Private-equity giants are latest targets of SEC’s record-keeping probes

The Securities and Exchange Commission and Commodity Futures Trading Commission in September settled with 11 broker-dealers accused of failing to maintain and preserve all of their employees’ communications (Photo: Reuters)
The Securities and Exchange Commission and Commodity Futures Trading Commission in September settled with 11 broker-dealers accused of failing to maintain and preserve all of their employees’ communications (Photo: Reuters)

Summary

Apollo, KKR, Carlyle disclose regulatory investigations into use of banned messaging apps

WASHINGTON : Wall Street’s private-equity giants are the latest companies to face regulatory investigations over deal makers’ use of banned communication channels.

Apollo Global Management Inc., KKR & Co. Inc., and Carlyle Group Inc. disclosed Tuesday that they face investigations over whether their employees used messaging apps such as WhatsApp to do business. They are the most prominent asset-management firms so far to reveal their exposure to a regulatory sweep that examines compliance with record-keeping rules.

The Securities and Exchange Commission and Commodity Futures Trading Commission in September settled with 11 broker-dealers accused of failing to maintain and preserve all of their employees’ communications. The firms collectively paid $1.8 billion to resolve the cases.

Apollo said in a securities filing that some of its subsidiaries are under investigation, and Carlyle disclosed that regulators told it to preserve business communications sent over text message, WhatsApp and WeChat. KKR also disclosed on Tuesday that it is subject to an investigation.

SEC rules require most employee communications to be preserved. Firms whose employees talk about business over prohibited mobile apps risk violating those rules if they don’t retain or monitor those messages. In many cases, according to the SEC, the firms didn’t collect those messages because they were exchanged on employees’ personal phones.

The broker-dealer arms of big banks such as JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. have paid fines of $200 million each and admitted that bankers broke rules requiring them to do business over archived and supervised communication channels.

Regulators have cracked down on violations of such rules because the absence of records can hurt their ability to conduct enforcement investigations.

Firms such as Apollo, KKR and Carlyle generally have to retain written communications related to investment advice, the placing or execution of trades, and certain types of information sent to 10 or more people.

The firms said they were cooperating with investigators. The disclosures don’t mean the firms broke any rules, and many SEC probes don’t result in formal allegations of wrongdoing.

Spokeswomen for KKR and Carlyle declined to comment. A spokeswoman for Apollo didn’t immediately respond to a message seeking comment.

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