–The SEC is weighing changes to conflict of interest rules that restrict which companies the ‘big four’ accounting firms – KPMG, Deloitte, PwC and EY – may audit, according to the commission’s chief accountant Kurt Hohl.
As reported by the Financial Times (paywall), speaking at Baruch College’s annual auditing standards conference, Hohl warned that long-standing independence rules may no longer be ‘fit for purpose’ as technology and AI companies form increasingly complex partnerships. Because large accounting firms now sell software and AI tools from companies such as Microsoft and OpenAI, they are often barred from auditing those same firms.
Hohl said this could leave major tech companies with effectively no auditor choice. With AI providers rapidly striking deals across the tech ecosystem, Hohl said the SEC will review the rules to ensure companies retain meaningful auditor options. He was appointed chief accountant in July.
–A US district judge has ruled that coffee chain Starbucks must face a shareholder lawsuit alleging it misled investors by downplaying a sharp decline in same-store sales in two of its biggest markets, the US and China.
As reported by Reuters (paywall), the suit claims that Starbucks touted a ‘reinvention plan’ in an analyst call and regulatory filing in January 2024, but failed to disclose material business risks or the immediate downturn.
When Starbucks later reported a 4.4 percent drop in same-store sales – 3 percent in the US and 11 percent in China – its stock fell by 16 percent, wiping out roughly $16 bn in market value.
Shareholders, including three New York pension funds, can now start claims against the company and its former CEO.
–Meta co-founder Mark Zuckerberg and a group of current and former company leaders have agreed to pay $190 mn to settle a shareholder lawsuit accusing them of harming the company by failing to protect Facebook users’ privacy.
According to Reuters, the settlement ends litigation that stemmed from the Cambridge Analytica scandal, in which data from tens of millions of users was improperly accessed for political targeting.
Shareholders initially sought $8 bn, alleging that leaders’ oversight failures landed Meta with billions in fines and legal costs, including a $5 bn FTC penalty. The trial ended abruptly in July after two days before high-profile witnesses, including Zuckerberg, Sheryl Sandberg, Marc Andreessen, Peter Thiel and Reed Hastings, could testify.
Attorneys said the deal ranks among the largest cash recoveries ever in a derivative case, underscoring the importance of corporate oversight.
–A federal appeals court has temporarily blocked SB 261, a California law set to take effect in January which will require companies with more than $500 mn in revenue and doing business in the state to report every two years on how climate change could impact their finances.
According to AP News, the US Chamber of Commerce asked the 9th US Circuit Court of Appeals to pause the laws, which were set to take effect next year, arguing they violate the companies’ First Amendment rights.
Meanwhile SB 253, the companion law mandating annual carbon-emissions disclosure from firms with more than $1 bn in revenue, was not paused and remains on schedule.
California lawmakers insist the laws promote transparency and accountability in the face of rising climate risks.
–Electrical infrastructure manufacturer Atkore is exploring a potential sale in response to pressure from activist investor Irenic Capital, which holds a 2.5 percent stake.
As reported by Bloomberg (paywall), the manufacturer may provide more details when it reports its quarterly earnings this Thursday.
The company’s board recently expanded its strategic review, partnering with Citi and JP Morgan to explore options including a possible merger or full sale.
As part of its cooperation with Irenic, Atkore is adding new board members and forming a strategic review committee to oversee the process. Franklin Edmonds is joining as a new independent director and Bruce Taten as a special advisor.
–The European Commission has proposed sweeping changes to the Sustainable Finance Disclosure Regulation (SFDR), streamlining how financial products report their environmental and social impact.
Key reforms include introducing clearer, risk-based product categories with defined minimum criteria; simplifying disclosures to focus on core sustainability strategies; and removing entity-level impact reporting to reduce overlap with CSRD.
The European Fund and Asset Management Association (EFAMA) welcomed the proposals, saying they make SFDR more coherent, effective and user-friendly, especially for retail investors.
However, EFAMA raised concerns about data consistency, noting the lack of binding rules for third-party ESG data providers could limit reliable reporting.