A number of high-profile hedge fund and private equity firms are discussing ways to deal with the US Securities and Exchange Commission’s crackdown on the financial industry’s use of disappearing messaging apps like WhatsApp, Telegram and Signal, according to a report by Bloomberg.
The report cites people familiar with the discussions in revealing that the firms have held talks on a legal approach and what potential settlements could look like, with their shared goal being to minimise fines and ensure that, if a settlement is reached, no firm is singled out for a harsher penalty.
Citadel, Ken Griffin’s Miami-based hedge fund firm, is prepared to fight the regulator in court if necessary, arguing that the rules requiring brokerages to keep records do not apply to hedge funds and private equity.
As part of a sweeping probe, the SEC is investigating whether financial companies failed to preserve work texts sent by dealmakers and executives on their personal devices and messaging apps, asserting that the once-widespread use of phones and apps violated its rules and complicated the investigation of securities crimes.
Under SEC rules, financial firms must maintain records of all business communications to track the negotiation of transactions. In cases where messages on apps are not tracked by employers and instead set to self-delete after being sent, authorities are not able to recover the content.
In recent years, the regulator has fined JPMorgan Chase & Co for $200m and Bank of America for $225m. In February, US Bancorp and Oppenheimer & Co amongst others paid over $81m combined in fines to the SEC for their failure to preserve electronic records.
