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The Morning Risk Report: Mark Zuckerberg, Chief Compliance Officer?
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People attending a Facebook developers conference last month in San Jose, Calif. PHOTO: STEPHEN LAM/REUTERS
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Facebook Inc.’s potential settlement with federal regulators over breaches of consumer privacy data could result in significant governance changes at the social media giant. Among them: CEO and founder Mark Zuckerberg could be named the company’s compliance officer, according to a person familiar with the matter.
The move is one of several possible changes currently being negotiated with the Federal Trade Commission, according to people familiar with the matter. Facebook faces an FTC fine of up to $5 billion after personal data of tens of millions of its users improperly wound up in the hands of Cambridge Analytica, a data firm that worked on President Trump’s 2016 campaign. Since then, other missteps have come to light, complicating the FTC’s investigation.
[Continued below…]
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Other changes on the table include adding a committee of board members to oversee the company’s privacy practices, with the aim of putting privacy on par with other board responsibilities. Another feature of the agreement would require the company to report on privacy incidents relatively quickly, probably within a matter of weeks.
The deal is nearing completion, one of the people said, with only relatively narrow issues still under discussion, and could be finished within a week or so. The FTC declined to comment.
In other Facebook news...
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From Risk & Compliance Journal
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Treasury Sets Expectations for Sanctions Compliance Programs
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The U.S. Treasury Department provided more insight into what it expects from corporate sanctions compliance programs, part of an effort aimed at improving the transparency of the department’s evaluation and resolution process, Risk & Compliance Journal’s Mengqi Sun reports.
The framework issued by the Treasury’s Office of Foreign Assets Control signals the agency wants companies to have an active sanctions compliance program, rather than a written policy alone, as the U.S. sanctions program becomes more dynamic and complex.
“There might be policies at the company,” said Jonathan Cross, a sanctions lawyer at Herbert Smith Freehills LLP, “but they need to be augmented in light of the new guidelines.”
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SEC Chairman Wants More Disclosure About Talent
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The Securities and Exchange Commission’s chairman says public companies should provide better disclosure about their employees.
“The importance of human capital to the performance of firms has gone way up compared to 40 years ago,” Jay Clayton says at an Investment Company Institute conference in Washington.
Clayton says investors should know more about how public companies are recruiting, developing and retaining their most valuable employees, such as those with technical or scientific skills.
But a new regulation prescribing a standard disclosure for all firms doesn’t make sense, Clayton adds, because human-capital needs vary by industry.
—Dave Michaels
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A Carnival cruise ship arrived in Havana in 2016. The company was sued over doing business on land that the plaintiffs say was wrongly seized from them. PHOTO: ADALBERTO ROQUE/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Two U.S. citizens sued cruise operator Carnival Corp. on Thursday in the first application of a long-dormant law allowing Americans to pursue legal action against foreign entities doing business in Cuba on property confiscated by the Castro regime. The filings, in the U.S. District Court in Miami, came on the first day that provisions of the 1996 Helms-Burton Act took effect after the Trump administration made good on a pledge to end a two-decade-old waiver. The U.S. move opens the door to billions of dollars in potential litigation in an attempt to starve the island of much-needed foreign investment.
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A federal jury in Boston convicted five former executives and managers of Insys Therapeutics Inc., including co-founder and onetime billionaire John N. Kapoor, of engaging in a racketeering conspiracy designed to boost profits from the company’s prescription opioid drug. The verdict follows a monthslong criminal trial that was the most high-profile prosecution to-date of pharmaceutical executives for their role in the nation’s opioid-addiction crisis.
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The Trump administration is considering a more-aggressive enforcement of its economic sanctions on Iran—targeting more companies and financial institutions that do business with the Islamic Republic in an attempt to cut off lucrative sources of U.S. dollar-denominated hard currency, U.S. officials said. The new sanctions would be aimed at choking off trade including Iran’s petrochemical sales to Singapore and its consumer-goods sales to Afghanistan.
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The Justice Department waded into the Federal Trade Commission’s case against smartphone chip maker Qualcomm Inc., seeking to limit the effects on next-generation cellular technology if a judge rules against the company. A U.S. district judge in San Jose, Calif., is expected to rule soon on the FTC suit, which argued that Qualcomm used its dominance in cellular technology to extract inappropriately high royalties from its patents.
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Brokerage firms that employ a higher number of troubled brokers or display other red flags could be subject to stricter financial protections under a plan issued by Wall Street’s self-regulatory arm, the Financial Industry Regulatory Authority. The proposed rule could raise costs for about 2% of the 3,600 brokerage firms doing business in the U.S.
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Small banks and credit unions could get a break on providing mortgage data to the government. The Consumer Financial Protection Bureau said it would propose changes to rules that require lenders to report data on their mortgage loans and applicants, including the loan amount and the borrower’s income, race and gender.
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PG&E Corp. said the Securities and Exchange Commission has opened an investigation into the company’s disclosures and accounting for losses related to California wildfires. The investigation, tied to fires in 2015, 2017 and 2018, represents a new problem for the troubled utility, which filed for bankruptcy protection earlier this year, citing wildfire-related liability costs. It is also under federal probation for safety-related problems.
