The week in GRC: Expect US-first approach to regulation, Mnuchin says; and study finds banks have more female directors than most other industries

– The Wall Street Journal reported that Jay Clayton, a partner at Sullivan & Cromwell and President Donald Trump’s pick to chair the SEC, will replace Mary Jo White, a former US attorney chosen by former president Barack Obama for her reputation as an aggressive prosecutor. By comparison, Clayton, a lawyer who has guided dozens of firms through stock sales and mergers, has written that federal foreign bribery investigations unfairly shackle US companies in their pursuit of growth overseas.

Clayton is expected to testify as soon as March 2 before the Senate Banking Committee, which must advance his nomination to the full Senate. Democrats, including Senator Sherrod Brown of Ohio, the panel’s ranking member, have said they are skeptical that a lawyer with career ties to Wall Street will share their desire for tough enforcement deals and strict rules intended to prevent another credit crisis.


– Reuters reported that Uber Technologies hired former US attorney general Eric Holder to conduct a review of sexual harassment claims at the ride-hailing service made by a former employee. Holder and Tammy Albarrán, partners at Covington & Burling, will look into the complaints about a manager at Uber, as well as general questions about diversity and inclusion, Uber CEO Travis Kalanick told employees in a memo.

Arianna Huffington, who joined Uber’s board last year, Liane Hornsey, the company’s chief human resources officer, and associate general counsel Angela Padilla will also help conduct the review, Kalanick said. In a statement, he called the former employee’s allegations ‘abhorrent and against everything Uber stands for and believes in.’


– Bloomberg said that, according to people familiar with the matter, China’s financial regulators are working to draft sweeping new rules for the country’s rapidly expanding asset management products that aim to make it clear there are no government guarantees on such investments. The draft rules would apply to products issued by banks, insurers, brokerages and other financial institutions, the sources said. The rules would be phased in after existing products mature, and would apply only to new issues, they add.


– The WSJ reported that Swiss engineering company ABB said Wednesday it had uncovered a ‘sophisticated criminal scheme’ in a South Korean subsidiary that led to about $100 million being stolen from the company. The suspect, who wasn’t named by the company, went missing on February 7, ABB said. A company spokesperson said ABB uncovered the theft on February 9 and is working with the relevant authorities. A spokesperson for ABB Korea declined to comment or identify the name of the official involved. Local police also declined to comment.


– Reuters reported that Wells Fargo announced it had fired four mid-level executives and stripped them of bonuses and stock awards as a result of an investigation into improper sales practices in its retail bank. The board of directors voted unanimously to fire them as part of its investigation into employees opening as many as 2 million deposit and credit card accounts without customers’ permission. A spokesperson for the Wells Fargo board of directors declined to comment further. None of the executives could be reached for comment.


– The Bank of England dealt a blow to UK insurers hoping for a quick fix to what they see as the most onerous aspects of EU capital requirements, the Financial Times reported. The insurance industry has been pushing for a more lenient interpretation of EU rules known as Solvency II. But in a speech to the Association of British Insurers on Tuesday, David Rule, the Bank of England’s head of insurance supervision, said its implementation of Solvency II had been ‘robust but proportionate’ and played down the potential for immediate changes.


– The WSJ said that, on the same day Bristol-Myers Squibb shook up its board to satisfy one activist investor, the company was faced with another: Carl Icahn. It isn’t clear how big a stake Icahn has bought, but the investor sees a valuable drug portfolio that could attract a takeover, according to people familiar with the matter. It’s far from guaranteed there will be any sale of Bristol-Myers Squibb, however; the potential obstacles are formidable.


– Law firms Norton Rose Fulbright and Chadbourne & Parke said they will merge into a single entity with more than 4,000 lawyers and expected annual revenue of just under $2 billion, The New York Times reported. The combined firm will be known as Norton Rose Fulbright. The merger with Chadbourne will give the new firm about 1,000 lawyers in the US, including more than 300 in New York and around 130 in Washington.


– Bloomberg reported that Xiang Junbo, chair of the China Insurance Regulatory Commission, vowed to impose ‘stringent’ rules and ‘severely’ punish short-term speculation by insurers, the latest sign of tightening controls on the nation’s industry. The regulator will also curb ‘aggressive’ pricing and the ‘unreasonably’ high returns of some insurance products, Xiang said.


– The WSJ said that, according to Arizona State University researchers, outside CEOs are more likely to have poor business performance and short tenures if their new employer’s board is more diverse than corporate boards they previously served.  

