Morgan Stanley Fined by U.K. Energy Market Regulator Over WhatsApp Uses
The fine was the first ever issued in the U.K. for record-keeping requirements related to trading wholesale energy products, the regulator Ofgem said Morgan Stanley has taken steps to enhance staff training and internal controls, the regulator said. Photo: Simon Dawson/Bloomberg News By Mengqi Sun Aug. 24, 2023 5:03 pm ET Morgan Stanley agreed to pay 5.41 million British pounds, equivalent to about $6.82 million, to the U.K.’s energy markets regulator to settle an investigation over its traders’ use of banned messaging apps that breached requirements to retain written communications. The fine, announced Wednesday, was the first ever issued in the U.K. for record-keeping requirements related to the trading of wholesale energy products, according to the regulator, the O
Morgan Stanley has taken steps to enhance staff training and internal controls, the regulator said.
Photo: Simon Dawson/Bloomberg News
Morgan Stanley agreed to pay 5.41 million British pounds, equivalent to about $6.82 million, to the U.K.’s energy markets regulator to settle an investigation over its traders’ use of banned messaging apps that breached requirements to retain written communications.
The fine, announced Wednesday, was the first ever issued in the U.K. for record-keeping requirements related to the trading of wholesale energy products, according to the regulator, the Office of Gas and Electricity Markets, known as Ofgem.
Morgan Stanley admitted that between 2018 and 2020, its wholesale energy traders discussed energy market transactions on encrypted messaging app WhatsApp using their privately owned phones.
U.K. regulations on energy market integrity and transparency require traders of wholesale energy products to record and retain electronic communications.
The use of WhatsApp for communicating about trades is prohibited by Morgan Stanley’s policies as well, but the bank failed to take steps to ensure compliance, the regulator said.
A spokesman for Morgan Stanley declined to comment.
The breach was discovered after Morgan Stanley responded to Ofgem’s requests for information, and the bank fully cooperated with the investigation, the agency said. Morgan Stanley also has taken steps to strengthen its compliance, including enhanced staff training and internal controls, the regulator said.
The regulator gave Morgan Stanley a 30% discount on the total fine because the bank agreed to settle the investigation.
“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,” Cathryn Scott,
regulatory director of enforcement and emerging issues at Ofgem, said in a statement.The U.K. fine comes after the bank faced similar scrutiny by U.S. regulators. Morgan Stanley last September agreed to pay penalties totaling around $200 million to the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission over admissions it violated record-keeping rules.
Off-channel communication and record-keeping violations have become a focal point in recent years for Wall Street regulators.
Earlier this month, several financial firms, including Wells Fargo and BNP Paribas,
agreed to pay about $555 million in total to two U.S. regulators, admitting their employees used banned messaging applications that broke record-keeping rules.Write to Mengqi Sun at [email protected]
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