US bank JP Morgan has been forced to pay two fines, one to the Securities and Exchange Commission, the other to the derivatives regulator, totalling $200 million. The reason? Failure to retain business communications made by its employees in the form of SMS and WhatsApp messages.
125 million fine from the Securities and Exchange Commission
For months, between the beginning of 2018 and the end of 2020, employees of Wall Street giant JP Morgan sent tens of thousands of work-related messages via their personal devices, whether emails, SMS or WhatsApp messages.
Contrary to legal requirements, these communications were not preserved, leading the Securities and Exchange Commission (SEC) to impose a $125 million fine on JP Morgan Securities, the group's brokerage subsidiary.
In a recent press release "JPMorgan admits to widespread recordkeeping failures and agrees to pay $125 million penalty to resolve SEC charges", the SEC points out that recordkeeping obligations have existed since the 1930s. "As technology evolves, it is even more important for filers to ensure that their communications are properly recorded and not made outside of official channels to avoid market surveillance," said SEC Chairman Gary Gensler.
75 million fine imposed by the Commodity Futures Trading Commission
While the JP Morgan banking group acknowledged its wrongdoing and agreed to pay the fine, it also faced a second sanction on the same day. This was imposed on the New York-based bank by the Commodity Futures Trading Commission (CFTC), the US authority in charge of overseeing derivatives markets.
The CFTC fine amounts to $75 million, and is aimed at punishing JP Morgan for its " widespread " use of " unapproved communication channels ". The CFTC accuses the US bank of having " failed to maintain, preserve and produce documents that were required to be maintained under the CFTC's recordkeeping requirements ", it states in a press release entitled "CFTC orders JPMorgan to pay $75 million for widespread use by employees of unapproved communication methods and related recordkeeping and supervision failures".
Indeed, the CFTC found, as did the SEC, that " since at least July 2015, JP Morgan employees, including those at senior levels, have communicated internally and externally on unapproved channels, including through personal text messages and WhatsApp messages."
However, " these written communications included messages relating to JP Morgan's activities as a CFTC registrant that were required to be maintained under the CFTC's recordkeeping requirements ", but the New York bank was unable to provide any record of these communications.
The Covid-19 pandemic and the spread of teleworking have made it more difficult to monitor business communications, which is essential for controlling the dissemination of information and combating attempted fraud. The SEC said it was conducting similar investigations at other financial institutions.