UK energy regulator Ofgem has imposed a fine of £5.41 million on Morgan Stanley for the inappropriate use of WhatsApp messages on private phones to discuss market transactions. This marks the first fine issued in Great Britain for failing to comply with legal requirements to record and retain electronic communications related to trading wholesale energy products.
The regulator discovered that although the bank had policies in place prohibiting the use of WhatsApp for trading communications, it did not take adequate measures to ensure adherence to these policies. Earlier in January, it was revealed that Morgan Stanley had already paid millions in fines to its bankers for using WhatsApp, highlighting a regulatory crackdown on the messaging app.
Morgan Stanley has acknowledged the recent breaches that occurred between January 2018 and March 2020 and has committed to enhancing staff training and improving its internal systems and controls. Cathryn Scott, Ofgem’s regulatory director of enforcement and emerging issues, stated that it is unacceptable for the bank to have failed in preventing unrecorded electronic communications, which threatens the integrity and transparency of wholesale energy markets.
The fine included a 30% discount for settling the case and is part of a broader trend of increased scrutiny by regulators globally regarding the use of private phones by traders for market discussions. Recently, banks such as Wells Fargo and BNP Paribas faced significant penalties from US regulators for similar violations involving unofficial communication tools like WhatsApp and iMessage. These actions follow a September ruling where the SEC fined firms including Bank of America, Citi, and Goldman Sachs a total of $1.1 billion over similar issues.