JPMorgan Securities agreed to pay $4 million to settle charges levied by the Securities and Exchange Commission (SEC) regarding record retention violations related to the deletion of approximately 47 million electronic communications.
JPMorgan Securities, a broker-dealer and investment adviser subsidiary of JPMorgan Chase, also agreed to a cease-and-desist order and censure, the SEC announced Thursday in an administrative proceeding.
The details: In 2012, JPMorgan engaged a vendor to handle its electronic storage of communications. The vendor claimed its media storage complied with SEC record retention rules, including that electronic communication documents within 36 months could not be permanently deleted, per the SEC.
After a project begun in 2016 to delete historical communications from the 1970s and 1980s failed because of glitches, JPMorgan’s corporate compliance technology department in 2019 tried to troubleshoot the issue.
During the troubleshooting, the compliance tech team ran deletion tasks on emails from Jan. 1 to April 23, 2018. Relying on representations from the vendor, the team erroneously believed the communications were protected from deletion by the vendor’s default retention setting of 36 months, according to the SEC.
As a result, JPMorgan employees mistakenly deleted communications from the first quarter of 2018, the agency alleged.
The issue went unnoticed until October 2019, when JPMorgan’s legal discovery team realized there were missing communications, the SEC said. Approximately 47 million communications in 8,700 mailboxes, including those of 7,500 employees, were deleted.
JPMorgan implemented new retention coding procedures and reported the event to the SEC in January 2020.
Compliance considerations: JPMorgan faced subpoenas and document requests in at least 12 civil securities-related regulatory investigations, eight of which included SEC staff. Communications couldn’t be retrieved or produced because of the permanent deletion, the agency noted.
Only one investigative team was informed about the compromised production, the agency said, adding unrecoverable deleted records make it impossible to determine their impact on the investigations.
An internal email from JPMorgan’s compliance department acknowledged the deleted documents could be relevant to future investigations, legal matters, and regulatory inquiries.
Company response: “J.P. Morgan takes its recordkeeping obligations seriously,” a company spokesperson said in an emailed statement. “We have taken steps to enhance our process and procedures.”
The firm agreed to the settlement without admitting or denying wrongdoing.
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