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The Morning Risk Report: SEC Fines BNY Mellon Over ESG Claims
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Good morning. The Securities and Exchange Commission fined the investment management arm of Bank of New York Mellon Corp. $1.5 million for misleading claims it made about funds that use environmental and social criteria to pick stocks.
The SEC said Monday that BNY Mellon Investment Adviser Inc. agreed to pay the fine after regulators found that some U.S. mutual funds it managed didn’t go through a quality review of environmental, social or governance factors from July 2018 to September 2021. BNY neither admitted nor denied the claims.
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Wall Street’s regulator is stepping up its scrutiny of claims by ESG funds as investors pour cash into the category.
BNY said in a statement that none of the six funds in question were part of its specific sustainable fund offerings. The firm has updated its investor communication materials to be more precise and complete, it said.
Regulators are struggling to keep up with a boom in ESG investing that has recently increased assets managed by such funds to trillions of dollars. There are few consistent standards for what constitutes an ESG stock or bond, leading some analysts to allege that large banks and asset managers are “greenwashing”—using new investment products to boost their bottom line in the name of doing good for the world. Read more.
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Archegos Case Shows Need for Diligence in Fund Compliance, SEC Enforcement Boss Says
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Private funds and their compliance staff need to intensify their focus on diligence following the meltdown of Archegos Capital Management and subsequent enforcement actions, the Securities and Exchange Commission’s head of enforcement said.
Gurbir Grewal, speaking to an audience of fund compliance leaders, highlighted apparent diligence shortcomings both at Archegos and at its counterparties.
“Candidly, I probably have to fill out more paperwork to get an apartment to rent in D.C. than they did to get a billion dollars in margin on a Tuesday afternoon,” Mr. Grewal said.
Archegos, a family office founded by Bill Hwang, collapsed last year in the largest single-firm meltdown since the 2008 financial crisis. Mr. Hwang and the former chief financial officer of Archegos were indicted last month on fraud charges stemming from the episode. They have pleaded not guilty.
Mr. Grewal advised compliance staff at private funds to more thoroughly look at statements that fund staff make to third parties, channels they use to communicate and restraints put in place to make sure they speak truthfully.
“Folks need to know at a basic level that when they're communicating with a counterparty, that they're dealing with each other honestly,” he said. “That's foundational to our system.”
Mr. Grewal was speaking Monday in New York at the MFA Legal & Compliance 2022, hosted by the Managed Funds Association, a trade group that represents the alternative investment industry.
–Richard Vanderford
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HSBC has sought to position itself as a leader in sustainable finance. PHOTO: STEFAN WERMUTH/REUTERS
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HSBC Holdings PLC suspended a senior executive who argued that investors didn’t need to worry about climate change and that policy makers were exaggerating the risks, according to people familiar with the matter.
The comments made by Stuart Kirk, the head of responsible investment and research at HSBC Asset Management, have drawn criticism from the bank’s chief executive as well as from environmental activists.
Mr. Kirk is being suspended while the bank undertakes an investigation, one of the people said.
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The attorney general for Washington, D.C., sued Facebook founder Mark Zuckerberg, alleging that he participated in decision-making that led to the Cambridge Analytica data breach.
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A federal appeals court blocked Florida from enforcing the bulk of a new state law that sought to make social-media platforms such as Twitter and Facebook potentially liable for removing political candidates and political content from their sites.
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Rep. Madison Cawthorn is facing an investigation from his House colleagues into whether he improperly promoted a cryptocurrency and had an inappropriate relationship with a staff member.
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During his first trip to Asia as commander in chief, President Biden said the U.S. made a commitment to defend Taiwan militarily if China tries to take it by force. PHOTO: POOL/REUTERS
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President Biden said the U.S. would respond militarily to defend Taiwan if China tries to take it by force, sparking uncertainty over whether the U.S. was moving away from its longstanding policy of “strategic ambiguity” as the White House looks for ways to check Beijing’s growing clout in Asia.
