The week in GRC: Court questions powers of SEC judges, while BlackRock and Vanguard said to consider climate vote

– The Wall Street Journal reported that Ford named Jim Hackett, a former head of Steelcase who has been chairing Ford’s Smart Mobility innovation unit, as its new CEO Monday morning. The shuffle ends Mark Fields’ three-year tenure at the helm of the auto maker and caps a 28-year career at the company. Ford chair Bill Ford said the company faces considerable challenges as the car industry pivots from conventional cars and trucks to new forms of transportation, including 3D printing and autonomous vehicles. The board began discussing the move earlier in 2017. Fields couldn’t immediately be reached for comment.


– Barclays has tightened its email security to avoid a repeat of the incident earlier this month when the bank’s CEO Jes Staley responded to a message from a prankster posing as the company’s chair, according to the Financial Times. To prevent a recurrence of the security lapse, Barclays has decided to activate a warning message whenever an employee sends a message to an external email address on a mobile device, which previously happened only on desktop computers. Barclays declined to comment. Executives at US and Swiss banks said they already received such alerts on both mobile and desktop devices.


– The SEC said David Peavler, associate director of enforcement in the agency’s Fort Worth office, is leaving after more than 15 years of service. Peavler has supervised a staff of more than 60 attorneys and other professionals responsible for investigating potential violations of the federal securities laws by a wide range of market participants.

Stephanie Avakian, acting director of the SEC’s enforcement division, said: ‘David is an exceptional attorney and a dedicated public servant who has led and supervised an array of complex and high-impact actions. He has demonstrated time and time again his commitment to protecting investors and our markets.’


– The WSJ said big law firms have long been reticent to openly address addiction and other mental health problems, despite research showing that lawyers face higher rates of substance abuse, depression and suicide than the wider population, but that such attitudes are slowly changing. Some US law firms are now offering on-site psychologists, training staff to spot problems and incorporating mental health support alongside other wellness initiatives.


– Bloomberg reported that, according to people familiar with the matter, Singapore Exchange (SGX) is nearing a deal with the Infocomm Media Development Authority (IMDA) – the city’s technology regulator – to develop a system designed to encourage local start-ups to list on the bourse. Under the agreement, SGX would help pair technology companies with investors with the aim of securing their listing in Singapore, the people said.

An SGX spokesperson declined to comment. Communications and information minister Yaacob Ibrahim said in a speech that IMDA is working with SGX to increase technology companies’ accessibility to capital markets, to ‘provide [a] runway for further growth.’


– The WSJ reported that the US Supreme Court limited the ability of patent holders to bring infringement lawsuits in courts that have plaintiff-friendly reputations. The court ruled unanimously that a specialized appeals court has been following an incorrect legal standard for almost 30 years that made it possible for patent holders to sue companies in almost any US jurisdiction. The ruling is a boost for technology companies and others, including retail businesses, that have been sued in magnet districts for patent cases. Dozens of them signed briefs urging the Supreme Court to reach the conclusion it did.


– According to US President Donald Trump’s fiscal 2018 budget proposal, the Consumer Financial Protection Bureau (CFPB) would undergo a ‘restructure’ that would reduce the federal deficit by $145 million in the 2018 fiscal year, Reuters said. The SEC would have its reserve fund, established under the Dodd-Frank Act, used to supplement its budget. In recent years, the fund has been used to overhaul the SEC’s information technology, including upgrades to the filing system for public companies and initiatives to help monitor fraud and track equities-trading patterns. At present, both the SEC and CFPB budgets do not impact the federal deficit.


– According to Bloomberg, the EU circulated criteria for cities vying to house the trade bloc’s banking and drugs regulators after Brexit forces them from London, identifying October as the deadline for a decision. The EU’s remaining 27 members have until July 31 to bid for the European Medicines Agency and European Banking Authority (EBA). More than 20 nations have said they will apply for the drugs regulator while cities such as Paris and Frankfurt are eyeing the EBA. No country can host both agencies and repeated rounds of voting will result in a final of two countries, the winner of which will need a majority of votes from fellow EU members.


– US Department of Labor secretary Alexander Acosta said the fiduciary rule governing brokers offering retirement advice will take effect on June 9 without further delay, the WSJreported. Acosta said ‘respect for the rule of law’ precludes a further delay in next month’s applicability date, which had been postponed from April 10 after Trump directed the department to re-evaluate the Obama-era regulation meant to protect retirement savings from conflicted investment advice.

‘We have carefully considered the record in this case and have found no principled legal basis to change the June 9 date while we seek public input,’ Acosta said. Brokers and insurance agents don’t need to comply with certain parts of the regulation until January 1, 2018.


– The Los Angeles Times reported that Target will pay $18.5 million to 47 states and the District of Columbia as part of a settlement over a 2013 data breach that compromised tens of millions of customers’ credit and debit card information. As part of the settlement, the Minneapolis-based retailer will also be required to employ an executive to manage a ‘comprehensive information security program’ and advise the company’s CEO and board of directors, according to a statement from California attorney general Xavier Becerra’s office. Target must hire an independent third party to do a comprehensive security assessment, according to a statement from the New York attorney general’s office.

Target said it was ‘pleased to bring this issue to a resolution for everyone involved.’ The retailer added that the costs associated with this settlement were ‘already reflected in the data breach liability reserves that Target has previously recognized and disclosed.’


