The energy regulator has fined Morgan Stanley £5.41 million after its traders exchanged WhatsApp messages about work using personal mobile phones.
Ofgem said the investment bank had breached energy market transparency rules requiring it to record and retain electronic communications about trading. The fine is the first issued in Britain under the rules and relates to communications that took place between January 2018 and March 2020.
“These communications were made by wholesale energy traders on privately owned phones via WhatsApp, [and] discussed energy market transactions,” Ofgem said.
The rules are designed to ensure that Ofgem has access to the information it would need to investigate and act on any allegations of market manipulation or insider trading.
Last year Morgan Stanley was fined $200 million by US regulators as part of an inquiry into record-keeping failures across the banking industry.
More than $2.5 billion of penalties have so far been levied against financial institutions in America after regulators found employees were routinely using messaging apps on personal devices.
In January it emerged that Morgan Stanley had fined several of its bankers more than $1 million over their use of WhatsApp and other services.
Financial regulators in Britain have so far taken only limited enforcement action over such behaviour. The Financial Conduct Authority in 2017 fined one banker £37,198 after he breached client confidentiality by boasting about a deal over WhatsApp and this year the Bank of England’s Prudential Regulation Authority censured the now defunct Wyelands Bank over failings including poor retention of WhatsApp messages.
The FCA said last year that it was “actively discussing personal device use with a range of UK-authorised firms” and that the companies in question were “not limited to those who may have been subjected to other regulatory enquiries”. It has previously noted that the rise of home working could increase the risks for record-keeping.
Ofgem said its investigation found that Morgan Stanley had policies in place that prohibited the use of WhatsApp for trading communications but failed to take “sufficient reasonable steps” to ensure its traders complied.
The regulator said that Morgan Stanley’s breach emerged after the bank responded “to information requests made using the information collection powers Ofgem has under the Remit [regulation on wholesale energy market integrity and transparency] enforcement regulations”.
Morgan Stanley was founded in 1935 and has more than 80,000 employees globally, with a European headquarters in London. Last year it reported net profits of $11 billion.
Along with investment banking and investment management, it offers sales and trading services to clients.
Morgan Stanley declined to comment but Ofgem said that it had admitted the rule breaches and “taken steps to ensure the breaches do not happen again, including enhanced staff training and the strengthening of its internal systems and controls”.
The financial penalty it paid was reduced by 30 per cent because it co-operated with Ofgem’s investigation and agreed to settle the case.
Cathryn Scott, regulatory director of enforcement 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 Morgan Stanley failed to prevent electronic communications which could not be recorded or retained.”