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What the New Tax Rules Mean for M&A

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Deborah L. Paul, T. Eiko Stange, and Joshua M. Holmes, Wachtell, Lipton, Rosen & Katz, on Friday, January 12, 2018 Editor's Note: Deborah L. Paul, T. Eiko Stange, and Joshua M. Holmes are partners at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton publication by Ms. Paul, Mr. Stange, and Mr. Holmes.

President Trump has signed into law the most sweeping changes to business-related federal income tax in over three decades. The new law, referred to as the Tax Cuts and Jobs Act (the “Act”), is expected to have far-reaching implications for domestic and multinational businesses as well as domestic and cross-border transactions, impacting the structure, pricing and, in some cases, viability of broad categories of deals. Among other things, the Act lowers tax rates on corporations and income from pass-through entities, permits full expensing of certain property, imposes additional limits on the deduction of business interest and adopts certain features of a “territorial” tax regime. By lowering tax rates, the new law makes conducting business in the United States more attractive. But, to pay for the reduced rates, the Act includes numerous revenue-raising provisions as well. The changes will shift transaction dynamics in complex and potentially unanticipated ways that will unfold over time, raising challenging interpretive questions that taxpayers and advisors will be grappling with for years to come. By vastly reducing the incentive for U.S.-parented multinationals to hold cash offshore, the new law is expected to free up cash for M&A activity, capital expenditures, debt repayment or stock buybacks.


Busy Directors and Shareholder Satisfaction

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Wayne R. Guay and Kevin D. Chen (University of Pennsylvania), on Friday, January 12, 2018 Editor's Note: Wayne R. Guay is the Yageo Professor of Accounting and Kevin D. Chen is a doctoral candidate at The Wharton School of the University of Pennsylvania. This post is based on their recent paper.

The job of a corporate director has become increasingly time consuming. The Wall Street Journal recently reported that the director of a public firm spends an average of 248 hours a year on each board, up from 191 hours in 2005. In light of this growing time demand, corporate directors face increasing investor scrutiny regarding the number of boards on which a given director sits. Prior research has examined the firm-level performance implications of corporate boards that have a large proportion of “busy” directors. However, there are several difficulties in these studies. In particular, firm-level analysis masks important heterogeneity in the time constraints and the expertise benefits of busy directors. For example, sitting on three boards might be excessive for a director with a full-time job, but it might be reasonable, or even optimal, for an individual who is retired. Also, certain firms (e.g., less experienced firms) may benefit more from the expertise and advising of a busy director. Furthermore, there may be omitted firm-level characteristics that are driving both director busyness and firm performance, which suggests that an observed positive (negative) association between director busyness and good (poor) firm performance does not necessarily imply that busy directors are beneficial (detrimental) to shareholders.


