“An effective compliance program is crucial to many businesses—especially those in regulated industries. Ensuring policies are proactively put in place to mitigate harmful and damaging communication helps businesses adhere to compliance rules set out by regulatory bodies.”
This week, we explore how the SEC has targeted private equity and hedge funds for using WhatsApp and private messages for business investigations—and why the industry is pushing back. We also learn key considerations when building an effective compliance program in regulated industries. We highlight the latest institution to be probed by the SEC for using unauthorized messaging platforms. Finally, we examine financial institutions’ use of fintech and regtech tools–while regulatory bodies are taking note.
The WhatsApp Showdown Between SEC and Money Managers
The SEC has shifted its attention to private equity and hedge funds regarding using and retaining WhatsApp and private messages for business communications. Apollo, KKR, and Carlyle have disclosed that they are all under investigation, along with several other hedge funds that were asked to review their employees’ phones for evidence that they talked to clients. But, the industry is pushing back due to differing rules between big bank capital markets divisions and investment managers. Many argue that treating investment managers the same way as broker-dealers is unfair, and they fear that the sweep will uncover chats that should have been preserved. If so, an individual firm may opt to settle with the SEC and agree to implement expensive new record-keeping requirements that other industry participants will feel obliged to follow.
Key Considerations for Building an Effective Compliance Program
An effective compliance program is crucial to many businesses—especially those in regulated industries. Ensuring policies are proactively put in place to mitigate harmful and damaging communication helps companies to adhere to compliance rules set out by regulatory bodies like the SEC, FINRA, FERC, and the DOJ. However, this is often easier said than done due to the many moving parts and pieces to consider. For example, are your outgoing communications compliant? Are you following the Department of Justice (DOJ) guidelines? Is your compliance training effective? Are your employees communicating on approved or unapproved channels?
Societe Generale Drawn by U.S. SEC Into its Widening Messaging Probe
France’s third-largest bank, Societe Generale, is the latest institution to be probed by the SEC on whether its staff had used unauthorized messaging platforms. The SEC sought information from SocGen’s U.S. unit related to “compliance with record-keeping requirements in connection with business-related communications on messaging platforms that were not approved by the firm,” said a report by the lender. Societe Generale is cooperating with the investigation.
Financial Institutions are Increasingly Eyeing FinTech & RegTech Tools, but so are Regulators
According to a recent survey, financial and regulatory technologies are beginning to see more use across the board. Even as governments see the benefits of fintech and regtech usage today, their regulators are also taking a closer look at how those fintech and regtech platforms operate. If the experiences of large banks are any indication, financial industry institutions of all types and sizes may want to ensure their fintech and regtech usage complies with applicable data laws.
