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May 01, 2020

The week in GRC: Warren seeks to curb M&A during pandemic, and SEC creates Covid-19 monitoring group

This week’s governance, compliance and risk-management stories from around the web

– The SEC has created an internal, cross-divisional Covid-19 market monitoring group. The temporary group will help the commission and its various divisions and offices in: (i) commission and staff actions and analysis related to the effects of the pandemic on markets, companies and investors; and (ii) responding to requests for information, analysis and assistance from other regulators and government organizations.

The New York Times reported that, according to people familiar with the matter, the General Data Protection Regulation (GDPR) has suffered from a lack of enforcement, poor funding, limited staff resources and stalling tactics by technology companies. As a result, even some of the law’s main supporters are frustrated with how it has worked. In addition, tackling Covid-19 is raising new questions about the role of privacy safeguards as digital tools for tracking health and location information become crucial parts of containment strategies.

Privacy groups and smaller tech companies complain that larger issuers aren’t facing tough oversight, while the public’s experience with the GDPR has been a frustrating number of pop-up consent windows to click through when visiting a website.

– Tyson Foods warned that ‘millions of pounds of meat’ will disappear from the supply chain as the coronavirus pandemic forces food-processing plants to close, with board chair John Tyson writing that ‘[t]he food supply chain is breaking’ in an advertisement published in The New York Times, Washington Post and Arkansas Democrat-Gazette, CNN reported.

US farmers don’t have anywhere to sell their livestock, Tyson said, adding that ‘millions of animals – chickens, pigs and cattle – will be depopulated because of the closure of our processing facilities.’ Tyson Foods recently closed its pork plants in Waterloo, Iowa and Logansport, Indiana so that workers in those facilities could be tested for the virus. Tyson wrote in the advertisement that the company has taken steps to protect its workers, including taking their temperatures and requiring face masks in all of its facilities.

– The SEC announced that its investor advisory committee will hold a virtual public meeting on May 4 to discuss public company disclosure considerations and public company shareholder engagement/virtual shareholder meetings in the context of the Covid-19 pandemic.

– Treasury secretary Steven Mnuchin said the government will perform an audit on any company taking out more than $2 million from the pandemic-related small business loan program, CNBC reported. The program allows companies to have their loans forgiven, provided they spend the funds on payroll, benefits, rent and utilities. ‘We’re going to do a full audit of every loan over $2 million. This was a program designed for small businesses. It was not a program designed for public companies that had liquidity,’ Mnuchin added.

The program faced criticism after several public companies disclosed that they had taken out the loans, which were intended to help small businesses with fewer than 500 employees survive the coronavirus crisis. More than 220 public companies applied for at least $870 million from the government program, according to FactSquared.

– According to NPR, the New York state attorney general’s office says Amazon may have violated federal safety standards for providing ‘inadequate’ protections to warehouse workers in the state. In a letter to Amazon obtained by NPR, the office of Letitia James says the company may have also broken the state’s whistleblower laws for firing a warehouse worker who helped organize a protest in Staten Island.

‘While we continue to investigate, the information so far available to us raises concerns that Amazon’s health and safety measures taken in response to the Covid-19 pandemic are so inadequate that they may violate several provisions of the Occupational Safety and Health Act (Osha)’ and other federal and state guidelines, James’ staff wrote in the letter.

Amazon did not directly respond to the letter but cited previous comments it has made on the criticisms. The company has argued that workers’ criticisms were unfounded and that it has taken ‘extreme measures to keep people safe.’ An Amazon spokesperson said in a statement that the company respects workers’ rights to protest but that ‘these rights do not provide blanket immunity against bad actions, particularly those that endanger the health, well-being or safety of their colleagues.’

The Wall Street Journal said the Organization for Economic Co-operation and Development’s (OECD) working group on bribery in international business transactions has warned countries to be on guard for potential bribery, particularly in the healthcare sector, as they tackle the coronavirus pandemic. The working group said the economic disruption and human suffering arising from the pandemic can create conditions ‘ripe for corruption’ and that bribery and corruption could undermine how countries respond to the crisis.

‘As countries struggle to gather the health and pharmaceutical products needed to fight the Covid-19 epidemic, it is a priority that all actors respect the rule of law and transparency to ensure the most efficient and effective distribution of the products,’ said OECD secretary-general Angel Gurría in a statement.

Reuters reported that Senator Elizabeth Warren, D-Massachusetts, and Representative Alexandria Ocasio-Cortez, D-New York, said they would introduce legislation to stop many mergers while the US struggles economically during the Covid-19 pandemic.

Warren and Ocasio-Cortez said they would introduce legislation that would put a moratorium on all mergers that would normally be reported to the Federal Trade Commission (FTC), and any involving companies with more than $100 million in revenue or private equity companies, among others. Warren will also seek to include the moratorium in any future relief bill. The moratorium would continue until the FTC unanimously decides that small businesses and workers are ‘no longer under severe financial distress.’

‘As we fight to save livelihoods and lives during the coronavirus pandemic, giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses and increase their power through predatory mergers,’ Warren said in a statement.

– The WSJ said that, according to people familiar with the matter, Senate majority leader Mitch McConnell, R-Kentucky, told Republican lawmakers on a private call that he wants to protect companies from liability over pandemic-related lawsuits. McConnell is responding to a major push by US companies, which are getting hit with lawsuits as workers in meat-processing facilities, grocery stores, retailers and other locations get sick or die from Covid-19.

In addition to seeking liability protections, big businesses are also fighting an effort by Democrats to require Osha to order all companies to implement comprehensive plans to protect workers who continue in their jobs during the pandemic.

Reuters reported that French financial markets regulator AMF wants to improve the flow of financial information as activist investor funds become more active in the country. The AMF said it wants to improve information regarding short positions and will support such measures at a European level. It wants to be better able to demand clarifications from investors or firms in any public declarations.

– According to the WSJ, the Financial Action Task Force (FATF) said the United Arab Emirates (UAE) has taken steps to combat money laundering in recent years but should be tougher in investigating and prosecuting financial crimes, including the smuggling of gold across its borders.

Since its last evaluation in 2008, the UAE has beefed up its approach to fighting financial crime and has undertaken a national review of its money-laundering and terrorist-financing risks, but the country’s reliance on cash transactions and its highly active trade in precious metals are among the issues that make the UAE susceptible to criminal activity, the FATF said.

A spokesperson for the UAE embassy in Washington, DC didn’t respond to a request for comment.

– Ford Motor Co said executive chair Bill Ford’s daughter Alexandra Ford English would join electric vehicle startup Rivian’s board, Reuters reported. Ford English currently serves as the director of corporate strategy at Ford Motor. ‘With Alexandra’s experience in mobility and self-driving services, she will bring a unique perspective to Rivian’s board,’ said Ford Motor CEO Jim Hackett in a statement.