Weekly Roundup: January 5–11, 2018

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by HLS Forum on Corporate Governance and Financial Regulation, on Friday, January 12, 2018 Editor's Note: This roundup contains a collection of the posts published on the Forum during the week of January 5–11, 2018. Non-rating Revenue and Conflicts of Interest
Posted by Bo Becker and Ramin Baghai (Stockholm School of Economics), on Friday, January 5, 2018 Tags:  Tax Reform Implications for U.S. Businesses and Foreign Investments
Posted by Philip Wagman, Richard Catalano, and Alan Kravitz, Clifford Chance, on Friday, January 5, 2018 Tags:  Industry Tournament Incentives and the Product Market Benefits of Corporate Liquidity
Posted by Jian Huang (Towson University), Bharat A. Jain (Towson University), and Omesh Kini (Georgia State Unviersity), on Saturday, January 6, 2018 Tags:  Damage Quantification in Delaware for Breaches of Contract in Post-Merger Litigation
Posted by Arthur H. Rosenbloom (Consilium ADR), on Sunday, January 7, 2018 Tags:  Ineffective Stockholder Approval for Director Equity Awards
Posted by Joseph Penko, Robert Saunders, and Audrey Murga, Skadden, Arps, Slate, Meagher & Flom LLP, on Sunday, January 7, 2018 Tags:  Does Size Matter? Bailouts with Large and Small Banks
Posted by Eduardo Dávila (New York University) and Ansgar Walther (University of Warwick), on Monday, January 8, 2018 Tags:  Delaware Court Ruling on Dual-Class Recapitalization Involving Controlling Stockholders
Posted by David J. Berger, Wilson Sonsini Goodrich & Rosati, on Monday, January 8, 2018 Tags:  Raising the Stakes on Board Gender Diversity
Posted by Brianna Castro, Glass, Lewis & Co., on Monday, January 8, 2018 Tags:  Managing the Family Firm: Evidence from CEOs at Work
Posted by Andrea Prat (Columbia University), on Tuesday, January 9, 2018 Tags:  Analysis of SEC Ruling on Apple Shareholder Proposal
Posted by Arthur H. Kohn, Sandra Flow, and Mary E. Alcock, Cleary Gottlieb Steen & Hamilton LLP, on Tuesday, January 9, 2018 Tags:  Compensation Season 2018
Posted by Jeannemarie O’Brien, Adam J. Shapiro, and Andrea K. Wahlquist, Wachtell, Lipton, Rosen & Katz, on Tuesday, January 9, 2018 Tags:  Pay-for-Performance Mechanics
Posted by Subodh Mishra, Institutional Shareholder Services, Inc., on Wednesday, January 10, 2018 Tags:  CEO Gender and Corporate Board Structures
Posted by Melissa B. Frye (University of Central Florida) and Duong T. Pham (Georgia Southern University), on Wednesday, January 10, 2018 Tags:  Activist Investing in Europe—2017 Edition
Posted by Armand Grumberg, Scott Hopkins, and Lorenzo Corte, Skadden, Arps, Slate, Meagher and Flom LLP, on Wednesday, January 10, 2018 Tags:  Political Uncertainty and Cross-Border Acquisitions
Posted by Chunfang Cao (Sun Yat-sen University), Xiaoyang Li (Shanghai Jiao Tong University), and Guilin Liu, (Huatai Property & Casualty Insurance Co., Ltd.), on Thursday, January 11, 2018 Tags:  The Most Important Developments in M&A Law in 2017
Posted by Gail Weinstein, Philip Richter, and Steve Epstein, Fried, Frank, Harris, Shriver & Jacobson LLP, on Thursday, January 11, 2018 Tags:  SEC Guidance on Tax Reform Reporting
Posted by Catherine M. Clarkin, Robert W. Downes, and Brian D. Farber, Sullivan & Cromwell LLP, on Thursday, January 11, 2018 Tags: 

Compliance Bricks and Mortar for January 12

Compliance Building -

These are some of the compliance-related stories that recently caught my attention.

Five Things to Think About Before a Surprise SEC Exam

by Joshua M. Newville, Robert E. Plaze, Christopher Wells and Alexandra V. Bargoot

If a team from the SEC arrives at your office and says, “We are conducting an on-site examination and would like to talk to the CCO right now,” are you prepared? A handful of registered investment advisers have faced surprise SEC exams in recent months. These exams come in two flavors: either a “for cause” exam arising from SEC staff concerns relating to a specific ongoing issue, or a standard exam that for some reason has a surprise component. [More…]

Are You Ready for Your Next Regulatory Exam?

by Patty P. Tehrani, Esq.

I know regulatory examinations can be stressful but without a defined process even more so. I’ve lived through exams managed without a process and those guided by one and not surprisingly having a process inevitably garnered better results. Below I share some practical tips to help you develop an examinations process or improve one that you already have. [More…]

Eight Compliance Events to Watch in 2018

by Matt Kelly

Without further delay, then, my annual list of compliance issues that should be worth watching in 2018. In no particular order…

SEC guidance on cybersecurity.  [More...]

“The Big Chill”: Personal Liability and the Targeting of Financial Sector Compliance Officers

by Court E. Golumbic

Prominent law enforcement and regulatory officials have referred to financial sector compliance officers, as “essential partners” in ensuring compliance with relevant laws and regulations, whose “difficult job[s]” merit “appreciat[ion] and respect.” Officials have noted the critical role these professionals play in shaping the culture of financial institutions, as well as the industry more generally. However, a series of recent enforcement actions in which financial sector compliance officers have been personally sanctioned has strained this partnership, fueling concerns among financial sector compliance officers that they are being unfairly targeted. [More…]

Court Rejects SEC Request For “Obey The Law” Injunction

in SEC Actions

[A] district court has granted summary judgment against the Commission in a Securities Act Section 5 case centered on a years long Ponzi scheme based on the statute of limitations and refused to enter an injunction, although Kokesh is not actually citedSEC v. Jones, Civil Action No. 17-11226 (D. Mass. Opinion Jan. 5, 2018).[More…]

