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Good morning. Microsoft Corp.’s proposed $75 billion acquisition of Activision Blizzard Inc. is likely to receive a close look from antitrust enforcers in the U.S. and abroad at a time when they have stepped up scrutiny of proposed mergers, especially in the tech sector.
The deal comes at a time of robust debate in Washington about whether the government should do more to restrain the nation’s largest and most powerful tech companies. Despite Microsoft’s size and role in the U.S. economy, as well as its history in the antitrust crosshairs in the 1990s, it has largely avoided the spotlight this time around. The Justice Department, the Federal Trade Commission and members of Congress have instead focused on alleged threats to competition presented by Alphabet Inc.’s Google, Amazon.com, Apple Inc. and Meta Platforms Inc.’s Facebook.
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The Activision acquisition could give Microsoft a turn in the hot seat.
“Recent actions by the antitrust agencies in the U.S., but also recent, unprecedented aggressive actions abroad, including in EU and the U.K., probably suggest the agencies will take a close look at the transaction,” said former Justice Department antitrust chief Makan Delrahim.
Under the helm of Biden administration appointees, both the Justice Department and the FTC have signaled their intent to scrutinize—and potentially challenge—a broader range of deals on the grounds that they threaten to reduce competition in the marketplace.
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From Risk & Compliance Journal
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Wells Fargo names chief risk officer. Wells Fargo & Co. has appointed Derek Flowers as the bank’s next chief risk officer. The move, effective immediately, follows the announcement earlier this month that Amanda Norton, who previously held the post, will retire this summer.
Mr. Flowers has worked for Wells Fargo for 24 years, most recently as the bank’s head of strategic execution and operations. Before that, he held the post of chief credit and market risk officer, where he oversaw companywide credit, counterparty and market risk.
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Pandemic Worsens Risk of Fraud, Cyberattacks and Noncompliance, Survey Finds
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More than half of U.S. companies surveyed by KPMG LLP said they expect external fraud, cyber threats and compliance breaches to increase over the next 12 months.
The accounting and consulting firm said the results of the survey of 642 senior risk executives in North and Latin America highlight a “triple threat” that may eat away corporate profits.
The survey found that the coronavirus pandemic has made things worse, with nearly nine in 10 respondents saying that working from home has made their companies’ measures to prevent fraud and ensure compliance and cybersecurity less effective.
Of the respondents, 34% of them are based in the U.S. Two-thirds of the U.S. respondents said they expect external fraud to increase in the next year, with 84% saying that cyber breaches will grow, and 73% expecting compliance-based risks to rise.
"Collectively, these issues create a 'threat loop' which can quickly overwhelm companies with economic loss, regulatory loss and reputation loss,” Amanda Rigby, KPMG’s U.S. forensic service network leader, said in a statement. “Despite the potential for calamity, the majority of U.S. companies are not ready to fight the threat loop."
—Mengqi Sun
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ESG to Remain a Top Risk and Compliance Focus in 2022, Navex Says
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Organizations can expect sustained public attention to environment, social and governance issues in 2022, risk and compliance services firm Navex Global Inc. said in an outline of its predictions for the year ahead.
Forward-looking chief compliance officers could use the surge of attention on ESG to increase their influence within their organizations, Navex said in the report published Tuesday.
"Visionary CCOs will see ESG responsibility as an opportunity for more resources, more organizational influence and impact, and a chance to further shape an ethical business culture," Navex Chief Risk and Compliance Officer Carrie Penman said. "This ownership must come with the appropriate resources, access to subject matter experts and overall authority to be successful."
The report also predicted an accelerated shift world-wide toward the adoption of binding ESG-related regulations.
—Richard Vanderford
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The framework of a recreational aircraft at an Icon Aircraft manufacturing facility in Mexico.
