The Securities and Exchange Commission (SEC) fined JPMorgan Chase’s broker-dealer arm $4 million for deleting tens of millions of emails from early 2018, with some relating to subpoenas in regulatory investigations.
According to a June 22 administrative order, the federal regulator stated that JPMorgan Securities erased 47 million emails during the period of Jan. 1, 2018, to April 23, 2018. These electronic messages were requested by subpoenas in at least a dozen regulatory probes and “could relate to potential future investigations, legal matters, and regulatory inquiries.”
In 2016, JPMorgan launched a project to eliminate older communications and documents, such as emails, instant messages, and communications shared over Bloomberg, from its system that were no longer required to be retained. After several glitches, the deletions started after the largest U.S. bank’s corporate compliance technology department explored assistance from an external vendor taking care of the financial institution’s email storage. The SEC noted that this vendor didn’t apply the three-year retention setting to Chase emails.
“As a result, the troubleshooting exercise permanently deleted all of the emails in that domain from that period which were not subject to legal holds,” the cease-and-desist order states.
The emails, which were deleted in 2019, involved roughly 8,700 email inboxes and up to 7,500 employees who maintained regular contact with Chase clients. They contained business records that the company was mandated to keep under federal securities laws for three years.
“Until October 2019, no one at JPMorgan realized that the electronic communications from that time period had been permanently deleted as a result of the deletion task,” the SEC stated.
“In October 2019, JPMorgan’s legal discovery team detected that electronic communications were missing from the early 2018 time period. The eComm Tech team and the vendor investigated the issue, and learned that electronic communications in the Chase domain which had been the target of the troubleshooting tasks had not, in fact, been properly coded by the vendor with the 36-month default retention and actually had been deleted.”
JPMorgan reported the deletion incident to the SEC in January 2020.
The firm is now unable to comply with “at least 12 civil securities-related regulatory probes to comply with subpoenas and document requests for communications that had been permanently deleted.”
The bank provided a settlement offer ahead of the federal proceedings, and the SEC accepted the proposal. JPMorgan Chase will pay a civil money penalty of $4 million and is censured. The SEC ordered the institution to “cease and desist from committing any future violations.” But the company didn’t admit or deny any wrongdoing in the civil settlement.
Troubles in the Past
This isn’t the first time that JPMorgan has gotten into trouble relating to emails.In 2021, JPMorgan paid $125 million in penalties for “widespread recordkeeping failures” relating to text messages and other electronic communications between January 2018 and November 2020.
“Recordkeeping requirements are core to the commission’s enforcement and examination programs, and when firms fail to comply with them, as JPMorgan did, they directly undermine our ability to protect investors and preserve market integrity,” Gurbir S. Grewal, director of the SEC’s division of enforcement, said in a 2021 statement.
“As today’s order reflects, JPMorgan’s failures hindered several commission investigations and required the staff to take additional steps that should not have been necessary,” said Sanjay Wadhwa, the deputy director of enforcement. “This settlement reflects the seriousness of these violations. Firms must share the mission of investor protection rather than inhibit it with incomplete recordkeeping.”
In 2005, the Wall Street titan paid a $700,000 fine for not maintaining electronic records from 1999 to 2002.
JPMorgan has paid millions in other fines. In 2011, the bank settled with the Treasury Department on an $88.3 million payout for violating U.S. embargo laws and trade sanctions in three separate incidents between 2005 and 2011. The company was accused of executing multiple transactions involving Cuba, Iran, and Sudan totaling more than $181 million.
JPMorgan Chase has faced additional legal troubles this year.
The company recently agreed in principle to settle a class-action lawsuit with a victim of sex trafficker Jeffrey Epstein. The proposed settlement includes $290 million, but it still requires approval from a judge.
“The parties believe this settlement is in the best interests of all parties, especially the survivors who were the victims of Epstein’s terrible abuse,” JPMorgan said in a statement. “Any association with him [Epstein] was a mistake, and we regret it. We would never have continued to do business with him if we believed he was using our bank in any way to help commit heinous crimes.”
JPMorgan, one of the world’s largest banks, is also facing a lawsuit by the U.S. Virgin Islands government. Epstein owned two neighboring islands and allegedly assaulted victims in his residences.
Epstein was a JPMorgan client from 1998 to 2013.