Discretionary Management of IRAs: Prohibited Transaction Issues for RIAs

However, there is a caveat. That is, BICE only applies to non-discretionary investment advice. In other words, if the financial institution or its advisors have the responsibility or authority to make the decisions, or if they actually make the investment or transaction decisions, and there is a financial conflict of interest (that is, a prohibited transaction), BICE does not provide relief. To make matters even worse, there are very few exemptions for prohibited transactions resulting from discretionary decisions. Based on conversations with RIAs over the last few months, I have learned that many of them are not aware that, where they have financial conflicts (for example, 12b-1 fees or payments from custodians) for discretionary investment management for IRAs, there is usually not an exemption and the compensation is prohibited. [More…]

Some bitcoin foolishness:

Miami Bitcoin Conference Stops Accepting Bitcoin Due to Fees and Congestion
Next week the popular cryptocurrency event, The North American Bitcoin Conference (TNABC) will be hosted in downtown Miami at the James L Knight Center, January 18-19. However, bitcoin proponents got some unfortunate news this week as the event organizers have announced they have stopped accepting bitcoin payments for conference tickets due to network fees and congestion. [More..]

Long Island Iced Tea shares soar after changing name to Long Blockchain
A visit to the new website shows that Long Blockchain is in the “preliminary stages of evaluating specific opportunities” in the blockchain space. At this time, the company has no agreements with any blockchain entities, nor does it have assurance that an agreement will be forthcoming, the website said. [More…]

While the cat’s away

Ethical Boardroom Feeds -

By Patricia J. Harned – Chief Executive Officer, Ethics & Compliance Initiative



When I was 10 years old, my mother took a full-time job in a nearby office so that she could provide a second source of income for our family. My siblings and I were old enough not to need a babysitter, so every day after school we became ‘latch-key’ kids – at home without supervision.

We were never big troublemakers as children, so there was no great risk that we would set the house on fire or cause some other calamity. Nevertheless, without fail, every afternoon the phone would ring at some point while we were home alone. When one of us would answer, my mother would inevitably be on the other end of the line explaining that she was calling ‘just to say hello’. Now, we might have been young kids, but my siblings and I all knew what she was really doing. She wanted to check up on us.

Nowadays, I meet leaders who have a similar perspective as my mom did, way back when. I have met CEOs who routinely call their offices while on travel, simply to be sure that their employees are actually working. I have heard other executives confess that they occasionally call remote employees, just to be sure that they are not ‘working’ while on the golf course. As leaders, we tell ourselves that it is all part of the effort to ‘trust but verify’ that the organisation is operating according to plan. However, on some deep level, I suspect that every one of us cannot help but wonder whether there is also some truth to the adage that, no matter how kind-hearted and trustworthy our employees may be, ‘when the cat’s away, the mice will play’.

We are not completely crazy to think that way. Despite the fact that most organisations today have established codes of conduct to set out their policies and standards for workplace conduct, and even though most supervisors say that their employees are committed to ethical conduct, each year an average of 44 per cent of workers at all levels say that they still observe at least one act that violates those standards, or the law. Thus it seems that, even if the cat is present in the workplace, the mice still play.

Importantly, however, levels of workplace misconduct have decreased by 25 per cent in the United States since several prominent regulations have been enacted; namely Sarbanes-Oxley, Dodd-Frank and a number of industry-specific requirements for corporate compliance programmes. Prior to the passage of those regulations, as many as 55 per cent of employees said they observed some type of wrongdoing in a given year. What has mattered is not that the regulations existed, but that companies established the systems and controls that are linked to the reduction of workplace wrongdoing. Those systems were prescribed by regulatory requirements and enforced when violations occurred. So, there is also some truth to the idea that we need the regulatory and enforcement cats to stay.

Is the cat going away?

Lately, I have received a number of calls from journalists asking me about the implications of what, so far, appears to be a loosening of US enforcement against corporate violations and the potential for the repeal of some of the legislation that has clearly influenced corporate conduct. There are some legitimate reasons for eyebrows to be raised. For example:

  • Wall Street regulators have imposed far lower penalties in Trump’s first six months of office than the Obama administration’s initial six months
  • So far, the Trump administration has collected about 60 per cent less money in fines from companies for violating pollution-control regulations compared to the same period of the past two presidential administrations
  • The only regulatory settlement that one of the biggest corporate scandals this year – Wells Fargo – has faced out of legal claims totalling $3.3billion has been a $185million settlement with Consumer Financial Protection Bureau (lead regulator), the Office of the Comptroller of the Currency and the LA City Attorney
  • The House of Representatives passed a bill in March that would substantially reduce private litigation by consumers against corporations and another bill in June that could undo significant portions of Dodd-Frank

Taken together, it comes to mind that once again, we are all concerned that we might be witness to the proverbial enforcement cat going away – and the likelihood that the corporate mice will begin to play in ways that we do not want them to.

