Good morning. Companies expect Thursday’s Supreme Court ruling on affirmative action to reduce racial diversity in the pool of highly educated candidates for future jobs, including leadership roles.

They also say the ruling, which prohibits race-conscious college admissions, will lead to challenges to internal diversity, equity and inclusion initiatives, many of which were put in place or augmented over the past few years.

• What each side says: Many large employers have said that affirmative action assists businesses by helping them serve a diverse universe of customers and clients. They have cited research showing that diverse teams are more creative and make better decisions than homogeneous ones. Opponents of affirmative action and diversity initiatives in the workplace say such policies are ineffective, divisive or based on illegitimate factors.
   
• The upshot: The ripple effects of the Supreme Court’s decision on companies could be extensive and felt for years to come, executives, employment lawyers and corporate advisers say. Rules for federal contractors, which require submission of a workforce analysis based on race, gender and other characteristics, could get a closer look, they say.
   
• What else: Some employers said they expect existing initiatives to be questioned more frequently by employees, while others predict such efforts could face legal challenges if the existence of race- or gender-based goals is seen by some as discrimination.

• No One Is Happy About Diversity Efforts at Work

Note to readers: The Morning Risk Report won't be published Tuesday in observance of Independence Day in the U.S. We'll be back Wednesday.

Supreme Court agrees to hear challenge to SEC’s power.

The Supreme Court agreed to consider the legality of the Securities and Exchange Commission’s use of in-house tribunals, setting up a decision next term that could alter how U.S. securities laws are enforced.

In an order list on Friday, the high court said it would hear the Biden administration’s appeal of a May 2022 lower-court ruling that found it unconstitutional for the SEC to bring enforcement actions seeking financial penalties through its in-house courts.

The Supreme Court’s eventual decision could restrict the SEC’s use of its in-house courts. Such proceedings are heard by administrative law judges who are employees of the SEC but are supposed to exercise independent judicial powers.

SEC says spot bitcoin ETF filings are inadequate.

The Securities and Exchange Commission said a recent wave of applications filed by asset managers to launch spot bitcoin exchange-traded funds are inadequate, according to people familiar with the matter.

The agency informed exchanges Nasdaq and Cboe Global Markets, which filed the applications on behalf of asset managers including BlackRock and Fidelity Investments, that they aren’t sufficiently clear and comprehensive, the people said. The exchanges or asset managers can update them to address the regulator’s feedback and refile.

• Dutch semiconductor companies will have to seek government permission before selling some types of chip-making equipment abroad, following discussions with the U.S. aimed at limiting China’s access to such technologies.
   
• An ethics official owned Meta Platforms stock when she recommended that Federal Trade Commission Chair Lina Khan recuse herself from a case involving the company, spurring a demand for an inquiry.
   
• Members of the Senate Judiciary Committee sent a letter to Meta Platforms, asking the company to explain child-safety enforcement shortfalls and how the company’s algorithmic recommendation systems connected pedophilic users.
   
• Britain’s top competition regulator said it plans to conduct an in-depth probe of Adobe’s proposed $20 billion deal for Figma, a maker of collaboration software, marking the agency’s latest scrutiny of big global deal making.
   
• Regulators in Europe are racing to create the West’s first comprehensive set of rules for artificial intelligence. Some businesses say their plans go too far.

New Chinese law raises risks for American firms in China, U.S. officials say.

U.S. counterintelligence officials are amping up warnings to American executives about fresh dangers to doing business in China under an amended Chinese law to combat espionage.

A bulletin issued Friday by the National Counterintelligence and Security Center warns that the revised law is vague about what constitutes espionage and gives the government greater access to and control over companies’ data, potentially turning what would be considered normal business activities into criminal acts.

The amended counterespionage law, which takes effect Saturday, has unsettled foreign businesses in China.

Big banks stay cautious as stress doesn’t end with a test.

Banks endured the stress tests pretty well. But they seem to be anticipating some bigger headaches to come.

The results of the Federal Reserve’s annual health checkup of the country’s biggest banks, announced earlier this week, were a bit anticlimactic, especially coming against the backdrop of a recent banking crisis: Nobody failed. But passing and failing are sort of beside the point. The results of the test were just prelude to the announcements, made late Friday, by banks of their expected new minimum capital requirements—and, in turn, how much they plan to pay out to shareholders in the form of dividends and buybacks.

Related: Banks Brace for More Turmoil Heading Into the Third Quarter

• A judge is weighing a dispute between AMC Entertainment and some of the same investors that helped the troubled movie-theater chain survive the Covid-19 pandemic.
   
• Disney paid female middle managers at least $151 million less than their male counterparts with similar experience and skill sets over nearly a decade, according to a pay-equity lawsuit.
   
• Food costs were finally starting to show signs of easing after the pandemic and Russia’s invasion of Ukraine sent prices skyrocketing. Now, a drought across America’s breadbasket is a threat to further relief.
   
• Hong Kong’s embrace of cryptocurrencies could draw more business and talent to the city. But the industry comes with a lot of baggage—and also some China-specific risks.

• The Supreme Court threw out the Biden administration’s plan to forgive student loans held by 40 million Americans, ending a $430 billion program the White House considers a crucial way to cement the president’s support among younger Americans.
   
• Apple on Friday became the world’s first corporation to close with a market value above $3 trillion, a milestone that reflects the lasting impact and resilience of the iPhone.
   
• Brazil’s electoral court barred former President Jair Bolsonaro from seeking office until 2030, finding that he undermined confidence in the country’s voting system months before losing last year’s presidential election.
   
• Rioters set fire to hundreds of buildings in the fourth consecutive night of violence across France, prompting President Emmanuel Macron to postpone a long-awaited state visit to Germany as he grapples with fallout from the killing of a teenager by police.
   
• The boom in demand for high-end chips powering the rise of artificial intelligence has given new life to some of the survivors of the last tech-hype cycle: cryptocurrency miners.

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