SEC Probe ‘Collects Thousands Of Wall Street App Messages’

The US Securities and Exchange Commission (SEC) has reportedly expanded a probe into the use of private messaging apps such as Signal and WhatsApp by Wall Street investment companies, collecting thousands of staff messages in its investigation.

The SEC is probing more than a dozen investment advisers and in recent months has asked for messages on personal devices or applications during the first half of 2021 that discuss business, Reuters reported.

At each firm the probe has reportedly targeted a selection of employees, in some cases as many as a dozen, including senior executives.

The firms being investigated include Carlyle Group, Apollo Global Managemenet, KKR & Co, TPG and Blackstone, as well as hedge funds including Citadel, according to Reuters.

Executives probed

The executives gave their personal phones and devices to their employers or lawyers to be copied, with messages discussing business handed to the SEC, the report said.

The investigation began two years ago and initially targeted broker-dealers, bringing in more than $2 billion (£1.6bn) in fines.

In October 2022 the probe expanded to include investment advisers, according to previous reports, and initially the SEC asked companies to search the devices of a group of executives and report back.

In the probes of broker-dealers, the SEC asked companies to report how many staff messages discussed work, and SEC staff reviewed only a sample of the messages themselves.

‘Invasive’

In a January letter led by the Managed Funds Association, the industry called the SEC’s request “invasive”, according to previous reports.

The SEC later demanded that the investment advisers hand over the messages, Reuters reported on Monday, citing unnamed sources.

MFA executive vice president and chief counsel Jennifer Han said the SEC’s move created a “dangerous precedent”, arguing the regulator was “unilaterally expanding the rules by enforcement actions”.

The investment advisers had earlier resisted the SEC’s request, saying their record-keeping requirements are narrower than those for broker-dealers.

WhatsApp discussions

Wall Street companies do not surveil staff’s personal messaging channels, meaning that when these are used to discuss business companies are put in breach of requirements to record all business communications.

Yet in its probe of broker-dealers, the SEC found this misconduct was so pervasive it was like “shooting fish in a barrel”, one of Reuters’ sources said.

The direct review of the messages by the SEC creates risk that the companies being investigated could discover compliance failures unrelated to the off-channel communications record-keeping issues.

In August the SEC said it had levied fines of a combined value of $289m on 10 broker-dealers for record-keeping failures involving personal use of apps such as WhatsApp or Signal to discuss work.