Morgan Stanley fined for traders’ WhatsApp messages in sign of things to come for banks
Morgan Stanley has been hit with a £5.41m fine by Ofgem after its traders were using WhatsApp to discuss deals, pointing to increased regulatory intervention against lenders caught breaking the rules.
Between January 2018 and March 2020 wholesale energy traders at Morgan Stanley discussed transactions using WhatsApp on privately-owned phones.
Ofgem found that while Morgan Stanley did have policies to prohibit the use of WhatsApp, the bank “did not take sufficient reasonable steps to ensure compliance with its own policies and the requirements of the regulations”.
Morgan Stanley has “taken steps to ensure the breaches do not happen again”, Ofgem said.
The fine included a 30 per cent discount for settling with Ofgem noting that Morgan Stanley co-operated with the investigation.
The rules, which fall under the REMIT Enforcement Regulations, are designed to protect consumers and ensure market transparency by providing Ofgem with the powers to investigate and punish market manipulation.
Although fines have been issued for failures to record messages in other markets, this is the first fine relating to wholesale energy products in the UK.
Cathryn Scott, regulatory director of enforcement and emerging issues at Ofgem, said: “This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action.
“It is unacceptable that MSIP 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,” Scott continued.
Regulators have been trying to clamp down on the use of private messaging services to discuss deals. So far, the majority of regulatory action has been taken in the US. The Securities and Exchange Commission (SEC) has handed out $1.8bn worth of fines to 16 lenders including Goldman, Citi, and Morgan Stanley.
UK regulators have been expected to follow the example of the US, and have been investigating the matter since the end of last year. The Prudential Regulation Authority recently censured Wyelands Bank for wide-ranging failings including “poor retention of Whatsapp messages”.
A number of banks, including Morgan Stanley, were recently found guilty of sharing commercially sensitive information about UK government bonds on Bloomberg terminals.