By Nathalie Voit
Global investment bank JPMorgan was hit with a $200 million fine for failing to disclose written business communications properly on employees’ personal devices to U.S. regulators.
The Securities and Exchange Commission (SEC) announced on Dec. 17 that the financial giant agreed to pay $125 million in penalties after admitting to “widespread” book-keeping failures in recent years. Another regulator, the Commodity Futures Trading Commission (CFTC), also issued an order Friday, fining JPMorgan $75 million for allowing unauthorized communications since at least July 2015.
The SEC said that JPMorgan staff regularly communicated about business securities matters on their personal devices, “using text messages, WhatsApp, and personal email accounts” from at least January 2018 through November 2020. None of those communications were preserved by the firm as mandated by the federal securities laws, the order stated.
JPMorgan further admitted that the book-keeping failures were “firm-wide” and standard. The SEC said that supervisors, including managing directors and other senior supervisors, the “very people” responsible for ensuring compliance with securities laws, used their personal devices to communicate about the firm’s sensitive business matters.
The SEC said it discovered JPMorgan was breaching the rules when the broker failed to turn up relevant records during the course of other investigations.
“JPMS frequently did not search for relevant records contained on the personal devices of its employees,” depriving SEC staff of “timely access to evidence and potential sources of information” in numerous investigations.
In addition to the hefty fine, the bank’s largest recordkeeping penalty to date, JPMorgan agreed to improve its policies and hire a compliance consultant to review its electronic communications procedures and controls, the SEC said.
The SEC said it would also investigate recordkeeping practices across other financial institutions.
“Recordkeeping requirements are core to the Commission’s enforcement and examination programs, and when firms fail to comply with them, as JPMorgan did, they directly undermine our ability to protect investors and preserve market integrity,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
“We encourage registrants to not only scrutinize their document preservation processes and self-report failures such as those outlined in today’s action before we identify them but to also consider the types of policies and procedures JPMorgan implemented to redress its failures in this case,” Grewal added.
