Recently, JPMorgan was ordered to pay a record $200 million in fines to U.S. regulators after they failed to track their employees’ use of messaging apps for work. Subsequently, the incidents involving the messaging apps resulted in a loss of communications. Specifically, the information contained in the communications was subject to regulatory recordkeeping rules. Previously, a company was awarded $7.5 million after a former partner’s unauthorized access of a company computer and stolen documents led to an unfair competition case.
Background of the Incident
Between January 2018 and November 2020, more than 100 JPMorgan employees allegedly used personal messaging apps for work purposes. In sum, the employees exchanged tens of thousands of business-related messages using WhatsApp, text messages, and email accounts from their personal devices. Communications included those involving:
- investment strategies,
- client meetings,
- market color and analysis, and
- other investment bank activity.
Furthermore, the company failed to record and report these exchanges to its regulator, Commodity Futures Trading Commission (CFTC).
Outcome of the Incident
Indeed, the company had a policy that prevented employees from using personal messaging apps for work purposes. However, the Securities and Exchange Commission (SEC) found the company culpable for failing to adequately supervise employees’ communications and enforce the rules. In summary, JPMorgan will pay a record total of $200 million in associated fines including:
- $125 million to the SEC, and
- $75 million to the CFTC for using unapproved communication channels.
Employee Takeaways and Using Personal Messaging Apps for Work
Certainly, increased employee texting and messaging app use for work communications is an alarming trend. Consequently, employers should consider such personal messaging app use when they create data retention policies. Whereas simply prohibiting such communication may be insufficient, as evidenced in this case, employers must be proactive with recordkeeping across all communications.
Employers may be subject to fines if they fail to properly supervise employees and ensure compliance with data retention policies. Markedly, companies retain culpability for communications lost because employees used personal messaging apps. As in this particular case, the SEC endeavors to inform brokerage companies of their obligations to protect information and enforce associated regulations. In fact, the SEC’s enforcement division may begin examining other brokerage companies for similar infractions.