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The Morning Risk Report: SEC Enforcement Actions Hit 30-Year High
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The SEC levied fines totaling $12.1 billion during the past three years, compared with $12.4 billion from 2014 through 2016. PHOTO: JONATHAN ERNST/REUTERS
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Good morning. A crackdown targeting the sale of higher-fee mutual funds boosted enforcement results for Wall Street’s main regulator in 2019, driving its annual fines to their highest total in more than 30 years.
The Securities and Exchange Commission brought 526 enforcement actions in the past fiscal year, which ended Sept. 30. The tally was lifted by 95 cases against investment advisers for inadequately disclosing their practice of selling more expensive funds to retail clients, according to SEC data.
[Continued below…]
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The total shows how the focus on protecting less sophisticated traders, as opposed to scouring for bigger cases where institutional or wealthy investors were defrauded, can still yield big fines. It isn’t known, though, how much of that money will be collected.
A higher share of the SEC’s largest cases in 2019, as compared with prior years, was against private companies or individual defendants, according to Georgetown University law professor Urska Velikonja, whose research focuses on SEC enforcement. Fines against such defendants are usually harder for the government to collect.
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From Risk & Compliance Journal
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Jury to Weigh Reach of U.S. Bribery Law
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A jury is expected to deliberate Thursday in a long-running case that is testing the reach of the U.S.’s foreign bribery law.
Closing arguments were delivered Wednesday in the trial of Lawrence Hoskins, a former Alstom SA senior vice president. The U.S. government’s case against Mr. Hoskins hinges in part on whether he qualifies as an “agent” under the U.S. Foreign Corrupt Practices Act, which prohibits bribes to foreign government officials.
To make that determination, the jury will consider whether Mr. Hoskins, who was charged in 2013 with helping organize a scheme to bribe Indonesian officials for a $118 million power contract, had sufficient ties to a former Alstom subsidiary based in Windsor, Conn.
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Supreme Court Decision on Ill-Gotten Profits Has Cost Investors $1.1 Billion, SEC Says
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The U.S. Securities and Exchange Commission has been unable to collect $1.1 billion in ill-gotten gains from alleged fraudsters as a result of a recent Supreme Court decision, the agency said Wednesday.
The Supreme Court ruled in 2017 that the SEC has a limit of five years after a suspected fraud to require bad actors to disgorge ill-gotten profits. The SEC said last year that it was unable to obtain about $800 million in cases that had been settled or were in litigation following the ruling.
The SEC, in a report published Wednesday, said it has shifted its resources as a result of the court’s decision in order to focus on investigations that “hold the most promise.” The agency ordered $3.2 billion in disgorgement during the 2019 fiscal year, or 30% more than a year earlier.
—Kristin Broughton
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In emails, Facebook executives repeatedly called messaging apps including WhatsApp a threat to Facebook and its own chat app, Facebook Messenger. PHOTO: THOMAS WHITE/REUTERS
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In the months before acquiring WhatsApp in 2014, Facebook executives described the messaging service and others like it as a threat to the company’s core business, offering potential evidence to regulators in the U.S. and Europe that are pursuing antitrust probes into the social-networking company.
In a trove of internal Facebook documents published Wednesday, including email chains and presentations, Chief Executive Mark Zuckerberg and other executives repeatedly called messaging apps including WhatsApp a threat to Facebook and to its own chat app, Facebook Messenger. The danger was perceived to be mounting as the social network’s usage moved from desktop to smartphones, where chat apps had proven popular, the documents showed.
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Federal prosecutors charged former United Auto Workers vice president and ex-General Motors board member Joe Ashton with fraud and money laundering, according to court documents, the latest in a yearslong criminal investigation into corruption in the union’s top ranks.
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Bankruptcy scholars on Tuesday called for an independent probe of the Sackler family’s dealings with OxyContin maker Purdue Pharma, which sought court protection from an avalanche of lawsuits over the opioid epidemic.
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A Supreme Court argument Wednesday prompted riffs on whiskey, grocery shopping and Agatha Christie as the justices signaled they were seeking a compromise outcome in a Hawaii water-pollution case.
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Huawei can survive without the U.S., Chief Executive Ren Zhengfei said, dismissing Washington’s campaign against it as ineffective.
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The Justice Department says Saudi agents have mined Twitter’s internal system for personal information about the country’s known critics. PHOTO: MIKE BLAKE/REUTERS
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Federal prosecutors charged two former Twitter employees and a Saudi Arabian national with spying on some users of the social-media platform who were critical of Riyadh and providing that information to the kingdom’s officials.
The complaint filed in federal court in San Francisco accuses Ahmad Abouammo, Ali Alzabarah and Ahmed Almutairi of acting as illegal agents of a foreign government.
