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crack down! SEC WhatsApp Probe Reaches PE with Apollo, Carlyle, KKR

Financial regulators are looking at the use of WhatsApp and other messaging apps for work by the largest private equity firms.

Financial regulators are looking at the use of WhatsApp and other messaging apps by the largest private equity firms for their jobs, in a signal that the US is stepping up its pressure to control Wall Street’s electronic communications.

Apollo Global Management Inc., Carlyle Group Inc. and KKR & Co. said in regulatory documents this week that they have received letters from the Securities and Exchange Commission about their use of electronic messaging for companies.

Financial companies must follow rules to monitor business communications to prevent inappropriate behavior. Investment advisors and money managers are required to maintain records related to the provision of investment advice.

The use of WhatsApp, Signal, Telegram and other chat apps has become widespread since the pandemic forced traders and dealmakers to work from home. Many of these apps have auto-disappearance features, and use of the apps by financial firms is a potential violation of SEC regulations.

As part of the investigation, the SEC has sent letters to dozens of investment firms in recent weeks. Over the past year, banking giants including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. jointly paid a record $2 billion in SEC and Commodity Futures Trading Commission fines to settle related allegations.

Receiving a request for information does not mean that something is wrong. Representatives from Carlyle, Apollo and KKR declined to comment. An SEC spokesperson did not immediately respond to a request for comment.

Carlyle said in a filing that it received a request for information from the SEC “relating to the preservation of certain types of electronic business communications,” including “text messaging and messaging on WhatsApp, WeChat, and similar applications.” The company said it plans to cooperate fully with the investigation.

Certain subsidiaries of Apollo investment advisors have received a request from the SEC for information and documents related to an investigation into compliance with data retention requirements for business communications via electronic messages, according to a filing.

KKR is cooperating in the investigation into business electronic communications, which it does not believe will have a material adverse effect on its financial condition or results of operations, the filing found.

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