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Morgan Stanley hit with £5.4 million fine after energy traders used WhatsApp

Morgan Stanley hit with £5.4 million fine after energy traders used WhatsApp

UK energy regulator Ofgem has fined Morgan Stanley £5.41 million over the use by traders of WhatsApp messages on private phones to discuss market transactions.

It is the first-ever fine issued in Great Britain under legal requirements to record and retain electronic communications relating to trading wholesale energy products.

The watchdog found that the bank had policies in place which prohibited the use of WhatsApp for trading communications - but did not take sufficient reasonable steps to ensure compliance with its own policies.

In January it emerged that Morgan Stanley had doled out million of dollars in fines to its own bankers for conducting business over WhatsApp, in breach of a regulatory crackdown on the use of the popular messaging app.

The bank has admitted the latest breaches between January 2018 and March 2020, and has agreed to conduct enhanced staff training and the strengthening of its internal systems and controls.

Cathryn Scott, regulatory director of enforcement and emerging issues at Ofgem, says: “It is unacceptable that Morgan Stanley failed to prevent electronic communications which could not be recorded or retained. It risks a significant compromise of the integrity and transparency of wholesale energy markets."

The fine, which included a 30% discount for agreeing to settle the case, is the latest in a series of crackdowns by regulators worldwide on the use of trader's private phones when discussing market transactions.

Earlier this month Wells Fargo and BNP Paribas were among the latest banks to be hit with multi-million dollar penalties by US regulators over employee use of unofficial communication tools like WhatsApp and iMessage.

Those settlements came after the SEC in September fined firms including Bank of America, Citi and Goldman Sachs a total of $1.1 billion.

Comments: (1)

A Finextra member
A Finextra member 24 August, 2023, 02:07Be the first to give this comment the thumbs up 0 likes

At an unnamed US operation of a foriegn IB, I was going through all billing (I'd been there maybe a year) from Bloomberg, and suddenly realized that I wasn't seeing anything from B Vault.  I checked with another vendor, and learned that the latter made messaging available for downloading and review, but we didn't seem to be doing anything with it.  From BB, we had something setup, but it was all a mystery.  Got into it, and discovered that a few years earlier, it was being setup.  But what I found made it clear that it hadn't been touched since then.  Many current users were not set up, most had no managers set up to review their messaging (the managers actually cared, for the most part, though some didn't, and some didn't want anyone in their 'business')..  Turns out that my then new boss had been in charge of the setup, then apparently walked away from it.  I told him it was a problem, but it was like he was Sgt Schultz in Hogans Heroes - I see nothing, I hear Nothing, I know nothing.  IOTW, don't bother me.  Until his former coworkers in internal audit informed me that they wanted to see where things stood.  Then my boss suddenly got religion.  He was a tiny bit helpful in getting a few bosses to cooperate, not in actually doing things.  A coworker and I basically set it up like new, learned how to administer it, And by the time I had to leave because my job was moving out of my commuting range (I WAS HYBRID, there was no good reason for it) we were mostly up again on BV.  But of course, no one wanted to know about other such exposures.


One sort of related thought; in my first full time Managing Market Data job, the trading floors had lockers for all phones.  But no one used them.  Surprise, surprise.  Compliance in a major bank?  Frequenty a huge, bad joke.