“From a board perspective, it is easy to prioritise regulatory requirements and enforcement activities. Yet it is important for leadership to not lose sight of the importance of ethics and compliance programmes and strong cultures, simply on their own merits”

That worry may be well-founded. After all, the majority of these regulations were established as a result of corporate misdeeds. Sarbanes-Oxley didn’t exist until a rash of corporate scandals took place (Enron, Tyco and Comcast among them). Thanks to the financial crisis, the same was true for Dodd-Frank. Even Chapter 8 of the US Federal Sentencing Guidelines – the framework that has in many ways become the de facto standard for ethics and compliance programmes – did not exist until judges were in need of guidance in sentencing of corporations that had been convicted of a crime.

So, it begs a few questions: if the tides are turning and regulatory and enforcement efforts continue to recede, how should boards think about ethics and compliance in their organisations? Should they shout for joy and count the cost savings for lack of a need of internal controls? Or should they double down on their programmes for fear that if the cat is going away, the mice will begin to play?

Double down

One need only think of Uber, Rolls-Royce or Volkswagen to appreciate the need for boards to remain vigilant in insisting upon strong ethics and compliance programmes in the organisations they govern. In each of these instances, we have yet to see what will come from enforcement actions for alleged wrongdoing. But already we are witness to the significant reputational loss from which these organisations now need to recover. And sadly, directors of these organisations discovered far too late that their corporate compliance programmes and cultures were not what they thought them to be.

ECI’s research has shown that when an organisation has a high-quality ethics and compliance programme in place, acts of misconduct are reduced by as much as 34 per cent. These programmes include the following:

  • A code of conduct, or other form of written standards
  • Training of employees on what actually constitutes corruption
  • Risk assessment to determine areas of greatest exposure
  • Systems for employee reporting/raising of concerns
  • Protections for employees who take steps to report (internally or externally)
  • Disciplining of employees who violate the code of conduct

These efforts must be accompanied by a focus on building and sustaining a strong ethical culture in an organisation, too. Culture is not influenced by regulation; it is the result of several activities and commitments by management to:

  • Communication of a set of core values that are intended to guide employee decisions and actions
  • Leadership efforts to consistently talk about the importance of integrity and to model the conduct they expect from the workforce
  • Supervisors’ reinforcement of the core values and the messages senior leaders are communicating
  • Encouragement and reinforcement that management wants employees to raise concerns and reports of suspected corruption
  • Systems in place to fairly and consistently investigate reports of wrongdoing
  • Accountability of employees, regardless of the level, when they engage in corruption

From a board perspective, it is easy to prioritise regulatory requirements and enforcement activities. Yet it is important for leadership to not lose sight of the importance of ethics and compliance programmes and strong cultures, simply on their own merits. These values pay dividends. It’s been show that:

  • Employee pressure to compromise standards is reduced by 76 per cent
  • Misconduct is reduced by 66 per cent
  • Employee reporting rises by 31 per cent
  • Retaliation against whistleblowers is reduced by 54 per cent

Additionally, employee engagement increases and their overall satisfaction with the organisation rises when high-quality programmes are in place. All of these outcomes are well worth the investment of an organisation in ethics and compliance.

Become the cat

Boards should begin to think of their company’s ethics and compliance programme as being essential to business strategy, regardless of what happens with regulation and enforcement. In other words, the board should be the cat that ensures that the mice stay in line. How can they do that?

If you are a director and you want to monitor the well-being of your organisation’s ethics and compliance programme and culture, you should not allow any board meeting to adjourn unless the following metrics have been provided to your satisfaction.

1. Communication of values and standards Boards should expect that multiple efforts are underway to communicate the importance of organisational values and standards in everyday business activity. Directors should ask for metrics showing:

  • Direct mention of the organisation’s core ethical values in most formal and informal communications by the CEO and other C-suite executives
  • Visibility of the code of conduct and reference to policies that relate to key risk areas
  • Use of multiple methods of communication to promote helplines (and other reporting mechanisms)
  • Encouragement of employee reporting of concerns
  • Use of incentives to recognise employee performance that aligns with the organisation’s values

2. Employee perspectives of the organisational culture Ask management to regularly gather information from employees to gauge their perceptions of the workplace from an ethics and compliance perspective. When significant shifts occur, management should be able to explain root causes and address efforts underway to resolve any issues.

