The US Securities and Exchange Commission (SEC) and Commodity Futures Tradition Commission (CFTC) have fined financial giant JPMorgan Chase a record $280 million (US$200 million) because its employees were conducting business communication on unofficial channels like WhatsApp.
JPMorgan Chase admitted to violating US recordkeeping obligations from early 2018 to November 2020 when employees talked about business using their personal devices and emails, text messages, and encrypted messaging service WhatsApp.
Under US securities law, financial companies like JPMorgan Chase must keep detailed records of their business operations for scrutiny by regulators like the SEC.
“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,” SEC Chair Gary Gensler said in a statement.
“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.”
Having dispersed communications across different platforms hindered the SEC’s ability to investigate market matters.
JPMorgan was unable to fully comply with subpoenas and requests because it couldn’t pull relevant information from the personal devices of employees.
The SEC said this practice wasn’t just confined to low-level employees either, noting in a public statement that “the very people responsible for implementing and ensuring compliance with [JPMorgan Chase’s] policies and procedures used their personal devices to communicate about the firm’s securities business”.
The SEC ordered JPMorgan to pay a $175 million (US$125 million) fine. It is now investigating other financial institutions for similar misconduct. The CFTC fined JPMorgan $105 million (US$75 million).
In a statement the CFTC said JPMorgan didn’t to keep thousands of business-related communications relating to its commodities and swaps operation, and “thus failed diligently to supervise its businesses”.
“Maintenance of complete and accurate books and records is required in order to operate in our industry, as is diligent supervision,” Acting CFTC Chairman Rostin Behnam said.
“Registrants, supervisors, and compliance officers must understand these regulations and adhere to them and their firm's guidance when conducting their business.”
