JPMorgan subsidiary fined $4 million by SEC for unintentional deletion of 47 million emails in 2018.
The SEC order against J.P. Morgan Securities LLC highlighted that several of the deleted emails, which could not be recovered, were originally requested through subpoenas in multiple regulatory investigations.
The SEC order stated that some of the deleted emails “could pertain to possible future investigations, legal issues, and regulatory inquiries.”
In 2019, approximately 8,700 email boxes, including those of around 7,500 employees who frequently interacted with Chase customers, experienced accidental deletion of the emails.
According to the order, a significant number of the deleted emails were classified as “business records” that were legally mandated to be retained under federal securities law.
J.P. Morgan Securities agreed to the SEC sanction, which also involved a censure of the firm.
The SEC accepted the settlement offer from the firm, which had been submitted in anticipation of administrative proceedings linked to the email deletions.
Furthermore, the SEC issued an order that mandates the firm to “cease and desist from any future violations” of the securities law, which requires broker-dealers to retain the original copies of all communications for at least three years.
This marks the third instance where the investment advisor has agreed to face consequences for its failure to preserve electronic records.
In late 2021, the firm reached a settlement to pay $125 million in penalties for its failure to preserve text messages and other electronic communications sent between January 2018 and November 2020.
In 2005, the firm incurred $700,000 in penalties for its failure to preserve electronic records between mid-1999 and mid-2002.
JPMorgan spokeswoman Patricia Wexler refrained from commenting on the recent sanction.
According to the SEC order issued on Thursday, JPMorgan started a project in 2016 to delete older communications and documents that were no longer necessary to be retained.
Among the messages that were deleted were old emails, instant messages, and communications sent via the Bloomberg terminal service.
However, the project encountered “glitches” as the identified documents were not actually expunged, as stated in the order.
During the troubleshooting process in June 2019, employees of the firm unintentionally deleted electronic communications from the first quarter of 2018, as stated in the order.
Based on claims made by the firm’s archiving vendor, the employees mistakenly believed that the documents were coded to prevent permanent deletion. However, it was later discovered that the records required by law to be retained for three years were erroneously deleted, as stated in the order.
The order stated that, contrary to belief, the vendor did not apply the default retention settings in a specific email domain.
“As a consequence, those communications, including numerous ones mandated for retention under broker-dealer recordkeeping regulations, were irretrievably deleted.”
The deletions came to light in October 2019 when a JPMorgan team responsible for producing records for legal cases noticed the absence of emails from early 2018, according to the order.
JPMorgan disclosed the deletions to the SEC in January 2020. The order mentioned that in several civil securities-related regulatory investigations, including those conducted by the SEC, JPMorgan received subpoenas and document requests for communications that could not be retrieved or produced due to permanent deletion.
Source : cnbc.com
