– The Wall Street Journal (paywall) reported that the SEC is asking investment advisers how they use and oversee artificial intelligence (AI), as agency chair Gary Gensler expresses skepticism about the technology. The SEC’s examinations team has sent requests for information on AI-related topics to several investment advisers. The agency wants details on topics including AI-related marketing documents, algorithmic models used to manage client portfolios, third-party providers and compliance training, according to one such letter obtained by Vigilant Compliance, a regulatory compliance consulting firm.
Karen Barr, head of the Investment Adviser Association, confirmed that her trade group has heard about the SEC outreach to advisers on the use and governance of AI. The agency’s exercise could be ‘extremely helpful as the commission considers policy issues relating to these emerging technologies,’ she said.
The SEC’s inquiries don’t mean it suspects misconduct. An SEC spokesperson said the agency’s examinations aren’t public and it doesn’t confirm or deny their existence.
– According to Bloomberg (paywall), activist investor Bluebell Capital Partners urged French payments company Worldline to shake up its board and replace its chair to ‘restore the trust of the market’ after the shares fell almost 60 percent in a day. Bluebell also asked the company to review CEO Gilles Grapinet’s performance, according to a letter seen by Bloomberg.
A Worldline representative declined to comment.
There is ‘no excuse to delay the start of a large reshuffle of the board,’ Bluebell said, calling for four directors to resign immediately. The investment firm is putting pressure on Worldline following the company’s announcement on October 25 that sales growth would be much less than anticipated this year.
– Six US lawmakers have written to the Federal Trade Commission (FTC) in opposition to Kroger Co’s proposed $24.6 bn acquisition of peer grocery chain operator Albertsons, according to a letter seen by Reuters. The companies have said they expect to complete their merger by early 2024, once the FTC completes its antitrust review.
Senators Elizabeth Warren (D-Massachusetts), Mazie Hirono (D-Hawaii), Bernie Sanders (I-Vermont) and Cory Booker (D-New Jersey) as well as representatives Summer Lee (D-Pennsylvania) and Alexandria Ocasio-Cortez (D-New York) said in the letter that Kroger’s proposal to divest 413 stores to C&S Wholesale Grocers would not address harms to consumers, employees and the grocery industry if the merger is allowed. Other lawmakers have sent letters in support of the deal to the FTC, which declined to comment.
‘Kroger’s merger with Albertsons will mean workers gain from $1 bn in higher wages, expanded benefits, long-term job security and a strong unionized workforce. The merger will also mean lower prices and more choices for fresh food for customers and more investments in our communities,’ a Kroger spokesperson said in a statement.
‘Albertsons merging with Kroger will expand competition, lower prices, protect union jobs and enhance customers’ shopping experience,’ a representative for Albertsons said in a statement.
– The WSJ reported that Choice Hotels is launching a hostile takeover offer for Wyndham Hotels & Resorts after its efforts to strike a friendly deal were rejected. Choice announced what is called an exchange offer for Wyndham stock, appealing directly to its rival’s shareholders. Choice also intends to nominate a slate of directors to be voted on at Wyndham’s 2024 AGM and is interviewing candidates. The window for nominations runs from January 10 to February 9.
Choice plans to file a Hart-Scott-Rodino notification to begin the regulatory review process required for such a combination. It has met with officials from the FTC to discuss any regulatory concerns and thinks a deal can be completed within a year. Wyndham has argued that a deal would leave the combined company with too much debt and leave employees and franchisees in limbo during the regulatory approval process.
– Representatives from nearly 200 countries agreed at the COP28 climate summit to begin reducing global consumption of fossil fuels to avoid the worst of climate change, Reuters reported. The deal was meant to send a strong message to investors and policymakers that the world is united in its desire to break with fossil fuels. The deal calls for ‘transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner... so as to achieve net-zero by 2050 in keeping with the science.’
The lead negotiator for the Alliance of Small Island States, Anne Rasmussen, criticized the deal as unambitious. ‘We have made an incremental advancement over business as usual, when what we really need is an exponential step change in our actions,’ she said, but she did not formally object to the pact.
Rachel Cleetus, policy director at the Union of Concerned Scientists, praised the climate deal but said it does not commit rich countries to offer more financing to help developing countries pay for the transition away from fossil fuels.
