The move marks an escalation of the investigation and raises the stakes for the companies and the executives concerned by exposing their conduct to SEC scrutiny
The U.S. securities regulator has collected thousands of staff messages from more than a dozen major investment companies, escalating its probe into Wall Street’s use of private messaging apps, said four people with direct knowledge of the matter.
“It increases risk,” one source said. “The more information you give the SEC, the more you fuel the beast.” In the latest phase of the probe of more than a dozen investment advisers, the SEC has in recent months asked for messages on personal devices or applications during the first half of 2021 that discuss business, the sources said. It has targeted a selection of employees, in some cases as many as a dozen, including senior executives.
“Now that they have all that data – it is very possible that the SEC will find compliance failures in there somewhere that have nothing to do with the off-channel communications record-keeping issues,” said Jaclyn Grodin, a lawyer at Goulston & Storrs who is not involved in the investigation. Private fund fees and expenses, conflicts of interest and preferential treatment of investors are issues the SEC is increasingly focusing on, she noted.
It has generated millions in fees for attorneys, with firms hiring dozens of lawyers to represent both the company and executives worried about their exposure, according to several sources.
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