Methods for this data collection can vary, but directors should be able to regularly receive metrics demonstrating employee sentiment. Ask management to utilise:

  • Surveys of employees
  • Focus groups
  • Ambassador programmes (employees embedded in operations who serve as sounding boards)
  • Internal social media sites
  • External social media sites (e.g. LinkedIn)
  • 360 degree evaluations and other feedback loops (e.g. evaluations of training programmes)

Reports and investigations

When cultures begin to erode, employees stop reporting wrongdoing to management.  Or if they do come forward to raise a concern about observed misconduct, employees in weakening cultures often say that they experience retaliation for having done so. This is a very serious risk to an organisation. Once retaliation begins to occur, there is a silencing effect overall. The worst thing that can happen is for the organisation to become a place where wrongdoing is taking place and employees are afraid to make problems known.

“Boards should begin to think of their company’s ethics and compliance programme as essential to business strategy, regardless of what happens with regulation and enforcement. In other words, the board should be the cat that ensures that the mice stay in line”

Management should be able to provide the board with a high-level summary report on a regular basis, listing the concerns that are being raised. Additionally, directors should be aware that, on average, only five per cent of reports of alleged violations are made to a formal company helpline. If business leaders are not providing insight into the reports that are made directly to supervisors or other members of management, ask them to do so.

It is equally important to monitor the investigations and disciplinary processes in place. Ask management to regularly provide an in-depth report on a few randomly selected cases. Pay attention to the:

  • Length of time from the receipt of a report to the closure of an investigation
  • Treatment of the employee who reported and the employee who was alleged to have committed a violation
  • Consistency of the process from one case to another
  • Extent to which employees involved report that they experienced retaliation for having come forward
  • Root cause analysis of the problem, lessons learned by the company and changes being implemented as a result

Turnover rates

When employees are dissatisfied with their jobs, they leave the organisation. When the culture becomes toxic and trouble is brewing, they leave in droves. Ask management to provide regular reports of employee turnover, especially in key operations where performance pressure is higher.

Perhaps most importantly, as a director, the message that ethics and compliance programmes and culture are important begins with you. It is your job to insist that management continually finds new strategies, better benchmarks, or additional sources of information to satisfy the board that your organisation is aware of the observance of standards and the well-being of its ethical culture.

After all, when the cat’s away, the mice will play.


About the Author:

Dr. Patricia J. Harned is Chief Executive Officer (CEO) of the Ethics & Compliance Initiative (ECI). Dr. Harned oversees ECI’s research agenda and its networking and conference events. She also directs outreach efforts to policymakers and federal enforcement agencies in Washington, D.C., and speaks and writes frequently as an expert on ethics in the workplace, corporate governance and global integrity. Dr. Harned advises CEOs and directors on effective ways to build an ethical culture and promote integrity in organisational activities.

Dr. Harned has served as a consultant to many leading organizations, including Penn State University, BP and the New York Stock Exchange. She has testified before Congress and the U.S. Sentencing Commission. Dr. Harned has been featured in media outlets including the Wall Street Journal, Washington Post, USA Today and CNN, and has appeared on the “Diane Rehm Show.” She was selected by Ethisphere Magazine as one of the 100 Most Influential People in Business Ethics in 2014, and was named one of the Top 100 Thought Leaders in Trustworthy Business Behavior in both 2010 and 2011 by the non-profit organization Trust Across America. Dr. Harned holds a Bachelor of Science in education degree from Elizabethtown College in Pennsylvania, a Master of Education degree from Indiana University and a Doctorate in the Philosophy of education from the University of Pittsburgh.

This Week in FCPA- Episode 84, the Playoffs are Here (for the Patriots) edition

FCPA Compliance & Ethics -

In this episode, Jay Rosen and myself take a look at some of the top compliance stories over the past week. Does Free Speech exist at the office? Can you tell your boss what you think of them? Ben DiPietro looks at a new Department of Labor approach in WSJ Risk and Compliance Journal. Are [...]

The post This Week in FCPA- Episode 84, the Playoffs are Here (for the Patriots) edition appeared first on Compliance Report.

