Month: December 2024

(Reuters) – Chipmaker Nvidia has completed its acquisition of Israeli AI firm Run:ai, the startup said on Monday, following antitrust scrutiny over the buyout.

The European Commission granted unconditional approval to Nvidia’s $700 million bid for Run:ai, which helps developers optimize infrastructure for AI, earlier in December after saying in October that the deal would require EU antitrust clearance.

The EU antitrust watchdog had warned that the deal threatened competition in the markets where the companies operate.

Its probe into the deal focused on practices that could strengthen Nvidia’s control over the market for graphics processing units (GPUs), which are the sought-after chips often employed in AI-linked tasks.

Nvidia dominates the market for AI graphics processors and commands about 80% of its share.

However, the European Commission concluded earlier in December that Run:ai’s acquisition, originally announced in April, would not raise competition concerns.

The U.S. Department of Justice is also investigating the chip giant’s buyout of Run:ai on antitrust grounds, Politico had reported in August.

Regulators on both sides of the Atlantic have recently stepped up their scrutiny of tech giants’ acquisitions of startups on concerns that such deals may shut down potential rivals.

Run:ai plans to make its software open-source, it said in a blog post.

“While Run:ai currently supports only Nvidia GPUs, open sourcing the software will enable it to extend its availability to the entire AI ecosystem,” it said.

(Reuters) – The new year may bring pivotal developments in a series of copyright lawsuits that could shape the future business of artificial intelligence.

The lawsuits from authors, news outlets, visual artists, musicians and other copyright owners accuse OpenAI, Anthropic, Meta Platforms and other technology companies of using their work to train chatbots and other AI-based content generators without permission or payment.

Courts will likely begin hearing arguments starting next year on whether the defendants’ copying amounts to “fair use,” which could be the AI copyright war’s defining legal question.

Tech companies have argued that their AI systems make fair use of copyrighted material by studying it to learn to create new, transformative content. Copyright owners counter that the companies unlawfully copy their works to generate rival content that threatens their livelihoods.

OpenAI, Meta, Silicon Valley investment firm Andreessen Horowitz and others warn that being forced to pay copyright holders for their content could cripple the burgeoning U.S. AI industry. Some content owners began voluntarily licensing their material to tech companies this year, including Reddit, News Corp and the Financial Times.

Reuters licensed its articles to Meta in October.

Other copyright holders, such as major record labels, the New York Times and several best-selling authors continued to press their claims or filed new lawsuits in 2024.

AI companies could escape U.S. copyright liability completely if the courts agree with them on the fair use question. Judges hearing the cases in different jurisdictions could reach conflicting conclusions on fair use and other issues, and multiple rounds of appeals are likely.

An ongoing dispute between Thomson Reuters and former legal research competitor Ross Intelligence could provide an early indication of how judges will treat fair use arguments.

Thomson Reuters – the parent company of Reuters News – alleged that Ross misused copyrighted material from its legal research platform Westlaw to build an AI-powered legal search engine. Ross denied wrongdoing, invoking fair use.

U.S. Circuit Judge Stephanos Bibas said last year that he could not decide before a jury trial whether Ross made fair use of the content. But Bibas canceled the scheduled trial and heard new fair use arguments in November, which could lead to a new ruling on the issue next year.

Another early fair use indicator could come in a dispute between music publishers and Anthropic over the use of their song lyrics to train its chatbot Claude. U.S. District Judge Jacqueline Corley is considering fair use as part of the publishers’ request for a preliminary injunction against the company. Corley held oral arguments over the proposed injunction last month.

In November, U.S. District Judge Colleen McMahon in New York dismissed a case from news outlets Raw Story and AlterNet against OpenAI, finding that they failed to show they were injured by OpenAI’s alleged copyright violations.

The outlets’ cases differ from most of the other lawsuits because they accused OpenAI of illegally removing copyright management information from their articles instead of directly infringing their copyrights. But other cases could also end without a determination on fair use if judges decide that copyright owners were unharmed by the use of their work in AI training.

(Bond Buyer) President-elect Donald Trump’s return to the White House has placed public finance leaders on the defensive, as tax policy changes may impact the industry’s investor base, increase borrowing costs and stymie certain infrastructure finance opportunities. Looking to the past offers some insight into how the coming months may play out.

Republicans last controlled all three branches of the federal government in 2016, which led to the enactment of the Tax Cuts and Jobs Act the following year. The TCJA axed tax-exempt advance refundings and the state and local tax deduction (SALT). It also nearly killed tax-exempt private-activity bonds.

