Title: SEC Expands Probe into Wall Street’s Use of Private Messaging Apps
Jala News – The U.S. Securities and Exchange Commission (SEC) has intensified its investigation into Wall Street’s use of private messaging apps, collecting thousands of staff messages from major investment companies. This expansion marks an escalation of the two-year-long probe, initially focused on broker dealers, which has already resulted in over $2 billion in fines.
The SEC had previously requested internal reviews from these companies regarding their employees’ use of apps like WhatsApp and Signal for work-related conversations. Now, the regulator’s focus has shifted to investment advisers, and it has asked for staff messages from more than a dozen firms, including Carlyle Group, Apollo Global Management, KKR & Co, TPG, and Blackstone.
In an effort to comply with the SEC’s request, executives have handed over their personal phones and other devices to their employers or lawyers to ensure that all business-related messages are copied and provided to the regulatory body. The SEC’s review of thousands of staff messages exposes the actions of companies and executives to scrutiny.
This latest development aligns with the SEC’s aim to ensure compliance with record-keeping rules, preventing any potential wrongdoing related to private fund fees and expenses, conflicts of interest, and preferential treatment of investors. However, the issue of monitoring staff communications has proven to be a challenge for Wall Street compliance departments, as using personal messaging channels for business discussions violates the requirement to record all business communications.
Chair Gary Gensler’s signature enforcement initiative at the SEC is now centered around this probe into off-channel communications. Major financial institutions such as Wells Fargo, Bank of America, Goldman Sachs, and Morgan Stanley have already been involved in the investigation. The legal fees incurred by these firms have been substantial, with multiple lawyers being hired to represent both the companies and concerned executives.
Initially, investment advisers resisted the SEC’s request for staff messages, citing narrower record-keeping requirements compared to broker-dealers. These concerns were echoed by the Managed Funds Association, which highlighted the invasive nature of the SEC’s request and raised privacy issues. However, the SEC later demanded that investment advisers provide the requested messages, further escalating the investigation.
As the SEC continues its probe into Wall Street’s use of private messaging apps, the financial industry awaits further developments and potential outcomes that may result from this extensive scrutiny.