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The Securities and Exchange Commission announced Friday that J.P. Morgan Securities, a subsidiary broker-dealer of JPMorgan Chase & Co.
JPM,
agreed to pay $125 million to resolve charges that it failed preserve written communications of its employees.
JPMorgan Securities admitted that it had violated federal securities laws by failing to preserve employee communications about business matters that were made using personal messaging accounts and devices, the SEC said.
“Since the 1930s, recordkeeping and books-and-records obligations have been an essential part of market integrity and a foundational component of the SEC’s ability to be an effective cop on the beat,” SEC Chairman Gary Gensler said in a 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 in order to avoid market oversight.”
The SEC said that from at least January 2018 through at least November 2020, JPMorgan Securities employees regularly used non-company messaging tools like Facebook’s
FB,
WhatsApp, text messages and personal email accounts to discuss company business.
JPMorgan admitted that these practices were widespread at the firm and that supervisors, including managing directors, were also guilty of these violations. The SEC that this was particularly egregious because they were “the very people responsible for implementing and ensuring compliance,” according to a press release.
The $125 million fine is the largest the SEC has ever leveled against a firm for record-keeping violations — the previous record was a $15 million fine charged to Morgan Stanley
MS,
in 2006.
The action is also notable because JPMorgan admitted that it violated the law, something companies typically try to avoid doing in order to protect themselves against private litigation and for reputational reasons. SEC Enforcement Director Gurbir Grewal said in October that the agency would strive to require that companies admit wrongdoing when they settle enforcement actions, to better deter violations of the law.
“When it comes to accountability, few things rival the magnitude of wrongdoers admitting that they broke the law, and so, in an era of diminished trust, we will, in appropriate circumstances, be requiring admissions in cases where heightened accountability and acceptance of responsibility are in the public interest,” Grewal said at the time.
The SEC said that the investigation is ongoing and that it has commenced additional investigations of similar practices at other financial firms.
