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The Morning Risk Report: SEC Launches Review of Online Strategies Used by Brokers, Advisers
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The SEC solicited public comments on social-networking tools, investing and contests with prizes among other ‘digital engagement practices.’
PHOTO: ARIEL ZAMBELICH/THE WALL STREET JOURNAL
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Good morning. The Securities and Exchange Commission launched a wide-ranging review Friday of the online strategies that brokers such as Robinhood Markets Inc. and investment advisers use to interact with customers, aiming to determine whether tools like smartphone notifications are in the best interests of investors.
The SEC solicited public comments Friday on “digital engagement practices” in the financial industry. These include social-networking tools, investing games and contests with prizes, digital badges, and leaderboards, notifications, celebrations for trading and chatbots.
[Continued below...]
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Requests for public comment often represent a first step in the process of developing new rules to guide behavior in the industry.
Robinhood and other online brokerages have rapidly attracted millions of novice investors with innovations like zero-commission trading and gamelike apps. Trading frenzies in GameStop Corp. and other so-called meme stocks—amplified by online forums such as Wallstreetbets—have prompted regulators to take a closer look at industry practices.
“In the last few years, we’ve seen a proliferation of trading apps, wealth-management apps, and robo advisers that use these practices to develop and provide investment advice to retail investors,” SEC Chairman Gary Gensler said. “In many cases, these features may encourage investors to trade more often, invest in different products, or change their investment strategy.”
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From Risk & Compliance Journal
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Risk & Compliance Forum Survey
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We’re conducting a survey of compliance professionals about the impact of the Covid-19 pandemic and the reopening of the economy, with findings due to be presented at the WSJ Risk & Compliance Forum on Oct. 12. If you work in a compliance-related role we’d love to hear from you via this survey link.
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J.C. Flowers & Co. and Its Romanian Subsidiary to Settle U.S. Sanctions Probe
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U.S. private-equity firm J.C. Flowers & Co. and its Romanian subsidiary have agreed to pay more than $860,000 to settle allegations the subsidiary violated U.S. sanctions on Iran and Syria, the U.S. Treasury Department said on Friday.
First Bank SA, which is based in the Romanian capital of Bucharest, allegedly processed 98 commercial transactions totaling about $3.59 million through the U.S. financial system on behalf of individuals or entities in Iran and Syria, according to a settlement agreement between the bank, J.C. Flowers and the Treasury’s Office of Foreign Assets Control, which enforces U.S. sanctions. First Bank also allegedly processed euro-denominated payments to Iran against U.S. regulations, after J.C. Flowers acquired a majority ownership interest in the bank in 2018, according to the settlement agreement.
U.S. sanctions generally prohibit the direct or indirect exportation of services to Iran and Syria, unless authorized by OFAC. The sanctions generally apply to foreign subsidiaries of U.S. entities as well.
A spokeswoman for J.C. Flowers declined to comment.
—Mengqi Sun
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Jury selection begins Tuesday in the trial of Elizabeth Holmes, seen walking with her attorneys after the first day of hearings in San Jose, Calif.
PHOTO: KATE MUNSCH/REUTERS
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Theranos Inc. founder Elizabeth Holmes could argue at her upcoming criminal fraud trial that she was in a decadelong abusive relationship with former Theranos President Ramesh “Sunny” Balwani that left her under his control during the period in which the government alleges the two blood-testing executives committed a massive fraud, newly revealed court records show.
Ms. Holmes claims the abuse by her former business and romantic partner was psychological, emotional and sexual, according to the documents.
Ms. Holmes accused Mr. Balwani of controlling what she ate, when she slept and how she dressed, throwing sharp objects at her and monitoring her text messages and emails, among other things, according to one of the filings.
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Peloton Interactive Inc. said Friday that the U.S. government has subpoenaed the company for information on its reporting of injuries related to its products. Both the U.S. Department of Homeland Security and the U.S. Department of Justice have issued subpoenas, Peloton said in its annual filing with the Securities and Exchange Commission. Additionally, it said the SEC is investigating the company’s public disclosures over these issues.
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Apple Inc. agreed to settle a class-action lawsuit with software developers who challenged the tech giant’s practices in connection with the App Store. The proposed settlement disclosed Thursday marks the latest step in legal battles Apple has had in recent years with small companies as well as larger entities such as Epic Games Inc., Match Group Inc. and Facebook Inc. that distribute apps through its platform.
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Wind from Hurricane Ida ripped a roof off a building in the French Quarter in New Orleans on Sunday.
PHOTO: ERIC GAY/ASSOCIATED PRESS
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Hurricane Ida made landfall on Sunday and battered New Orleans and much of southeast Louisiana, knocking out power, downing trees and causing havoc as the region’s most severe storm since Hurricane Katrina exactly 16 years earlier.
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Covid-19 hospitalizations nationwide crossed above 100,000 this week for the second time in the pandemic, overwhelming caregiver capacity in several states.
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More than three-quarters of the largest U.S. companies reported higher revenue than before Covid-19, according to a Wall Street Journal analysis, indicating that many have adapted to changing business conditions caused by the pandemic.
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China’s growing assertiveness toward Taiwan has triggered a public push by Japanese leaders to plan for a possible conflict, a shift that could lead to closer cooperation with the U.S. military.
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‘We didn’t live up to the expectations we have for ourselves to protect our customers,’ wrote Mike Sievert, chief executive of T-Mobile US.
PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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The chief executive of T-Mobile US Inc. apologized to customers for a security breach that has exposed personal data from more than 50 million people and said the wireless company was working to strengthen its cyber defenses.
The Bellevue, Wash., company on Friday said it struck long-term partnerships with cybersecurity firm Mandiant and consulting firm KPMG LLG after the hack of its systems that exposed millions of Social Security numbers, birth dates and other data.
“We didn’t live up to the expectations we have for ourselves to protect our customers,” CEO Mike Sievert wrote in a public letter. “Knowing that we failed to prevent this exposure is one of the hardest parts of this event.”
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Posts from GameStop chairman Ryan Cohen—including a photo of a tombstone bearing the words, “RYAN COHEN R.I.P DUMB ASS”—inspired countless discussions across the internet. MARK ABRAMSON FOR THE WALL STREET JOURNAL
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The tweet from GameStop Corp. director Ryan Cohen, on its face, made little sense: a picture of a McDonald’s ice cream cone alongside a frog emoji. Yet on the February afternoon that he posted it, investors in the video game retailer spun into a frenzy.
As traders on social media scrambled to untangle the post’s meaning and shared it as a meme, GameStop’s stock rocketed higher and finished the session up 104%. Mr. Cohen has never publicly revealed the meaning behind the Feb. 24 tweet, and it’s impossible to say to what extent it drove GameStop’s price movement that day.
One thing was clear: A meme lord now occupied the boardroom.
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The cargo operation of Korean Air is having a busy summer as an alternative to crowded ocean shipping lanes.
PHOTO: YONHAP/EPA/SHUTTERSTOCK
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The global air cargo sector is flying planes at almost 90% of capacity as record amounts of goods crisscross the globe, bound for free-spending consumers and parts-hungry manufacturers.
Packed planes pose a challenge for shippers, airlines and airports entering the traditional peak U.S. season for moving goods, when demand increases for consumer electronics, household items and clothing ahead of the holiday-shopping spree.
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