The Securities and Exchange Commission (SEC) announced charges against J.P. Morgan Securities for widespread and longstanding failures by the firm and its employees to maintain and preserve written communications. J.P. Morgan agreed to pay a $125 million penalty and implement improvements to its compliance policies and procedures to settle the matter.
“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,” said SEC chair Gary Gensler in a statement.
From at least January 2018 through November 2020, J.P. Morgan’s 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. These failures were firm-wide and that practices were not hidden within the firm. Supervisors, including managing directors and other senior supervisors used their personal devices to communicate about the firm’s securities business.
Gubir Grewal, director of the SEC’s Division of Enforcement, said in a statement: “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.”
As a result of the findings in this investigation, the SEC has commenced additional investigations of record preservation practices at financial firms. Separately, the Commodity Futures Trading Commission announced a settlement with J.P. Morgan and affiliated entities for related conduct.