JPMorgan Chase was fined $200 million by regulators on Friday for failing to track work-related communication on employees’ personal cellphones and email.
Staff members in the bank’s securities division avoided oversight by discussing company business on their personal devices via text messages, the messaging service WhatsApp and personal email accounts, according to the Securities and Exchange Commission, which find the bank $125 million. The bank’s “widespread and longstanding failures” spanned from January 2018 to November 2020, the S.E.C. said.
The Commodity Futures Trading Commission also fined the bank $75 million in a separate enforcement order for similar misconduct dating back to 2015.
JPMorgan admitted that its conduct violated federal securities and commodity-trading laws, which are aimed at protecting investors and maintaining fair markets. It also agreed to hire a compliance consultant to review its policies and procedures for retaining electronic communications.
Record-keeping is “an essential part of market integrity and a foundational component of the S.E.C.’s ability to be an effective cop on the beat,” Gary Gensler, the S.E.C. chairman, said in the 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.”
A spokesman for the bank declined to comment.
The magnitude of the fines could serve as a warning to Wall Street, where bankers have increasingly relied on text messages and chats, preferring them to company email.
Serious penalties for failing to maintain proper records have generally been rare: The last major S.E.C. fine for such conduct was just $15 million against Morgan Stanley in 2006, for failing to produce emails during investigations on initial public offerings and research produced by analysts.
The S.E.C. has not yet closed its investigation into JPMorgan, which found that more than 100 people, including senior managers, used personal communications to send tens of thousands of messages that were not properly retained in the bank’s systems, according to an S.E.C. official briefed on the matter who declined to be identified discussing a still-open inquiry. The messages covered a wide range of topics, from investment strategy to client meetings, and involved various teams, including parts of the investment bank, the person said.
The regulator only learned about the unapproved communications through third parties, including in one instance in which it was investigating JPMorgan’s role as an underwriter, the S.E.C. said in enforcement order. Employees including desk heads, managing directors and other senior executives sent more than 21,000 texts and emails relating to work for an investment-banking client from January 2018 to November 2019. The bank did not keep records of those communications, according to the order.
The JPMorgan inquiry has also prompted investigations into other financial firms’ records, the regulator said on Friday. It encouraged companies to come forward to report any similar issues. That is because firms that voluntarily report lapses in compliance to the authorities typically receive less severe punishments.
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JPMorgan Chase Fined $125 million Over Work Communication Violations - The New York Times
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