Mr. Biden’s comments were met with anger from Beijing and praise from Taipei. They were also part of a pattern: In August and October of last year, the president answered questions on Taiwan by suggesting a break in U.S. policy toward the democratically self-ruled island, only to have aides jump in to say nothing had changed.
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Bridging a river under enemy fire is one of the toughest tasks any land force can face. Russia is offering the world lessons in how not to do it, say Western combat veterans.
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Since launching its large-scale invasion of Ukraine three months ago, Russia has sought to cross several rivers using temporary floating bridges so its troops could advance. Many of the attempts went badly.
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The European Central Bank is likely to increase its key interest rate, currently negative, to zero by September and could continue raising rates after that, President Christine Lagarde said, signaling the end of the ECB’s eight-year experiment with negative rates amid record-high inflation and concerns about the weakness of the euro currency.
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Americans reported the highest level of financial well-being last fall than at any point in almost a decade, leaving them better-positioned to withstand an economic slowdown this year, according to a Federal Reserve survey.
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Nonetheless, fears of an economic downturn have lately gathered steam. Corporate executives at the World Economic Forum in Davos, Switzerland, struck a mostly gloomy tone to match.
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The Biden administration is considering a release of diesel fuel from federal reserves to address skyrocketing prices and the threat of supply outages on the East Coast.
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Danish vaccine maker Bavarian Nordic A/S is making more of a smallpox vaccine typically stockpiled in case of biological warfare, as governments seek doses that also offer protection against monkeypox amid an unusual outbreak around the world.
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Didi’s American depositary receipts have plunged from their initial public offering price. PHOTO: BRENDAN MCDERMID/REUTERS
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Less than a year after Didi Global Inc. listed its shares in the U.S., the Chinese ride-hailing company said its shareholders approved its plan to delist from the New York Stock Exchange, concluding a regulatory roller-coaster ride that sent its market value plummeting.
The move will allow the company to move forward after it was caught in Beijing’s campaign to tighten its grip on China’s tech giants and their troves of data. Didi had told shareholders it needed to delist before it can resolve a cybersecurity probe in China.
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Airbnb Chief Executive Brian Chesky at a Shanghai event in 2017. PHOTO: ADAM JOURDAN/REUTERS
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Airbnb Inc. plans to close its domestic business in China after harsh Covid-19 lockdowns compounded the pain from mounting local competition, according to people familiar with its decision.
Bookings of stays and experiences in China typically account for about 1% of Airbnb’s overall revenue, the people said.
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Starbucks Corp. is closing down its business in Russia, as the invasion of Ukraine puts an end to its 15-year presence in the country and marks the departure of another big Western corporation.
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Broadcom Inc. is in talks to pay around $60 billion for VMware Inc., people familiar with the matter said, in what would be one of the biggest takeover deals of the year.
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Zoom Video Communications Inc. sales continued to slow as work life returns to normal and the demand for the company’s videoconferencing services winds down.
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Amid threats of recession, chief information officers say they are prioritizing technology that drives efficiency, mitigates ongoing supply-chain struggles and contributes quickly to the bottom line.
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Marketing budgets have risen to 9.5% of total company revenue in 2022, according to the annual CMO Spend Survey by research firm Gartner Inc. The figure represents an increase from the 6.4% seen in 2021, but still lags behind prepandemic levels.
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Companies are bypassing prime blocks in Midtown Manhattan for neighborhoods further west or downtown, as Park Avenue fades from prominence after decades as a magnet for some of the world’s biggest companies.
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Three doses of the Pfizer Inc. and BioNTech SE Covid-19 vaccine were 80% effective at preventing symptomatic Covid-19 and generated a robust immune response in children ages 6 months to 5 years old, the companies said.
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The gold rush for drugmakers making Covid-19 vaccines and treatments might be over, as demand plateaus, supplies turn ample and the pandemic evolves.
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