– Acting assistant attorney general Nicole Argentieri, who heads the US Department of Justice’s criminal division, defended the use of settlements that let companies avoid pleading guilty after senators questioned whether prosecutors have been too soft on corporate crime, the WSJ reported. Deferred prosecution agreements and non-prosecution agreements, which stop short of requiring corporate guilty pleas, don’t let businesses off the hook, Argentieri told a US Senate Judiciary Committee hearing. ‘Those are really serious agreements that are highly negotiated,’ she said. ‘They require forward-looking change by a company. They’re not a pass.’
Senators from both parties raised concerns about the department’s efforts to tackle corporate crime. They focused on the use of the settlement agreements along with decisions in some cases to not prosecute executives.
– CNN reported that the UK’s Competition and Markets Authority (CMA) is investigating Unilever over concerns it is ‘misleading’ shoppers about how environmentally friendly its products are. An ‘initial review’ into Unilever’s marketing tactics ‘uncovered a range of concerning practices,’ the CMA said in a statement as it announced a formal probe into the consumer goods company.
The investigation is the latest evidence of efforts by regulators to crack down on greenwashing. EU lawmakers look set to agree new rules in January that will ban phrases such as ‘biodegradable’, ‘eco’ and ‘environmentally friendly’ where these are not backed up by proof. The CMA said it was ‘concerned that Unilever may be overstating how green certain products are through the use of vague and broad claims, unclear statements around recyclability and ‘natural’-looking images and logos.’
Unilever said it was ‘surprised and disappointed’ by the investigation but would co-operate with the CMA. ‘We… refute that our claims are in any way misleading,’ a company spokesperson said in a statement. ‘Unilever is committed to making responsible claims about the benefits of our products on our packs and to these being transparent and clear.’ The spokesperson also noted that Unilever’s products contain information about how to dispose of the packaging after use.
– Officials and pension employees in Oklahoma are running into difficulties while trying to comply with a new law requiring the state to stop doing business with financial companies that ‘boycott’ the oil & gas industry, according to the WSJ. In one case, the state’s second-largest public pension found it would cost $10 mn to move its money out of funds managed by BlackRock and State Street, two of the blacklisted firms.
Oklahoma is among several conservative states that have recently passed legislation targeting financial firms that have embraced ESG investing principles. But no state has moved as fast to enforce a broad blacklist of such firms.
Representatives for BlackRock and State Street declined to comment.
– Reuters reported that, according to people familiar with the matter, the US Department of the Treasury’s Office of the Comptroller of the Currency (OCC) conducted its first climate risk assessment of more than two dozen banks in recent months, laying the groundwork for more intense scrutiny of Wall Street’s accounting for such threats.
The ‘discovery review’ involved the OCC assessing how banks are accounting for the impact of climate change on their loan books and business, and exploring how they manage energy finance and greenhouse gas emissions, the people said. The regulator used the discovery review to establish a baseline of banks’ practices so it has a yardstick with which to assess their progress in implementing the guidance, they said.
An OCC spokesperson acknowledged carrying out the discovery review but declined to comment on the details. ‘The OCC’s focus on and supervision of climate-related financial risk is firmly rooted in its mandate to ensure that national banks and federal savings associations operate in a safe and sound manner. The OCC’s approach is focused on banks’ risk management, not on setting industrial policy,’ the spokesperson said.
– The WSJ reported that the Treasury Department named two new deputies to help lead its sanctions enforcement and anti-money-laundering units, at a time when their mandates are gaining in significance due to geopolitical events such as Russia’s invasion of Ukraine.
Lisa Palluconi was appointed deputy director of the Office of Foreign Assets Control, which implements and enforces US economic sanctions. Palluconi, who joined the Treasury in 2012, most recently was associate director for sanctions policy and implementation. Meanwhile, Jimmy Kirby, who has been acting deputy director of the Financial Crimes Enforcement Network since July 2022, was named to the role permanently.
– CNBC reported that Trian Fund Management announced it was nominating its CEO, Nelson Peltz, and former Walt Disney CFO Jay Rasulo to the media company’s board. ‘Unfortunately, the board and CEO appear to have no conviction that things will get better,’ the activist investor firm said in a press release.
Disney responded by defending its current board. ‘Disney has an experienced, diverse and highly qualified board that is focused on the long-term performance of the company, strategic growth initiatives including the ongoing transformation of its businesses, the succession planning process and increasing shareholder value,’ Disney said in a statement. The company also said its governance and nominating committee will review the nominations and provide a recommendation to the board.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
