JP Morgan has been landed with a $125 million penalty over failings in preserving written communications, as staff were found to be using personal devices, text messages, WhatsApp, and their own email accounts to discuss securities-related business matters.
The penalty from the Securities and Exchange Commission (SEC) pointed out “widespread and longstanding” failures by JP Morgan Securities – the bank’s broker-dealer arm – and its employees to maintain and preserve written communications.
JP Morgan accepted the fine and agreed to implement robust improvements to its compliance policies and procedures to settle the matter.
The bank admitted that from at least January 2018 through November 2020, its employees often communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts.
None of these records were preserved by the firm as required by the federal securities laws.
JP Morgan Securities further admitted that these failures were firm-wide and that practices were not hidden within the firm.
The SEC found that supervisors, including managing directors and other senior supervisors – the very people responsible for implementing and ensuring compliance with JPMS’s policies and procedures – used their personal devices to communicate about the firm’s securities business.
JP Morgan Securities also acknowledged that its record-keeping failures deprived the SEC staff of timely access to evidence and potential sources of information for extended periods of time and in some instances permanently.
As such, the firm’s actions meaningfully impacted the SEC’s ability to investigate potential violations of the federal securities laws.
“Record-keeping requirements are core to the Commission’s enforcement and examination programs and when firms fail to comply with them, as JP Morgan 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 scrutinise 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 JP Morgan implemented to redress its failures in this case.”