The week in GRC: Trump names FTC pick, and SEC appoints new market oversight chief
– Bloomberg reported that Gary Cohn, President Donald Trump’s chief economic adviser, said he sees a major risk evolving in clearinghouses, platforms that regulators made key to the swaps markets following the financial crisis. As ‘we get less transparency, we get less liquid assets in the clearinghouse; it does start to resonate with me to be a new systemic problem,’ Cohn said.
JPMorgan Chase and BlackRock have argued for years that clearinghouses pose their own threats by shifting risk to a handful of entities. The US Department of the Treasury’s Office of Financial Research has warned that clearinghouses used for derivatives trades can be vulnerable and potentially spread risks through the financial system.
– Reuters said that, according to people familiar with the matter, Japan’s Financial Services Agency (FSA) is likely to include exchange rates in forward contracts under fair disclosure rules for listed companies. That would broaden the scope of requirements already put in place by Tokyo Stock Exchange and explain clearly what needs to be disclosed. Investors have expressed concerns that lack of clarity could prompt companies to hold back information for fear of unintentionally breaking the law.
Guidelines on what will be included in Japan’s fair disclosure rules will come out in the near future, the people said, ahead of full implementation of the law early next year. An FSA spokesperson declined to comment.
– According to CNBC, members of the Nordstrom family told the department store’s board that the group has suspended for the balance of this year its efforts to take the company private. The Nordstrom family said it plans to continue its efforts after the conclusion of the holiday season. The Nordstrom family group, which owns 31.2 percent of the retailer, said in June it was looking to take the company private in order to make necessary investments for the retailer’s long-term plans without having to face public shareholders.
– The Wall Street Journal reported that activist hedge fund firm RBR Capital Advisors has set its sights on breaking up Credit Suisse Group. The firm said it wanted Credit Suisse to split into an investment bank, a wealth manager and an asset manager. ‘It’s going to be better off being a pure player,’ said William Raynar, a board member at RBR. He added that RBR has had ‘a number of interactions’ with other investors.
‘While we welcome the views of all our shareholders, our focus is on the implementation of our strategy and our three-year plan, which is well on track and which we believe will unlock considerable value for our clients and shareholders,’ a Credit Suisse spokesperson said.
– Bank leaders met in Washington, DC, with a warning for regulators that opening the financial system to thousands of financial technology start-ups and Silicon Valley firms may unleash a wave of cyber-crime, and the word is that governments are starting to see those dangers, too, according to Bloomberg. ‘The regulators have woken up,’ Barclays CEO Jes Staley told an audience at the meeting. ‘They will have to extend their reach if they are going to protect the integrity of the payment systems and financial data of consumers around the world, who will soon be asking for their data to be shared with this aggregator or that.’
– The WSJ reported that Procter & Gamble (P&G) said it beat Nelson Peltz by 6.15 million votes – or only about 0.2 percent of its shares outstanding – a slim difference that will require a recount to determine the final outcome of the most expensive proxy fight in history.
‘Trian continues to believe the election is too close to call,’ Peltz’s Trian Fund Management said, adding that the initial results are based ‘on estimates and incomplete information.’ P&G said it could take several weeks for an independent inspector to confirm the results. ‘P&G shareholders have spoken,’ a company spokesperson said. ‘Our focus continues to be on delivering the results shareholders expect of us and we expect of ourselves – and we’re on the right track. We are confident in the conclusion we reached last week.’
– The WSJ also noted that the UK government moved to extend its powers to block foreign acquisitions of UK companies that threaten national security to include makers of advanced technology alongside military equipment manufacturers. The proposals include measures that would allow the government to scrutinize much smaller deals than existing rules allow. The plans emerge as China’s appetite for foreign technology companies raises concerns over its access to intellectual property that might potentially be used against the US and Europe both economically and militarily.
