8 months ago
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Image source, Reuters
Morgan Stanley has been fined £5.41m after energy traders discussed business on WhatsApp on their private phones.
Ofgem, the energy regulator, said it breached rules that require firms to record messages relating to trading wholesale energy.
It is the first fine of its kind to be issued under transparency rules aimed at protecting consumers against market manipulation and insider trading.
The watchdog said that Morgan Stanley's failures were "unacceptable".
It also said that the fine could have been as much as £7.7m but the bank agreed to settle the case and received a 30% discount.
Morgan Stanley has declined to comment.
Ofgem said that the investment bank had policies in place to prohibit staff to use WhatsApp for trading communications. But it "did not take sufficient reasonable steps to ensure compliance with its own policies and the requirements of the regulations".
Cathryn Scott, regulatory director of enforcement and emerging issues at Ofgem, said Morgan Stanley's failure to record or retain communications between January 2018 and March 2020 risked a "significant compromise of the integrity and transparency of wholesale energy markets".
Under legal requirements, Ofgem requires firms to record and retain electronic communications relating to trading wholesale energy products to ensure transparency and discourage market manipulation and insider trading.
Insider trading is the buying and selling of a listed company's shares or other securities, such as bonds or share options, based on information that is not available to the public.
In many countries, including the US and UK, insider trading is illegal as it is seen as giving an unfair advantage to those with access to the information.
The regulator said on Wednesday it discovered the breach requested information from Morgan Stanley, which it said had admitted the failings.
Ofgem said the bank had strengthened its "internal systems and controls" and trained staff to avoid future breaches.
