The week in GRC: GOP bills take aim at regulators, SEC releases exam priorities, and more

- The Financial Times reported that some of the world’s largest banks will spend more than $200 million each to implement new regulations that will ramp up capital demands for some parts of their trading businesses. Consultancy Oliver Wyman has calculated the new cost estimates of implementing the fundamental review of the trading book rules after studying the plans of 20 European, US and Asian banks with large trading businesses.

The fundamental review of the trading book imposed by the Basel Committee on Banking Supervision will overhaul how banks treat the risk of the bonds, stocks, commodities and other assets they hold in the short term so they can facilitate clients’ trading.


- AT&T expects to be able to bypass the Federal Communications Commission (FCC) in its planned $85.4 billion acquisition of Time Warner, Reuters reported the companies as saying in regulatory filings. Time Warner said that as it does not plan to transfer any FCC licenses to AT&T, it would likely not need FCC approval and would need only the consent of the US Department of Justice.


– Yahoo said Monday that it would reduce the size of its board after completing its deal with Verizon Communications, meaning that several long-time directors, including CEO Marissa Mayer and co-founder David Filo, will step down as directors, the Wall Street Journal reported.

After the sale of its core internet business, the company will change the name of the remaining business from RemainCo to Altaba, Yahoo said in a regulatory filing. Eric Brandt, who joined Yahoo’s board last March and is the former CFO of Broadcom Corp, will become chairman of Altaba, according to the filing. Mayer was named CEO of Yahoo after she joined the firm from Google in 2012. She is expected to remain with Yahoo once it becomes part of Verizon.


– Oliver Schmidt, formerly in charge of ensuring that Volkswagen vehicles complied with US emissions standards, was arrested by Federal Bureau of Investigation agents and charged as part of a US investigation into emissions cheating by the auto maker, according to the WSJ. Schmidt is suspected of conspiring to defraud the US government and US consumers to sell Volkswagen diesel vehicles.


– The FT reported that the Federal Deposit Insurance Corporation (FDIC) claimed in a lawsuit filed on Monday that Bank of America (BofA) owes it at least half a billion dollars in unpaid premiums. The FDIC claimed that for a roughly five-year period, BofA failed to assess its own risks correctly and thus short-changed the Deposit Insurance Fund.

Eugene Scalia, a partner with Gibson Dunn & Crutcher, representing BofA, noted that the FDIC made ‘significant changes’ to the relevant rule in 2014, and it is now claiming that what it added in 2014 is what the rule said all along. ‘Our position is that the new words gave the regulation new meaning,’ he said. ‘That new meaning can’t be applied retroactively, especially because the FDIC never gave [BofA] fair notice of its view prior to this year.’

A bank spokesperson noted that the sums in dispute are a ‘fraction’ of its annual dues to the FDIC, and stressed that the bank kept the regulator ‘regularly updated’ on its calculations.


– The WSJ reported that US president-elect Donald Trump will put his assets into a trust and give up control of his business to his two adult sons in an effort to avoid conflicts of interest during his presidency.Some ethics specialists said the trust and other measures don’t create the firewall needed to fully insulate him from his holdings.

They called on Trump to sell his assets, citing a constitutional clause that addresses payments from foreign governments and other potential conflicts they say could put the president-elect’s personal financial interests out of step with the interests of the US more broadly. Trump’s attorney said selling the business would give rise to a host of other problems.


– The EU proposed new rules that would curb how companies such as Google and Facebook track users to deliver targeted ads, introducing legislation that might restrict a key revenue stream for online advertisement companies and other website publishers, according to the WSJ. The European Commission has proposed rules that would require users to actively consent to the use of cookies. Google and Facebook declined to comment.


– The FT reported that London-listed pharmaceuticals group Shire has agreed a $350 million settlement over US claims that it used ‘kickbacks and other unlawful methods’ to induce doctors to prescribe one of its drugs. The US Department of Justice said Shire staff had unlawfully ‘induced clinics and physicians with lavish dinners, drinks, entertainment and travel’ as well as ‘unwarranted payments’ for speaking engagements and cash credits and rebates to boost sales of Dermagraft, a bio-engineered human skin substitute.

Deputy US attorney general Benjamin Mizer, head of the justice department’s civil division, said the settlement was ‘the largest False Claims Act recovery’ in a kickback case involving a medical product. Shire said it had not ‘admitted wrongdoing of any kind’ in the settlement.