Matt Fabian, partner at Municipal Markets Analytics Inc., told The Bond Buyer’s Caitlin Devitt that the return to Republican control has once again given rise to significant challenges to the tax exemption .

“The muni lobby has improved the data that they have, they have improved the arguments for preserving the [tax] exemption and I think they’ve been preparing for this potential scenario for months,” Fabian said. “So if [the tax exemption] can be defended, they’ll do it.”

Industry groups like the Bond Dealers of America are increasing their focus on several legislative policies aimed at strengthening the muni market.

“Congress has been afforded the chance to reevaluate policy decisions made in 2017, and we urge them to further embolden Americas’ infrastructure by promoting municipal bonds, reinstating tax-exempt advance refundings, raising the bank-qualified limit, and exploring options to further utilize and expand private activity bonds,” Brett Bolton, senior vice president at the Bond Dealers of America, said in an interview with The Bond Buyer’s Scott Sowers .

Read more:A wary municipal market ponders post-election threats

Market leaders are looking for silver linings in the meantime.

In late November, Trump announced Scott Bessent as his nominee for Treasury Secretary. Bessent, founder of the Key Square Group hedge fund and longtime collaborator of financier George Soros, has muni and banking experts alike hopeful — and wary — of his chances for success.

“Scott Bessent is a great pick because he knows markets,” Chris Iacovella, president and CEO of the American Securities Association, said in an interview with The Bond Buyer’s Scott Sowers . “He will vigorously implement the president’s agenda, and he knows how to talk to the bond market. … All of those skills will be required to be the secretary of U.S. Treasury at this moment.”

Read on to dive into expert predictions of Trump’s impact on the markets and how leaders are preparing for changes in every direction.

Protection of tax-exempt bonds is top issue for public finance leaders

As public finance leaders continue to navigate uncertain waters in the markets, professionals are mindful of protecting the tax exemption and further promoting municipal bonds.

The Tax Cuts and Jobs Act of 2017 and the numerous provisions included in it that are set to expire later this year mean bond advocates are once again doubling down on “preserving and protecting all tax-exempt bonds during any attempt at tax reform,” Toby Rittner, president and CEO of the Council of Development Finance Agencies, said in an interview with The Bond Buyer’s Scott Sowers .

Industry associations like the Bond Dealers of America and the CDFA are also pushing to enact changes in the Farm Bill and the strength of the State Small Business Credit Initiative to better support developing rural communities.

(Reuters) -Healthcare organizations may be required to bolster their cybersecurity, to better prevent sensitive information from being leaked by cyberattacks like the ones that hit Ascension and UnitedHealth, a senior White House official said Friday.

Anne Neuberger, the U.S. deputy national security advisor for cyber and emerging technology, told reporters that proposed requirements are necessary in light of the massive number of Americans whose data has been affected by large breaches of healthcare information. The proposals include encrypting data so it cannot be accessed, even if leaked, and requiring compliance checks to ensure networks meet cybersecurity rules.

The full proposed rule was posted to the Federal Register on Friday, and Department of Health and Human Services posted a more condensed breakdown on its website.

The healthcare information of more than 167 million people was affected in 2023 as a result of cybersecurity incidents, she said.

The proposed rule from the Office for Civil Rights (OCR) within HHS would update standards under the Health Insurance Portability and Accountability Act (HIPAA) and would cost an estimated $9 billion in the first year, and $6 billion in years two through five, Neuberger said.

“We’ve made some significant proposals that we think will improve cybersecurity and ultimately everyone’s health information, if any of these proposals are ultimately finalized,” an OCR spokesperson told Reuters late Friday. The next step in the process is a 60-day public comment period before any final decisions will be made.

Large healthcare breaches caused by hacking and ransomware have increased by 89% and 102%, respectively, since 2019, she said.

“In this job, one of the most concerning and really troubling things we deal with is hacking of hospitals, hacking of healthcare data,” Neuberger said.

Hospitals have been forced to operate manually and Americans’ sensitive healthcare data, mental health information and other information are “being leaked on the dark web with the opportunity to blackmail individuals,” Neuberger said.

(JD Supra) The Securities and Exchange Commission (SEC) announced on November 22, 2024, that three broker-dealers have agreed to settle charges for filing suspicious activity reports (SARs) that failed to include important, required information. These cases follow an August 2024 SEC enforcement action against another broker-dealer for failing to file SARs over a three-year period due to deficient anti-money laundering (AML) policies.

The settlements illustrate the increased focus by regulators on AML and countering the financing of terrorism (CFT) efforts of private financial institutions, including broker-dealers, investment advisers, loan or finance companies, and others. It is no longer simply a failure to file SARs that triggers enforcement. These latest actions underscore that broker-dealers who file SARs run the risk of enforcement action if those SARs do not contain complete information.

