JPMorgan Chase (NYSE:JPM) is paying a $125-million fine to settle Securities and Exchange Commission charges that its Wall Street division allowed employees to use WhatsApp and other platforms to circumvent federal record-keeping laws.
The SEC said Friday in a statement that JPMorgan Securities admitted to "widespread" record-keeping failures in recent years. The bank’s employees used personal smartphones and email accounts, as well as messaging services including Meta-owned (NASDAQ:FB) WhatsApp, to conduct securities business matters from at least January 2018 through November 2020, the regulator said.
SEC officials who spoke to reporters Thursday evening said JPMorgan’s failure to preserve those off-line conversations violated federal securities law and left the regulator blind to exchanges between the bank and its clients.
U.S. federal law requires financial firms keep meticulous records of electronic messages between brokers and clients so that regulators can make sure those firms aren’t skirting anti-fraud or antitrust laws.
Regulators in New York and London have ratcheted up enforcement of record-keeping rules in recent years as traders migrated to encrypted messaging platforms including WhatsApp, Signal or Telegram.
While phone conversations and messages on official company devices and software platforms are preserved, it’s much harder for bank compliance departments to surveil communications on third-party apps.
The method picked up in popularity after two of the industry’s biggest trading scandals of the past decade (involving manipulation of Libor and foreign exchange markets) hinged on incriminating messages preserved in chatrooms, resulting in multi-billion dollar fines for banks.
JPM shares declined $2.61, or 1.6%, to $157.77
