On December 17, 2021, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) announced that each had entered into an agreement with JP Morgan Securities (the “Company”) to resolve issues relating to the books and – records the obligations. The agencies alleged that, over a period of years, the company failed to keep and retain copies of certain communications in accordance with record-keeping rules for brokerage firms, swap brokers and prospective commission merchants. – including WhatsApp and text messages on employees’ personal devices. The Company has admitted that its conduct did not comply with Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(b)(4) and 171-4(j) and Section 4(s)(h)(1)(B) of the Trade in Goods Act and Regulations 166.3 and 23.602, and agreed to pay a total of $200 million to resolve the allegations ($125 million dollars to the SEC and $75 million to the CFTC).
Federal laws require businesses to comply with record-keeping obligations and books and records to assist with agency investigations and enforcement efforts. The Corporation had policies to ensure compliance with these obligations. Under these policies, Company-approved methods of communication are monitored and, where appropriate, safeguarded. Employees have further been informed that these policies prohibit the use of unapproved methods of electronic communication. Nevertheless, the company admitted that from July 2015 to November 2020, its employees communicated on business matters on their personal devices, such as SMS, WhatsApp and personal email accounts, including in relation to securities activities. company, investment strategy, and client appointments.
The SEC and CFTC orders said they learned of employees’ use of personal devices after issuing third-party subpoenas for communications in other investigations and receiving productions of communications that they had not received from the company.
The resolutions are clearly intended to send a meaningful message to the industry. The SEC announced that it had already begun additional investigations into record-keeping practices at financial firms (which had previously been reported but which the SEC rarely confirms). And he also said, “Companies that believe their record-keeping practices do not comply with securities laws are encouraged to contact the SEC,” providing a specific email address for self-disclosures. Further, the SEC’s Chief Enforcement Officer stated that “[w]We encourage registrants to not only review their records retention processes and self-report deficiencies such as those described in today’s action before identifying them, but also to review the types of policies and procedures implemented by JPMorgan to remedy its shortcomings in this case. Accordingly, companies and enterprises registered with the SEC and/or the CFTC may wish to review their own practices and compliance in this area, as well as the controls required under this regulation.
Links & Downloads –
SEC Settlement Order