UN votes to impose new sanctions against North Korea

Global Compliance News -

On 22 December 2017, the UN Security Council (UNSC) unanimously voted to imposed new sanctions on North Korea following its intercontinental ballistic missile test in November. The UNSC adopted Resolution 2397 (2017), which seeks to limit North Korea’s access to refined petroleum products and crude oil, and its earnings from workers abroad. The measures involve the following:

  1. North Korea’s imports of refined petroleum have been capped to 500,000 barrels for 12 months starting on 1 January 2018;
  2. North Korea’s imports of crude oil have been capped at 4 million barrels for 12 months as of 22 December 2017;
  3. Expansion of sectoral sanctions by introducing a ban on the export of food and agricultural products, machinery, electrical equipment, earth and stone, wood and vessels from North Korea;
  4. A ban on the supply, sale or transfer to North Korea of all industrial machinery, transportation vehicles, iron, steel and other metals (except spare parts to maintain North Korean commercial civilian passenger aircraft currently in use);
  5. Requirement for Member States to repatriate all North Korean nationals earning income within 24 months from 22 December 2017;
  6. Authorisation for Member States to seize, inspect, freeze and impound any vessel in their territorial waters found to be illicitly providing oil to North Korea through ship‑to‑ship transfers, or smuggling coal and other prohibited commodities from the country; and
  7. Designation of an additional 16 individuals (mainly banking officials – asset freezes and travel bans imposed), and 1 entity (‘Ministry of the People’s Armed Forces’ – asset freeze imposed).

The UNSC stated that additional tests of nuclear weapons or long‑range ballistic missiles by North Korea would result in further restrictions on its import of petroleum.

Following the adoption of Resolution 2397 (2017), OFAC also designated as SDNs two individuals, listed in said resolution, pursuant to Executive Order 13687. Kim Jong Sik and Rik Pyong Chol are senior officials in the Workers’ Party of Korea Munitions Industry Department and both are said to be key figures in North Korea’s ballistic missile development. As a result of the SDN designations, any property or interests in property of these SDNs (as well as any entities 50% or more owned by them) that come within the possession or control of a US person are blocked, and transactions by US persons involving the designated persons are generally prohibited.

The EU has also aligned its list of sanctioned parties with Resolution 2397 (2017); the 16 individuals and 1 entity stated in point 7 above have been transposed into the EU sanctioned parties list for North Korea.

The post UN votes to impose new sanctions against North Korea appeared first on Global Compliance News.

BRINK’s Top 5 Geopolitical Risk Stories of 2017

BRINK News -

The past year saw no shortage of upheaval in the geopolitical landscape.

In Asia, China continued to expand its influence on the world stage through the high-profile Belt and Road Initiative. In Europe, nations grappled with the implications of Brexit and similar deglobalization initiatives. And new technologies and cross-border tensions forced corporations everywhere to expand their notion of risk.

Here are five stories about geopolitical risk that captured the attention of BRINK readers in the past year.

The Geopolitical Impact of China’s Economic Diplomacy

The prevailing wisdom of a singularly powerful, hegemonic China may be too simplistic. In the interconnected geoeconomics of today’s world, complex political realities surround the execution of China’s economic diplomacy.

At a public forum at the Brookings Institution titled The Geopolitical Impact of China’s Economic Diplomacy, panelists outlined a collection of competing political interests—within and outside of China—vying for a geopolitical advantage that might tip the balance of power in Asia in their favor.

Experts made the case that despite the enormous influence China exhibits across the globe today, the story of Asia’s future will be written by many Asian countries.

“[When China announced the Belt and Road Initiative] people said ‘Oh my god, China’s got this new big strategic initiative, how are we going to react to this?’ as if connectivity in Asia had been invented in China, invented in 2013, and like Athena from Zeus’s head had sprung from the head of President Xi Jinping,” said Evan Feigenbaum, vice chairman of the Paulson Institute. “It’s easy to forget that for most of its history Asia was an astonishingly interconnected place.”

Does China’s ‘One Belt, One Road’ Threaten an East-West Rift Within Europe?

China has worked hard to make its Belt and Road Initiative feel more like a charm offensive than coercion. It has tried to calm the EU’s anxieties about its motives, insisting that it would prefer Europe strong and united and that it wants to contribute to various European projects rather than compete with them. However, regardless of the economic benefits of China’s engagement, the EU still sees it as a threat. Already the signs are there that this investment comes with political strings attached, writes Małgorzata Jakimów, a lecturer in Chinese Politics at the School of East Asian Studies at the University of Sheffield, UK.

