Morgan Stanley has been issued a fine of £5.41 million ($6.9 million) by regulatory authority Ofgem due to discussions of business conducted via WhatsApp on private phones by energy traders.
The regulator found that the bank had breached regulations mandating the recording of messages connected to energy trading. This fine represents the first instance of its kind under transparency rules designed to safeguard consumers against market manipulation and insider trading.
Ofgem firmly stated that Morgan Stanley’s shortcomings were deemed “unacceptable.” The watchdog revealed that the potential fine could have reached £7.7 million, but the bank opted to settle the case, resulting in a 30% discount on the imposed penalty.
While Morgan Stanley declined to provide a comment on the matter, Ofgem asserted that despite the bank having policies in place to forbid staff from utilizing WhatsApp for trading communications, it failed to implement adequate and reasonable measures to ensure adherence to its policies and regulatory requirements.
Cathryn Scott, Regulatory Director of Enforcement and Emerging Issues at Ofgem, emphasized that the bank’s inability to record or retain communications between January 2018 and March 2020 posed a significant risk to the integrity and transparency of wholesale energy markets.
Under legal obligations, Ofgem requires firms to record and retain electronic communications relating to the trading of wholesale energy products. These measures are aimed at promoting transparency and deterring market manipulation and insider trading.
Insider trading involves the trading of securities, such as shares or bonds, based on non-public information about a listed company. This practice is considered illegal in various jurisdictions, including the US and UK, as it confers an unfair advantage to those with access to confidential information.
