JPMorgan Chase was recently fined $200 million for allowing employees to use their personal devices to utilize WhatsApp and other social platforms to communicate about company business and sensitive business matters. The SEC found the messages included a wide array of content, including investment strategies, client meeting and market observations. The SEC indicted that the offline communication was widespread throughout the company and even managers and senior personnel were responsible for the unauthorized communications.

Federal law requires financial firms to document records of electronic communications between brokers and clients so that regulators can monitor activity to determine firms are not skirting anti-fraud or antitrust laws. The unauthorized communications through personal devices by way of WhatsApp were not preserved by JPMorgan and it was therefore deemed the failure to preserve those off-line conversations resulted in violations of federal securities law, as it left regulators “blind to exchanges between the bank and its clients.”

The investigation into JPMorgan is ongoing and the SEC has launched similar probes into other firms across the financial industry. In addition to the fines, JPMorgan has agreed to hire a compliance consultant to review the bank’s policies and training. JPMorgan has also begun the process of upgrading employee compliance software. The total fine imposed is comprised of a $125 million fine from the SEC and a $75 million fine from the Commodity Futures Trading Commission. The $125 million fine is the largest record-keeping penalty issued to date.

We recommend that our clients review their written policies to confirm compliance.  We also recommend pushing further education to its employees and representatives of the serious nature and consequences of failing to follow this guidance.