Boards should pay attention to an external CEO’s past exposure to diverse boards because a recruit lacking such experience ‘often clashes with fellow directors at the new company,’ observed David Zhu, an associate management professor at Arizona State’s WP Carey School of Business and the study’s lead author. ‘The firm’s financial performance suffers following such extensive conflicts,’ he continued. ‘An outside new leader must be able to work productively with the new board to help a company move forward.’


– The FT reports that, according to a PwC Governance Insights Center study, large US banks have more female directors than most other major industries, but the proportion of women in their boardrooms is growing more slowly than the rest of corporate America.

Women made up 26 percent of directors at 21 of the largest banking and capital markets companies by market capitalization in 2016 – the same proportion as the boards of 11 big retail companies and more than any of the other seven industry groups PwC studied. Across the entire S&P 500, 21 percent of board members were female.


– Many executives running community banks – normally defined as those with less than $10 billion in assets –  are calling for relief from rules introduced since the financial crisis, according to the FT. They argue that if the Trump administration is serious about easing the flow of credit, it should start by helping out the 6,000 or so banks that support much of the grassroots growth in the world’s largest economy.

These smaller banks have been caught up in a complex web of regulation designed to rein in trillion-dollar banks, says Cam Fine, head of the Independent Community Bankers of America. He is pushing what he calls a ‘plan for prosperity’, aiming to reshape many of the standards now applied to banks that had nothing to do with the crisis.


– Bayer indicated that its $66 billion takeover of Monsanto may face delays, with regulators pressing for more information, even as the company reiterated plans to complete the transaction by the end of the year, according to Bloomberg. The German drug maker will only seek approval for the transaction in the EU next quarter after regulators there requested more information, CEO Werner Baumann said Wednesday. The target timing was previously the first quarter. The company is also responding to a second request from the US Department of Justice, he said.


– Automakers are wasting no time in pushing the Trump administration to make good on its promise to roll back regulations on business, according to theTimes. Two lobbying groups representing auto manufacturers have written letters urging the new head of the Environmental Protection Agency, Scott Pruitt, to reverse a decision last month by the Obama administration to move forward with tougher fuel economy standards that car makers are supposed to meet by 2025.


– The WSJ reported that companies and interest groups have waged behind-the-scenes lobbying campaigns over who will chair the Federal Trade Commission, an appointment with far-reaching implications for the high-tech and telecommunications industries.


– Treasury Secretary Steven Mnuchin told Bank of England governor Mark Carney that the Trump administration will promote US national interests in global talks on financial regulation, according to Bloomberg. ‘Secretary Mnuchin underscored that he looked forward to working with governor Carney on international financial regulatory issues and noted that one of the administration’s core principles for financial regulation is to promote American interests in international financial regulatory negotiations and meetings,’ the Treasury said.


– The WSJ said companies in Brazil are racing to hire compliance officers to root out corruption, in a sign the country’s investigation into graft at state-run oil company Petróleo Brasileiro (Petrobras) is prompting a wider clean-up of Brazilian business.

The investigation into bribery and kickbacks at Petrobras has landed scores of the country’s top businessmen and politicians behind bars. Now Brazilian corporations ‒ whether they are accused of wrongdoing or not ‒ are taking steps to protect themselves from potential litigation from the country’s increasingly assertive judiciary and public prosecutors.

Petrobras has said it is a victim of the graft ring authorities estimate cost the oil producer about $13 billion. The company created a compliance department in early 2015 in an effort to convince investors it can prevent corruption in the future. João Elek, Petrobras’ director of governance, risk management and compliance, said the company planned to increase its compliance department to 400 or more people this year from 350 at the end of 2016.


– The SEC said the March 9 meeting of its investor advisory committee will include panel discussions on research into investor behavior and financial capability, and another on unequal voting rights of common shares. The committee was established under the Dodd-Frank Act to advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure and initiatives to protect investor interests, and to promote investor confidence and the integrity of the securities marketplace.


– Reuters reported that US regulators joined their European counterparts in granting last-minute relief on a swaps rule, after the derivatives industry said it was overwhelmed with record-keeping requirements by the rule coming online next week.

The Federal Reserve, Office of Comptroller of the Currency and Federal Deposit Insurance Corporation said parties trading swaps without a central clearinghouse must follow the rule for their biggest and riskiest trades by the original March 1 deadline. But they granted more flexibility for smaller trades, giving the firms until September to comply with the rule on variation margin, the cash and bonds traders put up to cover losses from day-to-day swings.