The experience of these broker-dealers is also informative for both registered investment advisers and certain exempt reporting advisers who will be required to develop risk-based AML/CFT compliance programs – including filing SARs – in response to regulations becoming effective by January 1, 2026.

In recent years, we have seen an increasingly active, whole-of-government enforcement approach by regulators and prosecutors to AML/CFT, sanctions, and national security, which, based on historical regulatory and enforcement trends, we do not expect to materially change in the incoming presidential administration.

The SEC’s enforcement actions against the broker-dealers

Federal law mandates that broker-dealers file SARs with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to report transactions that the broker-dealer has reason to suspect involve, among other things, funds derived from illegal activity or activity that has no apparent lawful purpose. Instructions from FinCEN require that SARs contain “a clear, complete, and concise description of the activity, including what was unusual or irregular that caused suspicion.” Brokers are also required to include any other information that is necessary to explain the nature and circumstances of the suspicious activity.

The SEC found that the three broker-dealers repeatedly filed SARs between 2018 and 2022 that failed to provide the required “who? what? when? where? and why?” information that was necessary to provide a clear, complete, and concise description required by law. Examples of specific deficiencies cited in the SEC’s findings include:

Failure to provide details regarding the circumstances of the transactions, and why they were deemed suspicious ( eg , why they appeared to involve layering and/or wash sales, why they were deemed manipulative, or why there was a high probability of insider trading)Failure to include subject/customer names and account numbersFailure to include the names of securities at issue and the dates, amounts, and prices of the tradesFailure to include details of regulatory inquiries, andFailure to describe the broker-dealers’ communications with subject/customers.

The SEC found that all three broker-dealers had policies in place that required SARs submitted by the respective firm to contain all necessary information, yet the firms each repeatedly submitted deficient SARs.

Consequently, the SEC found that the broker-dealers violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Without admitting or denying the findings, the firms agreed to be censured, cease and desist from violating the charged provisions, and pay civil penalties totaling $275,000 across the three firms. The SEC also required two of the broker-dealers to hire an independent compliance consultant as part of a review of their AML programs.

What does this mean for investment advisers and other gatekeepers?

These enforcement actions emphasize the SEC’s increased focus on ensuring that financial industry gatekeepers are fully satisfying their reporting requirements under the Bank Secrecy Act (BSA). These actions also show that the SEC is willing to probe the contents and details of SARs, even where the regulated entity has an AML program in place. Specifically, the SEC – like the Treasury Department – expects SARs to meaningfully assist law enforcement, rather than be a rote or automated compliance process.

For SARs to be helpful to law enforcement, broker-dealers need to devote resources to AML/CFT programs to ensure that they understand the basic “who? what? when? where? and why?” of the suspicious or unusual activity that they may come across and include that information in the SARs.

Additionally, FinCEN recently issued a new rule that will require SEC-registered investment advisers and certain exempt reporting advisers to develop and implement risk-based AML/CFT compliance programs, and to file SARs in accordance with the BSA by January 1, 2026 (the IA AML Rule), with potential civil and criminal penalties for willful violations. See our prior alert for a more detailed discussion about the new rule.

One of the Treasury Department’s goals in promulgating the IA AML Rule was to level the playing field, making it more difficult for investment advisers to operate if they have inadequate AML/CFT controls, or if they either enable or ignore money laundering and national security risks.

Given the whole-of-government enforcement environment related to AML/CFT, sanctions and national security, and the punitive and remedial measures being imposed by regulators ( eg , fines, penalties, asset caps, third-party monitors, and compliance consultants), industry participants should understand that a risk-based AML/CFT compliance program could become a competitive advantage for financial institutions (including broker-dealers, registered investment advisers, and exempt reporting advisers).

Key takeaways

The risk of government action may be mitigated by conducting thorough risk assessments. These actions may include:

Regularly evaluating and, where appropriate, improving policies and proceduresConducting robust training and tabletop exercises designed to implement and test policies and procedures, andFor SEC registrants, conducting mock examinations designed to detect and remediate potential deficiencies before regulators have the opportunity.

BRUSSELS (Reuters) -Sixteen EU countries asked the European Commission on Monday to propose a new law in the coming months on taxing tobacco in the bloc to include new products such as electronic cigarettes – vapes – which are not covered under existing legislation.

The initiative, led by the Netherlands, has the support of Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Latvia, Slovakia, Spain, Belgium, Bulgaria, Ireland, Slovenia and Portugal.

