Citadel to fight over probe of WhatsApp

Firm would be first to fight SEC over untracked communications

Citadel is preparing to push back against the Securities and Exchange Commission's WhatsApp probe, taking a harder line than the almost two dozen banks that have paid hefty settlements over the past two years.

Ken Griffin's hedge fund has told industry peers that it plans to battle the SEC if the regulator moves against Citadel, according to people familiar with the talks. And it's willing to take the agency to court, said the people, who asked not to be identified discussing private conversations.

The Miami-based firm would be the first to fight the SEC over any allegations of untracked communications.

As a hedge fund, it would likely argue that it's not subject to the same rules as Wall Street banks like JPMorgan Chase & Co. and Bank of America Corp., which agreed to pay more than $2.5 billion to settle U.S. regulators' investigations into their employees using unofficial messaging platforms for business.

“Citadel takes seriously its obligation to comply fully with the SEC's investment adviser rules and regulations, including those concerning the proper monitoring and recordkeeping of our employees' business-related communications,” the company said in an emailed statement.

The SEC declined to comment. Bloomberg reported in February that Citadel was under SEC investigation for alleged unmonitored communications, though the agency has yet to formally move against the fund and could ultimately decide against bringing an action. The threat of drawn-out litigation raises the stakes for the regulator and risks a court loss that may weaken its authority in this area.

Under Chair Gary Gensler, the SEC has significantly stepped up its scrutiny of the $26 trillion private funds market through new rules and enforcement actions.

In response, hedge fund and private equity industry groups have sued the regulator over its clampdown on how these firms conduct business with investors.

More broadly, the agency is clashing with financial firms over its approach to everything from crypto to stock-market rules. Last year, the agency