– The US Chamber of Commerce on Wednesday said it could be a mistake to repeal Obamacare quickly without developing a replacement healthcare insurance plan and urged the incoming Trump administration not to erect trade barriers, Reuters reported.

‘As a new healthcare plan takes shape, it’s important to remember things were far from perfect before we started, before Obamacare,’ chamber president Tom Donohue said in his annual address outlining the group’s priorities. On issues where the chamber agrees with Trump, Donohue renewed calls to roll back regulations imposed by the Dodd-Frank Act and said he agrees with calls to change the Consumer Financial Protection Bureau.


– Bloomberg reported that UK financial services firms have watered down their efforts to retain open access to the EU post-Brexit via regulatory passporting, accepting that Prime Minister Theresa May’s government is unwilling to press for their demands against EU resistance.

In a summary of industry priorities for the upcoming negotiations released on Thursday, TheCityUK lobby group made no mention of its once key demand to safeguard passporting, which allows banks with bases in London to service customers throughout the EU. The banks are now pushing for ‘mutual access’ and additional time to adapt to the new environment.


– The US Department of Labor found that JPMorgan Chase inappropriately retaliated against a former employee who raised questions about the bank’s sales tactics and investment products, according to The New York Times. The bank was ordered to pay back wages and damages to Johnny Burris, a former broker at one of its Arizona branches.

A letter released on Tuesday by the Occupational Safety and Health Administration, a division of the department, said JPMorgan had violated provisions of the Sarbanes-Oxley Act designed to protect whistleblowers. A JPMorgan spokesperson said the bank planned to appeal the findings, and added that the Financial Industry Regulatory Authority had previously ruled against Burris when he told an arbitration panel he was fired as retaliation.


– Republicans on Wednesday passed a bill in the House of Representatives that touched on nearly every step US agencies take in creating and applying new rules, Reuters reported. The House passed the Regulatory Accountability Act, which combines eight bills aimed at changing how the government bureaucracy runs. The legislation would give Trump tools ‘to wipe out abusive regulation,’ said Bob Goodlatte, R-Virginia, the Judiciary Committee chairman who is among the many House leaders calling for lighter regulation.


‒ The SEC’s office of compliance inspections and examinations on Thursday announced its 2017 priorities.   Areas of focus for the year ahead include electronic investment advice, money market funds and financial exploitation of senior investors. The priorities also reflect a continuing focus on protecting retail investors, including individuals investing for their retirement, and assessing market-wide risks. The 2017 exam priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers and national securities exchanges.


‒ According to the WSJ, the UK’s Financial Reporting Council wants more power now that companies in the country have made progress in disclosing the material risks and uncertainties they face. After the first full year of reporting on long-term viability, the quasi-government regulator for corporate governance and reporting said compliance with the principles of the UK corporate governance code remains high. As with most obligatory disclosure, however, there remains the risk of it becoming a box-ticking exercise. Boards should aim for more in-depth analysis of risk scenarios and provide context for their timeframes, the FRC said in its annual review of corporate governance and stewardship.


‒ The Environmental Protection Agency accused Fiat Chrysler Automobiles of using software on its diesel-powered Jeep Cherokee and Ram pickups that allowed them to release illegal amounts of pollution into the air, according to the WSJ. The EPA delivered a violation notice to Fiat Chrysler accusing it of using illegal software in 104,000 vehicles. The accusation could cost the company $4.63 billion in fines, the agency estimated. Officials did not say Fiat Chrysler’s software was designed to cheat emissions tests, and said they were continuing to investigate why the car maker failed to disclose the software and whether it was intended to fool regulators.

Fiat Chrysler CEO Sergio Marchionne denied that the car maker subverted emissions rules or violated regulations, saying the dispute involved a difference of opinion with the EPA about the calibration of Fiat’s vehicles’ emission-control devices. ‘We have done nothing, in our view, that is illegal,’ he said, accusing regulators of ‘grandstanding’ and trying to ‘lynch companies’ over differences of opinion.


‒ Reuters reported that the House of Representatives on Thursday passed a bill requiring the SEC to add up the costs of following new rules before putting them into force, as part of a Republican push to reform the federal bureaucracy. The bill would also require the commission to periodically review its existing rules.

‘Whether it is buying a car or choosing a college savings plan, every American family weighs the pros and cons before making major life decisions,’ said Ann Wagner, R-Missouri, who sponsored the bill. The House also passed a bill requiring the Commodity Futures Trading Commission to assess the costs and benefits of proposed regulations or orders.