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Drug distributor McKesson Corp. has agreed to pay $37 million to resolve claims brought by West Virginia officials that the company helped fuel the opioid epidemic, the two sides said. The San Francisco-based distributor is among roughly two dozen companies up and down the drug supply chain that face a wave of litigation from states and local municipalities over the opioid crisis.
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Volkswagen AG said that profit dropped nearly 10% in the first quarter, hit by slowing growth in China, fresh diesel-related charges, and weaker earnings in its core brands. Earnings were hit by a €1 billion charge taken to cover potential legal risks that plague the company more than three years after its 2015 diesel emissions-cheating scandal.
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New international lease accounting rules are prompting some finance chiefs to overhaul how they benchmark corporate performance—a move that could disenfranchise investors married to metrics once used to compare performance to past results. Companies in more than 140 countries that require the application of International Financial Reporting Standards have to transition this year to the new rules.
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Hedge fund-backed media company Digital First is pushing Gannett, publisher of USA Today, to sell itself. PHOTO: RICHARD DREW/ASSOCIATED PRESS
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Barclays BCS CEO Jes Staley came out on top in a showdown over the bank’s strategy as shareholders voted overwhelmingly against adding activist Edward Bramson to the board. The result gives Mr. Staley more time to prove the British lender’s strategy of combining consumer, business and investment banking is paying off after a weak first quarter for securities trading and advisory services.
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Digital First Media, the hedge fund-backed media company pushing Gannett Co. to sell itself, picked up some support as it seeks board seats at the USA Today publisher in a proxy vote this month. Influential proxy adviser Institutional Shareholder Services Inc. is recommending Gannett shareholders support one of Digital First’s three director nominees at Gannett’s annual meeting, according to a report sent to its clients viewed by The Wall Street Journal.
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New York State Comptroller Thomas DiNapoli failed in a bid to make North Carolina utility Duke Energy more transparent in its political spending. Mr. DiNapoli had filed a shareholder proposal on behalf of the New York State Common Retirement Fund, which owns more than 1.5 million shares in Duke Energy, or about 2% of the company.
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Fluor Corp. lost more than a fifth of its market value after its CEO abruptly resigned and the engineering-and-construction company slashed its full-year earnings guidance. Fluor said David Seaton, who had been CEO since February 2011 and chairman since February 2012, stepped down on Wednesday after 34 years with the company. Fluor didn’t give a reason for the resignation.
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Berkshire Hathaway Inc. Vice Chairman Charlie Munger thinks Timothy Sloan should still be running Wells Fargo & Co. In an interview with The Wall Street Journal, Mr. Munger blamed Mr. Sloan’s predecessors for the string of scandals that have badly damaged the bank’s reputation. Berkshire, which holds its festival-like annual meeting Saturday, is Wells Fargo’s largest shareholder.
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Walmart is remaking its U.S. store workforce as it invests in grocery delivery and other services aimed at better competing with Amazon. PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
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Walmart Inc. is testing a new store employee structure, in some cases using fewer midlevel, in-store managers to oversee workers while boosting pay and responsibilities for those roles. The shift comes as the country’s largest employer works to control labor costs, keep workers longer and attract talent, while spending more to raise wages.
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Some U.S. industrial companies are having a hard time figuring out who their typical workers are and how much they make. Several S&P 500 companies in the industrials and materials sector posted swings in what they said their median worker was paid in 2018 versus 2017, according to an analysis by The Wall Street Journal of annual disclosures for hundreds of big U.S. companies as provided by MyLogIQ.
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Tesla, facing concerns over whether it has enough cash, is looking to raise capital. PHOTO: MARK RALSTON/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Tesla Inc. is looking to raise as much as $2.3 billion through a bond and stock sale after the electric-car maker reported a steep quarterly loss last week that heightened concerns about its dwindling reserves of cash. Tesla shares, which have been under pressure, rose Thursday as investors said they welcomed the fresh injection of capital. Fidelity Investments, T. Rowe Price Group Inc. and other fund managers have sold millions of shares in 2019 amid concerns about the firm’s finances and performance.
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JPMorgan Chase & Co. said it is tapping Microsoft Corp.’s cloud-based services to boost its blockchain platform, aiming to make it easier, faster and cheaper for companies to build and deploy blockchain applications. Microsoft’s Azure will power the platform, named Quorum, which will allow enterprises to build new blockchain applications in as little as a few weeks without needing as much expertise, said Umar Farooq, JPMorgan’s head of blockchain initiatives.
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TV-station giant Sinclair Broadcast Group Inc. has struck a deal valued at more than $10 billion to acquire 21 regional sports networks from Walt Disney Co., according to people familiar with the matter. For Sinclair, which already is the nation’s biggest owner of local television stations, the acquisition would instantly make it a force in cable programming. Among the properties it is acquiring are sports channels in Los Angeles and Detroit.
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3M Co. said it agreed to buy wound-care company Acelity Inc. from an investor group for about $4.3 billion as the manufacturing and technology conglomerate continues to build its health-care business. The St. Paul, Minn., company is buying Acelity from private-equity firm Apax Partners and Canadian pension giants Canada Pension Plan Investment Board and Public Sector Pension Investment Board for a total enterprise value of about $6.7 billion, including the assumption of roughly $2.4 billion in debt.
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