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The Morning Risk Report: SEC Chairman Scolds Weak Anticorruption Enforcement Abroad
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SEC Chairman Jay Clayton, pictured last year, on Monday warned on foreign corruption enforcement and risks in the corporate bond market. PHOTO: ALEX WONG/GETTY IMAGES
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Good morning. The chairman of the U.S. Securities and Exchange Commission took aim at foreign counterparts around the world for spotty enforcement of antibribery laws. In a speech in New York, Jay Clayton said countries that neglect to punish corporate bribery create a two-tiered system that gives their domestic companies a leg up on U.S. firms that face punishment for not following the law.
“For the past two plus decades, we have vigorously enforced the Foreign Corrupt Practices Act or ‘FCPA,’” Mr. Clayton said Monday. “We should, however, recognize that we are acting largely alone and other countries are incentivized to play, and I believe some are in fact playing, strategies that take advantage of our laudable efforts.”
[Continued below...]
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Mr. Clayton said he wouldn't unilaterally ease how his agency enforces the law, which forbids U.S. companies and executives from trading favors or paying money to win business overseas. But the chairman said he would press his concerns with overseas regulators and anticorruption cops.
Mr. Clayton’s remarks echoed criticisms he made as a corporate lawyer in 2011, when he led a New York City Bar Association committee that said the antibribery regime “tends to place disproportionate burdens on U.S. regulated companies in international transactions.”
“Speaking for myself, I have not seen meaningful improvement,” he said.
Read the full speech here
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U.S. Authorizes Transactions Involving Some Individuals Affiliated With Venezuelan Government
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The U.S. is allowing transactions with certain individuals that have connections to the government of Venezuela, the U.S. Treasury Department said.
The exemption includes individuals who are U.S. citizens or permanent residents, according to a general license issued by the Treasury’s Office of Foreign Assets Control, as well as former employees and contractors of the government of Venezuela. It also includes individuals connected to the Venezuelan government who are in the U.S. with a valid U.S. visa, other than those that are part of Venezuela’s mission to the United Nations.
The exemption follows the issuance of the executive order by President Trump in early August, which freezes all assets of the Venezuelan government and prohibits transactions with it, unless specifically exempted.
The general license is designed to limit the collateral impact created by the broad definition of the government of Venezuela in the executive order, said Adam M. Smith, a sanctions lawyer at Gibson Dunn & Crutcher LLP. “It’s further calibrating and sharpening what the executive order means for the sanctions,” he said.
—Mengqi Sun
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Texas Attorney General Ken Paxton, at the podium, joined other attorneys general in announcing a 48-state antitrust investigation into Google outside the Supreme Court building in Washington. PHOTO: MICHAEL REYNOLDS/EPA/SHUTTERSTOCK
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A bipartisan group of attorneys general representing almost every state kicked off an antitrust investigation into the online advertising practices of Alphabet Inc.’s Google on Monday, saying the search giant’s dominance raised troubling concerns for businesses and consumers.
Texas Attorney General Ken Paxton, a Republican, announced the probe in front of the U.S. Supreme Court building, joined by about a dozen other state attorneys general. In all, 48 states are part of the investigation, plus Puerto Rico and the District of Columbia, officials said.
Website publishers and advertisers alike say they have little choice but to use Google’s ad services because the company operates the dominant tool for placing ads online and runs the main tech platform that connects buyers and sellers of ads. Google generates enormous revenues by selling ads that appear alongside its search results, as well as by selling display ads that appear on other sites across the internet.
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The Securities and Exchange Commission is stepping up pressure on exchanges to finish a huge, long-delayed database designed to help detect market manipulation and investigate episodes of anomalous trading. The exchanges would face financial penalties if they miss further deadlines for building the database project, called the Consolidated Audit Trail, or CAT, according to a proposal released Monday by the SEC.
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Seven states asked a federal court on Monday to invalidate a regulation that requires stockbrokers to disclose more about conflicts of interest that could influence their financial advice, claiming that the rule is weak. The lawsuit, filed in Manhattan federal court by the states’ Democratic attorneys general, illustrates how a rule intended to protect mom-and-pop investors has become a political lightning rod for the Securities and Exchange Commission.
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The U.S. has filed criminal charges against a Chinese professor in Texas who had earlier been accused in a civil suit of stealing a U.S. startup’s technology for China’s Huawei Technologies Co., marking an escalation of the Justice Department investigations into issues related to the telecommunications giant. The criminal complaint against Bo Mao doesn’t mention Huawei by name, but the case it lays out closely parallels a civil suit filed by Silicon Valley’s CNEX Labs Inc. against Huawei.