Mr. Abouammo, one of the former Twitter employees, was arrested in Seattle on Tuesday and is accused of trying to obtain personal information about Saudi Arabia’s critics, U.S. authorities said Wednesday. He made an initial court appearance Wednesday, prosecutors said.
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Republican Sen. Marco Rubio of Florida is urging the Pentagon to remove Chinese-made surveillance cameras that have raised national-security concerns and have been banned for government purchase.
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Mallinckrodt PLC said it may have to file for bankruptcy over liabilities tied to the opioid crisis. PHOTO: GEORGE FREY/REUTERS
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Mallinckrodt PLC said it may have to file for bankruptcy protection over liabilities tied to the opioid crisis while offering creditors the opportunity to swap their claims for new, discounted debt. The generic drugmaker said Tuesday that despite its efforts to resolve hundreds of lawsuits over its alleged role in fueling opiate addiction, it may be “necessary or advisable” for it to restructure its debts in a bankruptcy proceeding.
Bankruptcy scholars, meanwhile, have called for an independent probe of the Sackler family’s dealings with OxyContin maker Purdue Pharma, which sought court protection from an avalanche of lawsuits over the opioid epidemic.
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Airbnb said it is working to improve the safety and quality of its short-term rental platform after a fatal shooting last week at a California home and a media report revealed a scam involving the company’s listings. Airbnb Chief Executive Brian Chesky said Wednesday that the company would ensure all its rental listings and hosts are verified by December 2020.
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Chinese ride-hailing giant Didi Chuxing Technology Co. is resuming its “Hitch” carpool service, which it halted in 2018 after two female passengers were killed by drivers in the space of a few months, the company said. Didi—the dominant ride-hailing company in China since U.S.-based rival Uber ceased operations here in 2016—said it is introducing additional safety features for Hitch.
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Marcus Riley, left, and Ashley Smith at a news conference in Aurora, Ill., on Tuesday. PHOTO: TERESA CRAWFORD/ASSOCIATED PRESS
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Buffalo Wild Wings fired two store employees, banned a customer from its restaurants and plans to speed up sensitivity training in the wake of a racist incident in suburban Chicago.
The company is accelerating the training after its employees told a group dining at its restaurant in Naperville, Ill., on Saturday that a regular customer didn’t want to sit by them because they were black.
The incident makes Buffalo Wild Wings the latest restaurant chain to face criticism over its handling of conflicts involving race at its stores. Starbucks Corp. closed thousands of stores for an afternoon last year to conduct antibias training for its employees after two black men were arrested at a cafe in Philadelphia for allegedly refusing to leave the cafe after they were denied use of the restroom. The men weren’t charged with any crimes.
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Saudi Arabia’s sovereign-wealth fund in January invested $400 million in Travis Kalanick’s new company CloudKitchens, according to people familiar with the situation, in a deal that could value the operator of so-called ghost kitchens at about $5 billion. It was the fund’s first known deal in Silicon Valley since the murder of journalist Jamal Khashoggi last year, the people said.
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Google is in discussions about changing its political ad policy, according to people familiar with the matter, about a week after Facebook and Twitter publicly diverged on how to handle those ads amid the spread of misinformation.
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Airbus CEO Guillaume Faury and He Lifeng, chairman of the National Development and Reform Commission of China, after signing the agreement. PHOTO: POOL/REUTERS
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Airbus plans to boost jetliner production in China, bolstering its position in what is set to be the world’s biggest aviation market and piling further pressure on Boeing as the U.S. company contends with trade tensions and the grounding of its 737 MAX plane.
The France-based plane maker is gaining market share while Boeing grapples with the global grounding of the MAX after two fatal crashes and a dearth of orders for larger aircraft. The U.S. aerospace giant’s efforts in China are also being hindered by the continuing trade dispute between the two countries.
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Capital One is among the banks trying to keep branches relevant to customers by offering coffee and regular events. PHOTO: RACHEL WISNIEWSKI / WSJ
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It is happy hour at the Capital One near Rittenhouse Square, and drinks are on the house at the Peet’s Coffee on the branch’s second floor. Staff tell customers to make themselves comfortable.
At a PNC Bank a few blocks away, customers approach tellers stationed behind windows. There is a Keurig machine for anyone who wants coffee.
A visit to the two locations on a recent morning illustrates one of the biggest head-scratchers in the banking business: what to do with the insides of their bricks-and-mortar storefronts.
U.S. banks have closed thousands of branches in recent years and poured billions of dollars into the smartphone apps that customers increasingly use for many of their daily banking needs. But customers still want the option of a physical branch, especially when they have problems that are tough to solve over a web chat.
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U.S. logistics operators say shipping imports are waning heading into the holidays in a sign that companies may be paring down inventories after stocking up heavily to get goods in place ahead of new tariffs.
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