UK’s Office of Gas and Electricity Markets (Ofgem) has imposed a fine of £5.41m on Morgan Stanley & Co. International (MSIP) for failing to keep records of electronic communications made via WhatsApp in relation to trading wholesale energy products.
The regulator said that wholesale energy traders made electronic communications, which were made on privately-owned phones through the social media platform. The discussions were about energy market transactions.
Ofgem has fined the financial services company for the communications made between January 2018 and March 2020.
MSIP admitted that the violations occurred during the specified period.
The company has also taken measures, including improved staff training, and the strengthening of its internal systems and controls to prevent further breaches.
Besides, MSIP is said to have co-operated fully with the UK regulator’s investigation and has committed to settle the case. The fine imposed upon the finance services firm includes a reduction of 30% for settling.
Ofgem Enforcement and Emerging Issues Regulatory Director Cathryn Scott said: “This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action.
“It is unacceptable that MSIP failed to prevent electronic communications which could not be recorded or retained. It risks a significant compromise of the integrity and transparency of wholesale energy markets.
“We welcome the steps MSIP has taken to ensure the breaches do not happen again.”
The security incident was discovered following MSIP’s responses to information requests made by Ofgem by using the information collection rights it has under the REMIT Enforcement Regulations.
Ofgem found that MSIP had established policies that forbade the use of WhatsApp for trading communications.
However, MSIP did not take sufficient reasonable steps to guarantee compliance with its own policies and the requirements of the regulations, said Ofgem.
