the Sec investigation extends to hedge funds – Corriere.it

The big names on Wall Street have come under investigation by the Securities and Exchange Commission (Sec), the US body responsible for overseeing the stock exchange. The survey of recent months has widened: last September sixteen listed banks were fined a total of $1.8 billion for an exchange of communications between employees and customers through sms and messages on Whatsapp, unauthorized channels of which no record has been kept. These include Goldman Sachs, Barclays, Bank of America, JP Morgan and Citigroup. But the hunt for the infringement of the Sec does not seem to be over: according to what is reported by the Financial Times, the Supervisory Commission’s attention now turned to private equity and hedge funds.

The investigations of the Sec

The investigations by the authority, conducted in collaboration with the Commodity Futures Trading Commission (Cftc, a body that protects the markets from fraud, manipulation and abusive practices), with regard to credit institutions were concentrated in one period between January 2018 and September 2021. Personal devices of employees were analyzed. Period of time in which long unrecorded work chats were found, as required by the regulation. A phenomenon that intensified during the pandemic, when most professionals worked remotely. US federal law requires publicly traded lenders to record communications between customers and brokers using official channels. Private ones, such as instant messaging from your device, are not among these for two reasons: regulators have a harder time monitoring them and they are more easily subject to information theft by hackers.

The case of private equity and hedge funds

As far as investment funds are concerned, Apollo, Kkr and Carlyle have ended up in the sights of the SEC. But in this case the category is reacting: ten associations, as reported by Financial Timeswrote directly to the chairman of the authority, Gary Gensler, pointing out the difference in US financial regulation between banks and funds. The former are included in the category of “broker-dealers” (subjects who carry out securities trading activities on their own behalf or on behalf of their customers) and therefore have more stringent rules. The latter, on the other hand, operate in a less invasive regime. According to trade associations it is unfair and risky to treat private equity and hedge funds as credit institutions. They fear that these investigations will lead to a tightening of the legislation, apparently already initiated by Gensler, which would have proposed a series of new requirements for investment advisors on issues such as outsourcing, IT security, up to the negotiation of commissions with customers.