JPMORGAN FINED $200M OVER RECORD-KEEPING
Firm’s employees conducted business on private devices
Regulators hit JPMorgan with $200 million in fines for violating federal recordkeeping laws, including looking the other way while employees conducted business over WhatsApp and personal devices.
The Securities and Exchange Commission announced a record $125 million settlement on Friday, citing “longstanding failures” by the bank’s securities arm to keep an archive of employee communications. Meanwhile, the Commodity Futures Trading Commission announced a $75 million penalty to settle a parallel investigation, citing open and “widespread use of unauthorized communication methods,” including by senior employees, since at least July 2015.
By law, financial firms are required to preserve electronic records between brokers and clients so that they can be scrutinized by regulators in the event of fraud and antitrust violations. But in the age of remote everything, some of Wall Street’s professional class has conducted business beyond the reach of company phone lines and messaging systems, with many migrating to platforms such as WeChat, Signal and Telegram.
“Since the 1930s, recordkeeping and books-and-records obligations have been an essential part of market integrity and a foundational component of the SEC’s ability to be an effective cop on the beat,” SEC Chair Gary Gensler said in a statement. “As technology changes, it’s even more important that registrants ensure that their communications are appropriately recorded and are not conducted outside of official channels in order to avoid market oversight.”
Offline messaging can have cascading effects in the financial world. The SEC encountered JPMorgan’s practice when it was unable to produce records in other investigations, which “meaningfully impacted the SEC’s ability to investigate potential violations of the federal securities laws,” the regulator said in a news release.
The fine is the biggest the SEC has imposed for such records violations, and the case has spurred reviews at other financial firms, the SEC said, suggesting the problem could be endemic in the industry. JPMorgan, Morgan Stanley, Deutsche Bank and BP have all taken enforcement action against traders over messaging practices in recent years.
“JPMorgan’s failures hindered several Commission investigations and required the staff to take additional steps that should not have been necessary,” Sanjay Wadhwa, the SEC’s deputy director of enforcement, said in a statement. “This settlement reflects the seriousness of these violations.
Firms must share the mission of investor protection rather than inhibit it with incomplete record-keeping.”
JPMorgan declined to comment but pointed to a regulatory disclosure acknowledging the settlement.
As part of the agreement, JPMorgan will have to hire a compliance consultant and step up its practices. Earlier this year, the bank ordered its employees to dig up communications on personal devices and messaging apps going back to 2018, Bloomberg reported.
The bank has already begun taking steps to improve its record-keeping policies, according to the SEC.
The use of private chat rooms by traders has played a role in some of the biggest financial scandals in recent memory.
They’ve been platforms for collusion and market manipulation, from the 2013 LIBOR foreign exchange debacle