and to deter potential market abuse.
Trades are increasingly being conducted electronically, but traders still need the phone to trade large blocks of stock or to buy and sell securities in the bond and other markets that don’t offer transparent pricing. Having employees scattered outside the workplace due to the coronavirus restrictions has threatened the ability of banks and other firms to record their trading-related calls.
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The Justice Department is examining whether lawmakers traded ahead of the market turmoil caused by the coronavirus pandemic based on confidential briefings they received, according to a person familiar with the matter.
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Securities and Exchange Commission Chairman Jay Clayton said he doesn’t believe the U.S. should try to prevent investors from betting against the stock market, as more countries look to short selling bans amid extreme volatility.
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Since January, the U.S. Food and Drug Administration has granted 20 emergency authorizations related to the new coronavirus and worked with about 230 test developers who have or are expected to seek that approval, the agency said. Among the recipients: Abbott Laboratories, which plans to make a rapid test available starting this week for use in physicians’ offices,
urgent-care clinics and other settings through an Abbott device.
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Many finance chiefs face an unprecedented task in the coming weeks: closing the books on a turbulent first quarter with most or all of their finance staff and auditors working remotely.
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Lawmakers and regulators are pressuring insurers to go beyond the legal language of policies to get cash to Americans amid the mounting cost of shutdowns from the coronavirus pandemic. In at least three states, lawmakers have proposed legislation to force insurers to pay billions of dollars for business losses tied to government-ordered shutdowns.
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The FDA wants to give a 120-day reprieve to e-cigarette makers who were facing a May deadline to either submit their products for federal review or take them off the market.
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The Trump administration is completing new rules on tailpipe emissions that would slash the emissions targets auto makers must reach over the next five years, according to people familiar with the situation.
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Downtown Los Angeles streets on Sunday. The economic damage from the coronavirus crisis would depend not just on how high unemployment goes in the next month or two, but how long it stays there. PHOTO: ALLISON ZAUCHA FOR THE WALL STREET JOURNAL
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The U.S. economy has suffered a body blow with no modern precedent. Unemployment, just 3.5% in February, could top 10% in coming months, higher than its peak in the 2008-09 recession. Some see it surpassing 20% soon, levels unseen since the Great Depression.
But it isn’t a foregone conclusion that this must wreak as much damage as the great recession, much less the depression. That would depend not just on how high unemployment goes in the next month or two, but how long it stays there. That, in turn, depends on two things: how long it takes health officials to stop the novel coronavirus pandemic, and whether businesses and workers, with the aid of government, can stay afloat in the meantime.
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A hidden pile of debt threatens dozens of emerging-market countries as the global economy stalls and commodity prices tumble. An estimated $200 billion of emerging-market debt owed to China has gone unreported in official statistics in recent years. The money is upending assumptions made by yield-hungry investors who have poured roughly $2 trillion into risky emerging markets over the last decade.
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Two big money managers wagering that struggling mall owners can still pay their debts have been hit by the retail devastation brought on by the coronavirus pandemic, wiping away more than a billion dollars from their positions.
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The economic fallout of the novel coronavirus poses a new challenge for small banks across the country. Most of America’s banks are woven into the local economy and a key source of credit for small businesses. As the downturn squeezes more industries, community banks must balance helping these businesses with protecting their own bottom lines.
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The coronavirus outbreak is ravaging nonprofit organizations’ finances, threatening many of their usual revenue sources at a time when demand for their services is skyrocketing.
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Some delivery and supermarket workers are staying home to draw attention to requests for better pay and added protections against the risks they face as the coronavirus pandemic intensifies.
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Macy’s shoppers in New York earlier this month. The retailer closed all its stores in mid-March. PHOTO: EDUARDO MUNOZ/REUTERS
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Macy’s and Gap will furlough more than 200,000 employees beginning this week, highlighting the limits of the $2 trillion rescue package for U.S. businesses that have been cut off from their customers.
The furloughs add to the swelling ranks of unemployed and the economic damage resulting from the fast-spreading coronavirus, which has now infected more than 150,000 people in the U.S. Several states have ordered nonessential businesses like Macy’s to close, and President Trump has advised that social-distancing restrictions remain in place until April 30.
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There is little overlap between making cars and the labor-intensive job of building ventilators, which are largely hand-built at small workstations. But car companies such as General Motors are being called on to help because they typically work with thousands of parts suppliers—many making components similar to those needed for a ventilator—and are accustomed to manufacturing at a large scale.
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Alan Duke in his home office on a Zoom call with Lead Stories co-founder Maarten Schenk, who is in his home office in Belgium. PHOTO: JULIA DUKE
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Lead Stories, a company run by former CNN producer Alan Duke, is helping Facebook and other social-media platforms limit the spread of virus-related misinformation by flagging it as false. Business is booming, thanks to a surge of posts that are both dangerous and harder to track than many other forms of what is known as fake news.
The claims that Lead Stories debunks are then labeled as false on Facebook, which limits their spread and links to Lead Stories’ reviews. Already ramping up with funding from Facebook to combat misinformation in the 2020 U.S. presidential election, Mr. Duke and others in the industry have pivoted to coronavirus almost full-time.
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CEO Mark Hoplamazian’s restricted stock and options would be worth about $10 million if Hyatt’s share price regains half its declines from the February high.
PHOTO: ANDREW HARRER/BLOOMBERG NEWS
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When Hyatt Hotels decided to furlough many of its hotel workers, it told employees that Chief Executive Mark Hoplamazian and Chairman Thomas Pritzker would forgo salaries and nine other senior leaders would take a 50% pay cut through May.
The executives also received their annually awarded restricted shares and stock options about a week after that March 17 announcement. If Hyatt’s share price bounces back near levels it was before the coronavirus pandemic caused the stock to plunge, those 11 executives stand to gain tens of millions of dollars through those awards, according to an analysis of the company’s March 26 securities filings.
This additional compensation could exceed the amount of the pay cuts they are taking over the next two months. In the case of Mr. Hoplamazian, it already has.
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Disney said Chairman and former Chief Executive Robert Iger has agreed to forgo most of his salary while his successor, CEO Bob Chapek, along with several executives, will take pay cuts as the company works through challenges stemming from the coronavirus outbreak.
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The executive board for the United Auto Workers began a process to remove one of its own members following an internal investigation into allegations he sexually harassed subordinates.
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Bank of New York Mellon said it named Todd Gibbons as chief executive, removing the interim tag he has carried since last fall. Mr. Gibbons took the helm of the New York bank in October after Charles Scharf resigned as chairman and CEO to become president and CEO of Wells Fargo.
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