PHOTO: ALEJANDRO CEGARRA/BLOOMBERG NEWS
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Chinese investment in U.S. plane maker draws scrutiny. The FBI and a U.S. investment-screening panel are investigating a Chinese investment in an aircraft startup following allegations of improper technology transfer to China, according to people familiar with the matter and documents reviewed by The Wall Street Journal.
Under review is a Chinese government-backed investment company’s nearly 47% stake—the largest of any shareholder—in Icon Aircraft Inc., a California-based maker of small recreational, amphibious planes. A group of U.S. shareholders has accused the Chinese firm of hollowing out Icon and moving its technology, which the Americans say has possible military applications, to China.
The Committee on Foreign Investment in the U.S., an interagency panel that can recommend that the president block or unwind deals on national-security grounds, began its review in late November after the American shareholders urged it to intervene, according to documents and the people familiar with the matter.
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Exxon said it would achieve its goal by focusing on energy-efficiency measures, reducing methane leaks, upgrading equipment and eliminating the venting and routine flaring of natural gas.
PHOTO: BRANDON THIBODEAUX FOR THE WALL STREET JOURNAL
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Exxon pledges to reduce carbon emissions. Exxon Mobil Corp. said it has set a goal to reduce or offset greenhouse-gas emissions from its operations to zero by 2050, as investor and public pressure mounts on oil producers to respond to climate change.
The oil giant said Tuesday it had developed detailed emission-reduction plans for major facilities and assets and can profitably navigate the nascent transition to greener energy sources. In a bruising proxy fight last year, an activist hedge fund elected three new members to the company’s board after criticizing its transition strategy.
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Crypto.com halts withdrawals. The online platform crypto.com suspended customer withdrawals for about 14 hours on Monday, after reports of unauthorized activity in the accounts of some users, the company said. No user funds were lost, Chief Executive Kris Marszalek said on Twitter late on Monday. While he didn’t offer details of the incident, he said the company will offer a full report after it completes an investigation.
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U.S. aims sanctions at pro-Russian agents. The U.S. is preparing financial sanctions on pro-Russian agents in Ukraine as Secretary of State Antony Blinken heads to Europe to meet the Ukrainian leadership and his Russian counterpart, part of a show of diplomacy and pressure that Washington hopes will dissuade Russia from invading its neighbor, U.S. officials said.
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Former editor files discrimination suit. A former high-ranking New York Post editor filed a discrimination lawsuit against the publication, alleging she was sexually harassed by former Editor in Chief Col Allan and fired after she told the Post’s current editor in chief about it.
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The U.K.’s Financial Reporting Council unveiled a three-year plan covering its strategy and priorities during a pivotal transitional period. PHOTO: DOMINIC LIPINSKI/ZUMA PRESS
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U.K. audit regulator expects to pursue more enforcement cases. The U.K. audit regulator said it expects to pursue more enforcement cases and increase its budget as it looks to tackle new responsibilities and fold into a new regulatory body.
The Financial Reporting Council on Tuesday unveiled a three-year plan covering its strategy and priorities during a pivotal transitional period. The FRC is in the process of folding into the Audit, Reporting and Governance Authority, which the U.K. government announced in 2019. The new regulator is expected to begin its work in 2023.
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Apple has said that a proposal in Congress would expose users to security threats by allowing certain software onto iPhone users’ devices without being vetted. PHOTO: JUSTIN LANE/SHUTTERSTOCK
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Apple says Senate’s big-tech legislation would weaken its user-privacy push. Apple Inc. is warning that Senate legislation aimed at reining in large tech companies would weaken a privacy-protection tool that it rolled out last year and has already stung Facebook, Snapchat and other online-ad businesses reliant on user data to target messages.
The Senate Judiciary Committee is set to debate a bipartisan bill, dubbed the American Innovation and Choice Online Act, on Thursday that supporters say aims to protect digital competition. The legislation is set to limit the power of the biggest U.S. tech companies, including Apple, Amazon.com Inc., Google-parent Alphabet Inc. and Facebook’s Meta Platforms Inc.
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