In a letter to the Commission, finance ministers from the countries say an update to the bloc’s 2011 EU tobacco taxation law is needed because – in the absence of EU regulations on vaping – each country now applies different rules and levels of excise tax, distorting the bloc’s single market.

“Based on the current directive, most of these products cannot be taxed like traditional tobacco products. The provisions of the current directive are insufficient or too narrow to meet the challenges faced by the administrations of Member States given the ever-evolving offerings of the tobacco industry,” said the joint letter, seen by Reuters.

“Due to shortcomings in the EU legislation, Member States have taken appropriate actions at the national level. This has led to fragmentation, an uneven playing field and, ultimately, to the distortion of our internal market,” it said.

An update to the EU tobacco taxation law was due at the end of 2022, but has been delayed and governments want the new Commission, which took office on Dec. 1 for the next five years, to address this urgently.

The European Commission has so far set regulatory standards for e-cigarettes, including limits on nicotine content and labels explaining they should not be used by non-smokers. Manufacturers must register with the government before selling.

But otherwise the rules differ from country to country. In France people under the age of 18 cannot buy vapes, and their use is banned in certain public places, including universities and on public transport.

Italy lifted a ban on using electronic cigarettes in public in 2013. Use in or near schools is still forbidden. Disposable vapes have attracted particular attention from lawmakers in some European Union countries amid environmental and health concerns. France has moved to ban them entirely.

The German Federal Council, the upper house of parliament, has called on the government to push for a similar ban on disposable vapes across the EU.

Tobacco company Imperial Brands, which makes vape brand blu, said harmonising EU rules on taxation would probably have a positive impact for consumers and manufacturers, provided vape taxes remained lower than those on cigarettes.

“We believe that proportionate excise can play a role in effective regulation of vaping,” it said.

(American Banker) A consumer advocacy group is calling for regulators to publicly release investigations into executives and directors of the three regional banks that collapsed last year: Silicon Valley Bank, Signature Bank and First Republic Bank.

Americans for Financial Reform is calling for executives and directors of the failed regional banks to be held accountable through potential fines, penalties and bans for misconduct. AFR sent an emailed solicitation to consumers calling for the Federal Deposit Insurance Corp. to publicly release its findings before the change in administrations.

“If the Biden administration’s FDIC doesn’t act by January 19, there’s every chance the Trump administration will sweep this under the rug,” said Annie Norman, campaign manager for Americans for Financial Reform. “The people responsible haven’t faced consequences. That’s outrageous.”

An FDIC spokesman said that any reports on SVB would have to come from the Federal Reserve, the bank’s primary federal regulator. Still, regulators typically do not release reports on bank investigations.

The FDIC’s chief risk officer issued reports on the agency’s supervision of Signature Bank and First Republic , while the agency’s inspector general released material loss reports on the twofailed banks .

The FDIC stopped deposit runs in March 2023 at Silicon Valley Bank and Signature Bank by declaring a so-called systemic risk exception to ensure that uninsured depositors at those failed banks were covered. First Republic Bank collapsed in May and JPMorgan Chase assumed all of the bank’s deposits.

While several post-mortems of the bank failures have been released, Americans for Financial Reform is making a last-ditch effort for probes into misconduct by executives and board members. SVB in particular offered its executives generous compensation packages and paid out bonuses to employees hours before being taken over.

Separately, the Department of Justice and the Securities and Exchange Commission also have probes into insider sales and disclosures made by the banks about their financial health before they failed.

The FDIC’s Deposit Insurance Fund took a massive $31.5 billion-dollar hit for the three failures, which includes coverage of uninsured depositors, losses on assessments and discounts on the purchase prices of the banks. Some industry experts have called into question the FDIC’s credibility because the agency initially low-balled the cost of resolving the banks.

Individual bank executives have not been critical of the FDIC, but bank lobbying groups have questioned the FDIC’s decision last year to charge more than 100 large banks a higher-than-expected special assessment to replenish the Deposit Insurance Fund.

Last year the Congressional Research Service described ways in which Congress and the federal government could recoup bonuses and other forms of compensation from former officers and directors at SVB, as well as ways to hold executives personally accountable.

AFR’s Norman expressed frustration that after nearly two years, no executives have yet been held accountable, and may never face accountability.

“The collapse of Silicon Valley Bank, Signature Bank and First Republic wasn’t just a fluke,” Norman said. “It came from high-risk practices, weak oversight and negligence at the highest levels. Yet to this day, the public hasn’t seen the findings. We can’t let these investigations disappear into bureaucratic limbo.”