– The Financial Industry Regulatory Authority (Finra) announced that Andrew Duff, chair and CEO of Piper Jaffray, was elected as a large-firm governor to the Finra board of governors. ‘Andrew’s deep experience working with institutional and individual investors will be an invaluable asset to our deliberations,’ said Finra president and CEO Robert Cook. ‘We look forward to his insights on Finra’s strategy, programs and operations.’


– According to the WSJ, the US Department of Justice (DoJ) sued Fiat Chrysler Automobiles, alleging that it used illegal software to cheat on government emissions tests. In a civil lawsuit, prosecutors said the auto maker used defeat-device software that allowed nearly 104,000 Jeep Grand Cherokee vehicles and Ram pickup trucks with diesel engines to pass government emissions tests and then pollute far beyond legal limits on the road.

Fiat Chrysler said it was ‘disappointed’ the DoJ filed the lawsuit and ‘intends to defend itself vigorously, particularly against any claims that the company engaged in any deliberate scheme to install defeat devices to cheat US emissions tests.’


– The Guardian reported that thousands of people took to the streets of downtown Chicago calling McDonald’s the ‘Donald Trump of corporations’ and protesting low wages and alleged sexual harassment at the company a day before its annual shareholder meeting. The protest, co-ordinated by pressure groups including Fight for $15, a union-backed lobby group calling for an increase in the US minimum wage, planned a second day of protests at McDonald’s annual meeting. The company did not return calls seeking comment.


– Music-streaming service Spotify has beefed up its board ahead of a likely public listing this year with the appointment of four new directors, according to the FT. The appointments are subject to shareholder approval, people familiar with the matter said. Spotify declined to comment. The latest moves come eight months after Spotify appointed Ted Sarandos, Netflix’s chief content officer, to the board.


– A divided US Court of Appeals for the District of Columbia Circuit appeared to tilt slightly in favor of the CFPB’s arguments that its structure does not violate the Constitution, in one of two cases that could affect the regulation of Wall Street, Reuters said. The case at issue hinges on whether the court should reconsider a ruling from last October by a three-judge panel that found the powers of the bureau’s director Richard Cordray were unconstitutional because he can be fired only by the president for cause, and not at will.


– Also on Wednesday, judges on the same court sharply questioned the powers of the SEC’s in-house administrative courts in a case that could transform how the agency carries out its enforcement authority, the WSJ reported. Appeals court judges probed whether the SEC’s judges exercise enough power that, under the Constitution’s appointments clause, they should have been hired by the SEC’s commissioners.

The challengers to the SEC’s system say it is a fatal flaw that the judges were hired by a human resources office, violating the Constitution’s call to limit the power of government officials who don’t answer to elected officeholders. The SEC argues its system for hiring judges is legitimate because the judges’ decisions aren’t final without the commission’s involvement.


– Banks, policymakers and investors have drawn up a new set of guidelines for behavior in the global foreign exchange markets, the FT reported. The 78-page code, co-ordinated and released by the Bank for International Settlements, complements an earlier version revealed a year ago. It is tough to enforce, and not designed to replace local laws, but the 55 principles have been compiled through consultation with all the major stakeholders. Central banks have made it clear they expect fairness, discretion and high ethical standards.


– Reuters reported that BNP Paribas agreed to pay $350 million to the New York Department of Financial Services (DFS) to settle a probe into alleged misconduct in its foreign exchange business, which the regulator said enhanced the bank’s profits at customers’ expense. More than a dozen traders and salespeople in New York and other trading hubs manipulated foreign exchange rates and engaged in other illegal activity while the bank failed to properly supervise the business, DFS said.

BNP Paribas said it ‘deeply regrets the past misconduct’, which it said occurred between 2007 and 2013. The bank said it has since strengthened its control and compliance systems, and that the fine would be covered by existing provisions.


– The WSJ reported that, according to people familiar with the matter, BlackRock and Vanguard Group are strongly considering a public rebuke to ExxonMobil over climate change at the company’s annual meeting on May 31. The firms are weighing a vote in favor of an investor proposal that would seek to pressure the oil company to conduct a climate stress test to measure how regulations to reduce greenhouse gases and new energy technologies could impact the value of its oil assets, the people said. Exxon has urged investors to vote against the resolution.

‘No decision has been made regarding our vote at Exxon’s annual shareholder meeting. Our deliberations continue and we look forward to continued engagement with the company,’ said Zach Oleksiuk, head of Americas for BlackRock’s investment stewardship group. ‘Directors at any company that doesn’t engage with those on whose behalf it serves risks losing investor support,’ said Glenn Booraem, a principal at Vanguard who works on its governance efforts. ‘Our view – and those of all other credible forecasters – shows a continued role for oil and gas through 2040,’ an Exxon spokesperson said.


– The American Petroleum Institute (API) and the National Association of Manufacturers (NAM) dropped their attempts to intervene in a court case over climate change after failing to reach an agreement on a unified legal position on climate science, Reuters said. The groups and the American Fuel & Petrochemical Manufacturers were arguing that a judgment requiring the government to tighten environmental regulations would harm their business interests. But discord arose among them after a judge ordered them to submit a joint filing stating their views on climate science.

A lawyer representing the three groups said in a court hearing on May 18 that they were unable to agree on the causes and effects of human activity and greenhouse gas emissions on the climate, transcripts of the proceedings show. An API spokesperson did not say why the industry group had asked to withdraw from the case. A spokesperson for NAM did not respond immediately to a request for comment.