– Kenneth Chenault, chair and CEO of American Express and one of the country’s most prominent African-American corporate leaders, will step down on February 1, according to the WSJ. Chenault will be succeeded as CEO by Stephen Squeri, a 30-year American Express veteran who previously ran its division in charge of corporate cards. As vice chair since 2015, Squeri had spent more time meeting with shareholders, leading many to believe he was on the short list to be the next CEO.
– The SEC appointed Brett Redfearn director of the agency’s division of trading and markets, which establishes and maintains standards for fair, orderly and efficient markets. The division oversees the major securities market participants and infrastructure including broker-dealers, self-regulatory organizations such as stock exchanges and the Financial Industry Regulatory Authority (Finra), alternative trading systems and transfer agents. Redfearn was previously with JPMorgan, where he was global head of market structure for the corporate and investment bank.
– The Consumer Financial Protection Bureau (CFPB) outlined principles for protecting consumers when they authorize third-party companies to access their financial data to provide certain financial products and services. The principles are intended to help foster the development of innovative financial products and services, increase competition in financial markets and empower consumers to take greater control of their financial lives, officials said in announcing the initiative.
– Finra requested comment on two proposals related to its arbitration program: a proposal to expand the options available to investors when filing a claim in arbitration against an inactive firm or associated person, and a second proposal related to compensated non-attorney representatives who provide public investors with an alternative to representation by attorneys in disputes between investors and broker-dealers.
– Bloomberg reported that China Banking Regulatory Commission chair Guo Shuqing reiterated the country’s commitment to reforming its finance industry, including easing ownership and business restrictions for foreign banks. The market share of foreign banks in China is falling, which isn’t good for competition, Guo said at the Communist Party’s congress in Beijing. The country will give overseas banks ‘more room’ in equity ownership and business scope, he said, without providing details.
– BHP Billiton CEO Andrew Mackenzie is facing an activist investor that appears to be agitating for his ouster, the WSJ reported. Mackenzie has come under fire in recent months from Elliott Management, a hedge fund firm founded by Paul Singer, which is pushing for sweeping changes at the mining company. Unless Mackenzie acts more aggressively on the fund’s recommendations soon, Elliott believes BHP’s board, under new chair Ken MacKenzie, should review the CEO’s position, according to people familiar with the matter.
‘There is much... Andrew Mackenzie and his leadership team have delivered in the past five years to set up BHP for success,’ the chair told shareholders. ‘Andrew, I look forward to working with you and your management team.’ The notion that the BHP CEO is on a timeline ‘is simply false and without merit,’ MacKenzie added.
– The WSJ reported that, according to a person familiar with the matter, the SEC has approved a plan by the Chicago Stock Exchange to introduce a new so-called speed bump: a brief delay designed to help protect slower traders from certain high-frequency trading strategies. The SEC’s decision comes as several other exchanges have also experimented with such delays. An SEC spokesperson wasn’t immediately available for comment.
– The White House formally announced that the president will nominate Washington, DC antitrust lawyer Joseph Simons to the Federal Trade Commission, along with Rohit Chopra, a former official at the CFPB, according to Reuters. Once confirmed by the Senate, Simons will be named to chair the agency, which works with the US Department of Justice to enforce antitrust law and investigates allegations of deceptive behavior by companies. The agency is reviewing a number of big mergers in industries where there are already few players. The president is also expected to nominate Noah Phillips, chief counsel for Senator John Cornyn, R-Texas, to fill an empty Republican seat, although that was not announced on Thursday.
– BP said the company’s long-standing chair Carl-Henric Svanberg is set to retire, launching a search for his replacement, according to the WSJ. The Swedish businessman became chair in January 2010, just months before a fatal blowout in the Gulf of Mexico propelled the company into the worst corporate crisis in its history. ‘BP’s comeback would not have been possible without the strong leadership and steadfast support of Carl-Henric,’ CEO Bob Dudley said. Svanberg will chair the company’s annual general meeting in May 2018 and remain in position until a successor is found, BP said.