A major US bank has been fined £5.4m by the UK’s energy regulator for failures to record and retain communications between traders.
Ofgem said that the penalty imposed on Morgan Stanley & Co International plc (MSIP) was the first of its kind and related to discussions over WhatsApp between January 2018 and March 2020.
The communications on energy market transactions, it explained, were made by wholesale traders on privately-owned phones in a breach of rules designed to protect consumers, ensure market transparency and prevent insider trading.
Private chat over WhatsApp is banned for traders due to the platform’s use of encryption. Banks are required to hold on to all communications and hand them to regulators on request.
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“Ofgem found that MSIP had policies in place which prohibited the use of WhatsApp for trading communications – but MSIP did not take sufficient reasonable steps to ensure compliance with its own policies and the requirements of the regulations,” the watchdog’s statement said.
“MSIP has admitted the breaches… and has taken steps to ensure the breaches do not happen again, including enhanced staff training and the strengthening of its internal systems and controls.
“MSIP fully co-operated with Ofgem’s investigation and has agreed to settle the case. The fine includes a 30% penalty discount for settling.”
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Ofgem’s regulatory director of enforcement added that the fine sent a strong message about enforcement of trading regulations.
“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.
“We welcome the steps MSIP has taken to ensure the breaches do not happen again.”
The company was yet to comment.