While the EU urgently needs a common policy toward China, many EU states clearly think they’ll do better if they form their own bilateral ties with Beijing—and as a result, many are now competing with each other, vying for China’s attention and cash.

As Ms. Jakimów notes, for all that the Belt and Road Initiative is presented as a purely economic project, it remains deeply political.

Examining Geopolitical Risks Under a Different Lens

2017 was fraught with tensions across the globe. The UK formally triggered its exit from the European Union, the U.S. warned North Korea about nuclear weapons and the far right made a credible bid for power in France. This level of instability and change requires businesses to develop a new lens for assessing geopolitical risk, writes Evan Freely, a global practice leader at Marsh.

“Historically, when assessing a potential foreign investment, a company might limit analysis to the economic and political risks associated with the host country and, possibly, to those that border it,” writes Mr. Freely. “Companies were generally most concerned about host government expropriation actions and international conflict. Today risks are no longer constrained by borders.”

A new lens should accommodate a broader view of the world, focusing on developments in both developed and emerging markets and analyzing a greater range of outcomes, including ways in which each could impact the full scope of business operations.

There is no consensus as to whether this challenging environment is a short-term period of instability or the edge of a longer period of change, Mr. Freely writes. But by better understanding the breadth, scope, and depth of geopolitical risks, companies can be in a better position to thrive while meeting the challenges ahead.

Sino-Indian Stand-Off Could Increase Risk and Benefit the U.S.

A tiny speck of land along the Chinese-Bhutan border roiled the leadership of both China and India last summer, causing the two countries to flex their military muscle amid hasty diplomatic communiques intent on keeping either side from firing the first shot.

Lindsay Hughes, research analyst for Future Directions International, examines how the stand-off surrounding the tri-border region between Bhutan, China and India in mid-June was emblematic of larger geopolitical themes encircling the region.

The potential for conflict in this region is causing a closer alignment between the U.S. and India, Mr. Hughes notes. This creates new geopolitical risks to China at a time when it is seeking to expand Beijing’s “soft power” in the region via the Belt and Road Initiative.

Peering Over the Precipice: Implications of a ‘Cliff Edge Brexit’

Brexit loomed large in 2017, as negotiations continued over the contours of Britain’s exit from the European Union. The slow progress made in negotiations—and the sometimes fractious relations between the two sides—appeared to portend UK’s exit from the bloc with no deal in place, a so-called “cliff edge Brexit.”

Thomas Lake, a senior analyst of political risk for BMI Research, outlines how a cliff edge Brexit would impact the British economy and the European Union at large.

The likely fallout from a cliff edge Brexit could discourage other countries with strong euroskeptic movements from seeking to leave the bloc, writes Mr. Lake. However, it would also show that the EU is more interested in preserving its key ideals than working toward a deal that would soften the blow of the UK leaving on other member states.

River flood risks will increase around the globe: researchers

Continuity Central.Com -

Rainfall changes caused by global warming will increase river flood risks across the globe say researchers from the Potsdam Institute. Fluvial floods are already among the most common and devastating natural disasters and scientists have now calculated the required increase in flood protection until the 2040s worldwide, breaking it down to single regions and cities.

The Root Cause Analysis

FCPA Compliance & Ethics -

One new and different item laid out in the Evaluation of Corporate Compliance Program (Evaluation), supplementing the Ten Hallmarks of an Effective Compliance Program from the 2012 FCPA Guidance, was the performance of a root cause analysis for any compliance violation which may led to a self-disclosure or enforcement action. Under Prong 1 Analysis and [...]

The post The Root Cause Analysis appeared first on Compliance Report.

Annual Broker-Dealer Regulatory Review and Outlook (2017)

Compliance Risk Concepts Blog -

As 2017 ends and 2018 emerges on the regulatory horizon, we find ourselves in a position to look back on what has transpired over the course of the past year in an effort to anticipate what the New Year may bring for Broker-Dealers.

In the following Annual Broker-Dealer Regulatory Review and Outlook (2017), Kaitlyn Gibbs offers her perspective on what the highlights were in 2017, as well as what will be at the center of regulatory development in 2018.

Download Annual Broker-Dealer Regulatory Review and Outlook (2017)

To download your complimentary copy of the Annual Broker-Dealer Regulatory Review and Outlook (2017), use the form below:
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The post Annual Broker-Dealer Regulatory Review and Outlook (2017) appeared first on CRC.

