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the Securities and Exchange Commission Fined a broker-dealer firm from c. B. Morgan Chase $4 million to delete about 47 million emails from early 2018, according to one department to request Thursday.
Some of the deleted emails have been requested through subpoenas in at least a dozen regulatory investigations, but can no longer be retrieved, SEC order against JPMorgan Securities Limited liability company noted.
Others “may relate to potential future investigations, legal issues and regulatory inquiries,” the order said.
The emails, which were mistakenly deleted in 2019, were to and from about 8,700 email inboxes, which included as many as 7,500 employees who were in regular contact with Chase clients.
The order said many of the emails were “business records required to be maintained under” federal securities law.
JP Morgan Securities agreed to the SEC’s penalty, which also drew criticism from the company.
The company made a settlement offer in anticipation of administrative actions related to the delistings, and the SEC accepted that offer.
The SEC also ordered the company to “cease and refrain from any future violations” of a securities law that requires brokers and dealers to retain for at least three years the original assets of all communications.
This is the third time the investment advisor has agreed to penalize failure to keep electronic records.
The company agreed in late 2021 to pay $125 million in penalties for failing to preserve text messages and other electronic communications sent between January 2018 and November 2020.
In 2005, the company paid $700,000 in fines for failing to keep electronic records from mid-1999 to mid-2002.
JPMorgan spokeswoman Patricia Wexler declined to comment on the latest punishment.
In its order Thursday, the SEC noted that in 2016 JPMorgan began a project to “delete outdated communications and documents from its system that are no longer required for retention.”
Those messages included old emails, instant messages, and communications sent through the Bloomberg terminal service.
The order stated that there were “holes” in the project, “in which the specified documents were not crossed out.”
The order stated that while exploring this issue in June 2019, company employees “executed deletion tasks on electronic communications from the first quarter of 2018.”
The order said those employees “wrongly” believed — based on the company’s archival vendor’s claims — that all of these documents were encoded in a way to prevent permanent deletion of those records that were required by law to be kept for three years.
“In fact, however, the vendor has not implemented the default retention settings on a particular email domain,” the order states.
“And these communications, including many required to be retained by the broker-dealer’s bookkeeping rules, have been permanently deleted.”
These deletions were discovered in October 2019, when the JPMorgan team responsible for producing records related to legal cases discovered that emails were missing from early 2018, according to the warrant.
JPMorgan reported the deletion to the SEC in January 2020.
The order noted that “in at least twelve regulatory investigations involving civil securities, eight of which were conducted by SEC employees, JPMorgan received subpoenas and documentation requests for communications that could not be retrieved or filed because they were permanently deleted.”
The order added that “JPMorgan notified only one of the eight investigative teams on the commission that its production in response to the subpoenas had been compromised by the 2019 deletion event.”
The order noted that because deleted communications are “unrecoverable, it is unknown — and unknown — how lost records might affect regulatory investigations.”
In fact, a member of JPMorgan’s compliance department admitted in an internal email after the deletions were revealed that “the missing documents could relate to potential future investigations, legal issues, and regulatory inquiries.”
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