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The Morning Risk Report: U.S. Fines Billions for Wall Street Fraud. Nearly Half the Time It Doesn’t Collect.
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The Securities and Exchange Commission has struggled for years to get defendants to pay more of their fines, although some are almost certain to avoid payment forever. PHOTO: JONATHAN ERNST/REUTERS
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Good morning. Wall Street watchdogs often tout the fines they levy on alleged wrongdoers. Yet much of that money is never collected.
The Securities and Exchange Commission over five fiscal years ending in September 2018 took in 55% of the $20 billion in enforcement fines set through settlements or court judgments, according to agency statistics. During the prior five years, from 2009 through 2013, the SEC collected on 60% of $14.6 billion.
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And in 2018, the commission collected just 28% of almost $4 billion. That rate—the lowest in a decade—was due in part to an unusual $1.7 billion settlement with the Brazilian oil company Petrobras that may never require payment to the SEC.
The SEC has struggled for years to get defendants to pay more of their fines, although some are almost certain to avoid payment forever. That includes people who went to prison on related criminal charges, or people behind Ponzi schemes who spent the funds they took from defrauded investors.
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From Risk & Compliance Journal
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Recruiting Compliance Staff is Key Risk for Banks, Regulator Says
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Criminals laundering money through the financial system have long been one of the top risks facing the banking industry. Building a solid defense against such intrusions is becoming another, a U.S. financial regulator said.
U.S. banks are having a hard time recruiting and retaining compliance professionals, particularly those who specialize in financial crimes, the Office of the Comptroller of the Currency said in a semiannual report on the risks facing lenders.
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The Shanghai Stock Exchange Building, where regulators are querying a growing number of companies over their financial reporting. PHOTO: QILAI SHEN/BLOOMBERG NEWS
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Kangmei Pharmaceutical Co., a drug company at the center of one of China’s biggest corporate crises, suspended trading in its stock Monday, after admitting it had been secretly buying its own shares.
The suspension of Kangmei Pharmaceutical occurred after the market regulator laid out how the Shanghai-listed company had inflated its cash holdings by more than $4 billion, and said it had diverted $1.3 billion into purchasing its own stock.
China’s stock exchanges and its securities commission are querying a growing number of listed companies over the accuracy of their financial reporting. At one, Kangde Xin Composite Material Group Co., there are question marks about a huge bank deposit, while another, Tunghsu Optoelectronic Technology Co. has kept borrowing at high interest rates despite its accounts showing an ample supply of cash.
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U.S. officials said Monday they would grant a handful of temporary exceptions to an export blacklist against Huawei Technologies Co., giving some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties. Huawei has begun to feel the effects of U.S. moves to curb its access to U.S. technology, as Alphabet Inc.’s Google cut access to some of its Android services on Huawei smartphones and a German chip supplier said it was cutting deliveries to the Chinese giant.
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Merck & Co. won a partial victory at the Supreme Court, with justices unanimously ruling that a judge, rather than a jury, must determine whether federal regulators took steps that immunize the company from claims its osteoporosis drug Fosamax injured patients. The court agreed with Merck that juries are less suited than judges to decide often technical questions of whether the Food and Drug Administration was provided sufficient information and refused to approve changes to the drug’s warning label regarding potential injuries.
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Federal Communications Commission Chairman Ajit Pai said he would back the more than $26 billion combination of cellphone carriers T-Mobile US Inc. and Sprint Corp. after the companies agreed to a package of concessions.
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When it comes to medical hiring, Duke University and the University of North Carolina have been cozy collaborators, according to a class-action lawsuit that Duke moved to settle for $54.5 million.
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The nation’s top court ruled trademark users don’t lose the power to sell merchandise or other contractual rights when the owner of that trademark files for bankruptcy protection and ends their licensing agreement early.
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A visitor to the China Beijing International High-Tech Expo looks at a computer chip through a microscope in May 2018. PHOTO: NG HAN GUAN/ASSOCIATED PRESS
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European businesses in China say forced technology transfers to local firms have become more common over the past two years as foreign firms battle for access in the world’s second-largest economy. Such technology transfers have continued to take place despite official assurances that this practice would be stopped, according to an annual survey by the European Union Chamber of Commerce in China.
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Iranian officials said Monday that within weeks they could exceed an internationally agreed cap on their stockpile of low-enriched uranium, as tensions between Iran and the U.S. escalated.
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“Fifteen years ago, everyone was talking about whether households were borrowing too much. Today everyone is talking about whether businesses are borrowing too much.”
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—Federal Reserve Chairman Jerome Powell
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Plastic represents one of the biggest waste challenges for cities in the future. The Wall Street Journal examines the new technologies that could revolutionize our conception of waste. Photo illustration: Drew Evans/The Wall Street Journal
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The backlash against single-use plastic has engulfed straws, bags and takeout containers, but the plastics industry is fighting back, arguing alternatives can be worse for the environment and disruptive for businesses. Trade groups are spending more on lobbying, reaching out to consumers and promoting recycling amid mounting regulation. Their message: Plastic bans target only waste and don’t take account of environmental negatives associated with raw materials and the production of alternatives.
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Pacific Investment Management Co. is facing its most turbulent stretch in five years. Two months ago, the nationwide college-admissions scam implicated the firm’s former chief executive. Since then, Pimco’s staff—and even clients of the firm—have learned that the central figure of the scam gave presentations on site to employees at one of the world’s biggest bond managers.
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American and the unions representing its mechanics have been in talks since late 2015 in pursuit of a new contract. PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
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American Airlines Group Inc. said Monday that it is suing two unions representing its mechanics in an effort to end an alleged work slowdown that it said could exacerbate delays and cancellations during the coming summer travel season.
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Ford Motor Co. said it is cutting 7,000 salaried employees, or about 10% of its white-collar workforce, part of Chief Executive Jim Hackett’s broader plan to reverse declining profits and catch up to competitors in the fast-changing car business.
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General Motors Co. plans to wind down its Maven car-sharing service in more than a half-dozen cities, the latest car company to encounter challenges as it works to expand new transportation ventures.
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Ascena Retail Group Inc. plans to wind down its Dressbarn retail operations, resulting in the closure of about 660 stores, the company said Monday.
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Snap CEO Evan Spiegel has completed the remake of his leadership team with two new promotions. PHOTO: ANDY RAIN/SHUTTERSTOCK
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Snap Inc. promoted two executives internally to run its finance and personnel units, respectively, completing Chief Executive Officer Evan Spiegel’s remaking of the leadership team after a series of departures over the past year.
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Sen. Kamala Harris is proposing that large employers pay women on an equal basis with their male counterparts or face government fines, seeking a sweeping shift in the way the nation addresses pay inequity.
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Legg Mason Inc. confirmed that it reached an agreement with Trian Fund Management LP on the composition of its board, naming Nelson Peltz and Ed Garden as directors. Legg Mason said Trian also will identify a third independent director candidate who, following board approval, will be included as a Legg Mason nominee.
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A package of ¥1.3 trillion in financing from Japanese banks would enable Toshiba Memory to buy out the preferred shares from the four American companies, according to people familiar with the plan. PHOTO: KIYOSHI OTA/BLOOMBERG NEWS
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Apple Inc., Dell Technologies Inc. and two other U.S. technology companies are set to give up their preferred shares in Japanese chip maker Toshiba Memory Holdings Corp. for more than $4 billion under a refinancing plan, according to people familiar with the plan.
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Dish Network Corp. reached a deal to buy EchoStar Corp.’s broadcast satellite-service business for about $800 million in stock, as it brings in-house operations it split off more than a decade ago.
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