LuxLeaks: Antoine Deltour Recognized as Whistleblower by Luxembourg Court

Whistleblower Protection Blog -

LUXEMBOURG CITY, LUXEMBOURG | January 11, 2018 — A Luxembourg court today has overturned the verdict against a “LuxLeaks” whistleblower who was convicted of leaking thousands of documents that revealed tax breaks for multinational firms. Former PricewaterhouseCoopers (PwC) employee Antoine Deltour was serving a six-month suspended sentence for leaking files related to tax-evasion schemes.  

Mr. Deltour is one of the two whistleblowers behind the LuxLeaks scandal in which nearly 30,000 documents exposed deals struck between Luxembourg and a long list of multinationals, including Amazon, Apple, IKEA, and Pepsi.

“Today is a victory,” Mr. Deltour said as he left the courtroom.

This decision is a significant step in the protection of whistleblowers in Europe,” Mr. Deltour’s lawyer, William Bourdon, told AFP news agency.

“For the first time in Europe, a high court recognizes the jurisprudence of the European Court of Human Rights,” Mr. Bourdon added.

Luxembourg’s highest appeals court said Mr. Deltour was wrongly accused and that he should have been fully recognized as a whistleblower as defined by the European Court of Human Rights. This status allows individuals to violate certain obligations, such as business secrecy, if it serves the public interest.

However, the sentence against Mr. Deltour’s colleague Raphael Halet, who received a 1,000-euro fine after an appeal, was upheld as the court said he did not fit the whistleblower definition. The Court found that the documents he had disclosed, “did not provide any hitherto unknown information that could revive or fuel the debate on tax evasion.”

ALTO US Partners with CAP Index to Solidify ALTO’s Supply Chain Risk Management Solution

Loss Prevention Media -

ALTO US has recently partnered with CAP Index, Inc. to create a new offering to support dynamic in-transit monitoring capabilities into the end-to-end ALTO AssuranceSM risk management platform.

By adding CAP Index’s crime risk data into ALTO’s in-transit analytics assessment model, supply-chain managers will have additional information at their fingertips to improve their in-transit risk mitigation efforts. “Understanding what you are driving into and making decisions on where to stop or rest is critical in today’s just-in-time decision making process for the shipper, carrier, and driver. We believe this partnership is a major step in assisting industries with the critical mitigation of in-transit risk. The addition of this key layer of data intelligence enabling the ALTO’s platform to predict, analyze, visualize, and better manage in-transit transportation risk is a real game-changer to the end user,” said Steve Longo, vice president of strategic initiatives at CAP Index.

The collaboration in product design with CAP Index continues to galvanize ALTO Assurance’s vision and industry support as an innovative solution provider in North America after more than a decade serving retailers and shippers in Latin America and Spain with proven success. “One of the challenges has always been to be able to layer the right pieces together to galvanize a comprehensive and holistic view of current or potential events. The combination of ALTO Assurance and CAP Index is one more step in delivering a comprehensive but easy-to-use solution for the end user. This allows us to continue to evolve our robust analytics platform and acknowledge the renaissance taking place in the supply-chain security industry that we strongly support and are pleased to play an active role in,” said Maurizio Scrofani, CCSP, LPC, vice president of supply chain security and intelligence for ALTO.

ALTO Assurance is a modular plug-and-play system that offers asset protection and risk management professionals visibility and compliance each step of the transit of goods to their stores. Using a combination of tools to ensure assets under care and custody are at the right place, right time with accuracy, its integration mechanisms allow for holistic risk assessment with route review, tracking, and a robust audit library to provide supply-chain and logistics managers all the information needed to ensure controls are in place throughout the process. This innovative approach is cloaked with a comprehensive business intelligence platform that focuses on managing a multitude of risk factors that reduces costs associated with delays, theft, and other preventable incidents—results that add to retailers’ bottom line from both expense reduction and enhanced operational efficiency.

The post ALTO US Partners with CAP Index to Solidify ALTO’s Supply Chain Risk Management Solution appeared first on LPM.

The Sexual Harassment Scandals are a Watershed Moment but We’ve Had Those Before

The Network Inc. GRC Blog -

For any watershed moment to truly make a difference, organizational leaders need to address the real problem behind the issue. Leaders and board members must be accountable for the culture of, and the behaviors in, their organizations – their responsibilities extend beyond just the financial results. So how do we ensure this watershed moment on sexual harassment is met with real action and leadership?


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