(JD Supra) A recent decision by the United States Bankruptcy Court for the Southern District of New York may have significant implications for digital asset holders and users. The decision, issued on October 24, 2024, granted a motion for alternative service of process by airdropping non-fungible tokens (NFTs) to the cryptocurrency wallet addresses of defendants whose identities and locations are unknown. The decision is one of the first of its kind to squarely address the challenges posed by digital blockchain technology in civil litigation and to authorize the use of NFTs as a means of service.

The decision arose from three adversary proceedings related to the bankruptcy case of Celsius Network LLC, a cryptocurrency lending platform that filed for Chapter 11 protection in 2022. The plaintiff in the adversary proceedings is the litigation administrator for the post-effective date debtors, who seeks to avoid fraudulent transfers and recover estate property allegedly misappropriated from Celsius by a former employee and a related entity. The defendants in the adversary proceedings are the owners of cryptocurrency wallets to which the plaintiff traced asset transfers from the former employee and the related entity. The plaintiff settled its case against the former employee and the related entity, but could not identify or locate the defendants who received the transfers. The only information the plaintiff had about the defendants was their wallet addresses on the Ethereum and Bitcoin blockchains.

NEW YORK (Reuters) – General Electric, doing business as GE Aerospace, will pay $362.5 million in cash to resolve a long-running shareholder lawsuit accusing it of hiding risks at its power business, court papers show.

A preliminary settlement of the proposed class action was filed on Monday night in federal court in Manhattan.

It requires approval by U.S. District Judge Jesse Furman, who in September 2023 refused to dismiss the case while warning a trial would be “expensive and risky” for both sides.

Filed in 2017, the lawsuit concerned GE’s reliance on factoring, or the sale of future revenue for cash, in connection with long-term service agreements at its GE Power unit.

Shareholders led by two pension funds — the Cleveland Bakers and Teamsters Pension Fund and Sweden’s Sjunde AP-Fonden — said the power unit grew increasingly reliant on factoring to boost revenue, while sacrificing future cash flows.

They said the unit did not have enough contracts to factor, and GE’s stock price fell after the company “blindsided” investors with billions of dollars of unexpected exposure.

The case covered alleged misleading disclosures between February 2016 and January 2018 by GE and former Chief Financial Officer Jeffrey Bornstein. Both denied wrongdoing in agreeing to settle.

Lawyers for the plaintiffs did not immediately respond to requests for comment on Tuesday. GE and defense lawyers did not immediately respond to similar requests. The plaintiffs’ lawyers may seek up to 25% of the settlement fund in fees.

In January 2021, Furman dismissed separate fraud claims concerning a GE insurance portfolio, and dismissed former Chief Executive Jeffrey Immelt as a defendant.

A month earlier, GE paid $200 million to settle U.S. Securities and Exchange Commission charges it misled investors about its power and insurance businesses.

GE, based in Evendale, Ohio, set aside funds for Monday’s settlement in the third quarter.

It spun off its healthcare business GE Healthcare in January 2023 and its renewable energy and power business GE Vernova in April 2024.

The case is Sjunde AP Fonden et al v General Electric Co et al, U.S. District Court, Southern District of New York, No. 17-08457.

(Reuters) – Citigroup has completed the separation of Banamex from its institutional banking business in Mexico as it prepares to list the retail bank, the Wall Street giant said on Monday.

The move to split Grupo Financiero Citi México from Grupo Financiero Banamex is part of Citi’s sweeping overhaul under CEO Jane Fraser aimed at simplifying its sprawling structure as it looks to improve the bank’s performance.

The New York-based bank is continuing to work on the proposed initial public offering of Banamex, the timing of which will depend on regulatory approvals and market conditions, Citi said.

“This separation represents an important milestone in our simplification,” Fraser said. “We will now prepare for the Banamex IPO.”

Citi has weighed a dual stock listing for the Banamex unit, possibly in Mexico City and New York, Reuters has reported.

The bank had previously said it planned to list its Banamex unit, which caters to nearly 20 million clients and has a network of 1,300 branches in Mexico, in 2025.

Citi was close to a $7 billion deal to sell Banamex to Mexican billionaire German Larrea’s conglomerate Grupo Mexico last year.

But tensions between the conglomerate and Mexican President Andres Manuel Lopez Obrador led to the two sides abandoning the deal, with Citi deciding to pursue an IPO instead.

Citi México will maintain a “significant” presence in the country and continue to serve the bank’s institutional clients with a team of roughly 3,000 employees.

The bank has closed its consumer banking divisions in nine markets since announcing its intention to exit the business across 14 markets in Asia, Europe, the Middle East, and Mexico, it said. Citi currently has a sale process underway in Poland.

Citi said its previously announced wind-downs of consumer businesses in China and Korea and overall presence in Russia are also nearly complete.