JPMorgan to Pay SEC Fines for Deleting Electronic Records

What happened

The SEC has fined JPMorgan Chase & Co. $4 million for allegedly deleting 47 million electronic records, including emails and instant messages between employees and customers.

On Thursday, the SEC said JPMorgan accidentally deleted the records in the first quarter of 2018 as it was troubleshooting glitches. Deleted records date from January 2018 to April 2018. The commission has ordered JPMorgan to pay a fine.

According to the SEC order, “JPMorgan willfully violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4).” The order claims JPMorgan must legally retain business communication records for at least three years, and further, failed to do so.

JPMorgan has neither confirmed nor denied the allegations.

So what

This isn’t the first time JPMorgan has failed to retain essential business communications.

In 2021, the SEC fined JPMorgan subsidiary “J.P. Morgan Securities” $125 million for failing to hold onto communications records -- employees, including executives responsible for keeping the firm compliant, communicated on business matters “off the record” via WhatsApp.

Because of this incident, the SEC ordered further investigations into financial firms. It found 16 firms guilty of poor record keeping, including Bank of America and Goldman Sachs. Collectively, the firms were fined over $1 billion for breaking the law.

This time, the SEC claims that JPMorgan’s inability to provide records will impact ongoing investigations into the company. The specifics are unknown, but regardless, it’s a bad look for the company, one of the United States’ biggest banking institutions.

Now what

JPMorgan customers have reason to dislike this news. Spontaneously vanished records are the opposite of transparent. At a high level, customers want to trust banks. Banks and brokers are responsible for keeping safe people’s wealth, much of which rests in the stock market.

Importantly, it seems this incident has compromised no personal information.

Banks are required to keep communications for a few reasons. They help regulators determine whether a bank employee is guilty of fraud, insider trading, or market manipulation. With records, regulators have an easier time uncovering evidence of guilt.

For context: In 2013, regulations were more lax regarding transparency. Some of the worlds’ biggest banks spent years manipulating foreign exchange markets to the detriment of clients. Modern investors don’t want a repeat of that scandal; hence, the recordkeeping.

Current JPMorgan customers probably won’t be directly impacted by the loss of old records. But this incident raises concerns about whether similar issues could arise, throwing the integrity of the banking system into question.

Customers who are worried about JPMorgan losing its records again can do one of two things: Create copies of essential banking records, or check out alternatives to JPMorgan, the best of which offer comparable brokerage services.