JP Morgan fined $200m for using WhatsApp to conduct securities business

The US Securities and Exchange Commission (SEC) has announced charges against the broker-dealer subsidiary of JP Morgan Chase for what it describes as “widespread and longstanding” failures to maintain and preserve written communications.

According to the regulator, JP Morgan Securities (JPMS) admitted that from at least January 2018 until November 2020, its employees regularly communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts. Supervisors, including managing directors and those in other senior roles were found to have used personal devices to communicate about the securities business.

These records were never preserved by the firm as required by federal securities laws.

The US watchdog, which fined the firm $125 million this week, said that JPMS further admitted that these failures were firm-wide and that practices were not hidden within the firm.

The bank agreed to pay the fine and has also committed to implementing improvements to its compliance policies to settle the matter.

JPMS had to pay a further $75 million penalty issued by the Commodity Futures Trading Commission (CFTC) last Friday, also for using texts and WhatsApp on personal devices to conduct business.

“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,” said Gary Gensler, SEC chair. “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.

“Unfortunately, in the past we’ve seen violations in the financial markets that were committed using unofficial communications channels, such as the foreign exchange scandal of 2013. Books-and-records obligations help the SEC conduct its important examinations and enforcement work. They build trust in our system. Ultimately, everybody should play by the same rules, and today’s charges signal that we will continue to hold market participants accountable for violating our time-tested recordkeeping requirements.”

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