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A tanker released from Gibraltar despite U.S. objections that it was carrying crude to Syria has unloaded its oil, a top Iranian official said, after the ship dropped anchor near a Syrian port. Washington has issued a warrant seeking to confiscate the vessel and its cargo. The U.S. alleges the sale would benefit the Islamic Revolutionary Guard Corps, which Washington has designated a terrorist organization, and accuses the ship’s managers of breaching a ban that prohibits the use of the American financial system for Iranian oil trades.
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Juul Labs Inc. made unauthorized claims to adults and children that its electronic cigarettes were safer than traditional cigarettes, the Food and Drug Administration said. In two letters to the startup, the agency wrote that it was troubled by Juul’s marketing and outreach practices. It cited testimony from a July congressional hearing describing a presentation to children in a school where a Juul representative described the company’s e-cigarettes as “totally safe.”
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California Democrats are poised to pass landmark employment legislation over the objections of two of the companies that would be most affected: Silicon Valley ride-sharing giants Uber Technologies Inc. and Lyft Inc.
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A promotions company owned by New York developer Stephen Ross is suing the U.S. Soccer Federation in federal court for allegedly conspiring with FIFA and the commercial arm of Major League Soccer to block foreign-club matches from being held in the U.S. The suit, filed Monday by Relevent Sports LLC in the Southern District of New York and alleging antitrust violations, challenges the primacy of FIFA as soccer’s international governing body.
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Starbucks has agreed to provide additional disclosures on how it recognizes revenue after the SEC questioned some of its accounting practices. PHOTO: GENE J. PUSKAR/ASSOCIATED PRESS
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Starbucks Corp. has agreed to provide additional disclosures on how it recognizes revenue after the U.S. Securities and Exchange Commission questioned some of its accounting practices.
The Seattle-based coffee chain is one of many U.S. companies adjusting to new accounting guidelines that came into effect at the start of last year for most public companies. The new rules aim to standardize how companies from different industries account for revenue from sales and services.
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U.K. Regulator Warns About Audit Quality
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The U.K. Financial Reporting Council issued a sharp warning about the quality of audits of financial statements in Britain, a move that comes ahead of the FRC’s integration into a new regulator.
Britain’s watchdog for accounting and audit in its annual report said U.K. audit firms continue to miss the regulator’s 90% target of large company audits requiring no more than limited improvements. This year, 75% of audits reached that goal, the FRC said.
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Novartis CEO Vas Narasimhan said the company has committed to notify the FDA within five business days of any ‘credible allegation’ of manipulation of data. PHOTO: JASON ALDEN/BLOOMBERG NEWS
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Novartis AG, under fire for keeping a data-manipulation issue under wraps for several months, vowed to more quickly disclose any similar concerns in the future. Chief Executive Vas Narasimhan told investors at an event in London that Novartis has committed to notify the Food and Drug Administration within five business days of any “credible allegation” of manipulation of data that had been submitted to the agency for drug approval.
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Quantum computers strong enough to crack today’s encryption are at least a decade away, but the market for quantum-safe applications is already developing. International Business Machines Corp. said last month that it has developed a quantum-computing-safe tape drive, which can be used to preserve data for decades.
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Terminal 5 at Heathrow Airport in London, which handles British Airways flights, stands virtually empty of passengers and staff on Monday. PHOTO: MATT DUNHAM/ASSOCIATED PRESS
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British Airways canceled almost all of its flights scheduled for Monday and Tuesday globally because of strike action by the airline’s pilots over pay.
The carrier said the move, which was flagged last month after a breakdown in lengthy negotiations between management and pilots, would result in more than 1,700 flight cancellations, affecting 195,000 customers.
The union representing BA’s pilots, the British Airline Pilots’ Association, or Balpa, confirmed Sunday that its members would take action this week to send “a clear message to the company’s managers.” It also plans a day of strike action on Sept. 27 and has said more could be announced.
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Hiroto Saikawa, president and chief executive officer of Nissan Motor Co. PHOTO: KIMIMASA MAYAMA/SHUTTERSTOCK
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Nissan Motor Co. Chief Executive Hiroto Saikawa is resigning, ending a term marked by controversy over the arrest of former Chairman Carlos Ghosn, turmoil with partner Renault SA and a sharp falloff in profits.
Nissan’s board moved to remove Mr. Saikawa quickly after a company investigation found that in 2013, Mr. Saikawa, then an executive vice president, received improper stock-based performance compensation of about $439,000. The company said Mr. Saikawa asked colleagues to explore ways to increase his compensation, and employees subsequently falsified documents to increase his performance pay, although it said it didn’t view Mr. Saikawa as responsible for misconduct.
“We believed immediate action was appropriate,” said Nissan director Yasushi Kimura, adding that the vote was unanimous.
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