Acting upon erroneous information, JPMorgan Chase’s brokerage unit deleted 47 million electronic communications, including emails and instant messages, that the company was required to keep, the Securities and Exchange Commission says. It was a costly mistake. On Wednesday, the SEC censured the company and fined it $4 million.
The bank agreed to pay the penalty without admitting or denying the findings of the SEC’s investigation, according to a regulatory order.
“J.P....
Acting upon erroneous information, JPMorgan Chase’s brokerage unit deleted 47 million electronic communications, including emails and instant messages, that the company was required to keep, the Securities and Exchange Commission says. It was a costly mistake. On Wednesday, the SEC censured the company and fined it $4 million.
People pass the JPMorgan Chase headquarters building on May 26, 2023 in New York City.
Michael M. Santiago/Getty Images
The bank agreed to pay the penalty without admitting or denying the findings of the SEC’s investigation, according to a regulatory order.
“J.P. Morgan takes its record keeping obligations seriously,” a company spokeswoman said in a statement. “We have taken steps to enhance our process and procedures.”
The trouble began in 2016 when JPMorgan undertook a project to delete older communications and documents no longer required to be retained, the SEC’s regulatory order states. The company ran into glitches, and JPMorgan staff began troubleshooting the problem. In June 2019, staff began deleting emails after an unnamed outside vendor mistakenly told JPMorgan that the emails were coded in a way that would prevent permanent deletion of records that JPMorgan was required to retain.
“In fact, however, the vendor did not apply the default retention settings in a particular email domain and those communications, including many required to be maintained pursuant to the broker-dealer recordkeeping rules, were permanently deleted,” the SEC order states.
In total, staff deleted approximately 47 million communications relating to the period from Jan. 1, 2018 through April 23, 2018 housed in about 8,700 electronic mailboxes, including the email boxes of as many as 7,500 employees who had regular contact with JPMorgan Chase customers, according to the SEC’s order.
The agency says that JPMorgan received subpoenas and document requests in at least a dozen regulatory investigations for communications that could not be retrieved because they had been permanently deleted.
JPMorgan did not realize the electronic communications had been permanently deleted until October 2019, according to the SEC.
Afterward, the bank implemented its own 26-month retention coding and updated its procedures to prohibit deletion tasks from being run on electronic communications within a period still subject to regulatory retention requirements, according to the SEC. JPMorgan reported the problem to the regulator in January 2020.
Write to Andrew Welsch at andrew.welsch@barrons.com