JP Morgan has suspended a senior credit trader for using a WhatsApp group to communicate with colleagues, underscoring the growing worry on Wall Street and the City of London over the use of unauthorized electronic messaging systems including Facebook’s FB, -0.56% popular chat app.
Edward Koo, who was based in New York, was placed on leave as the bank carries out a review as to whether he broke its policies by using WhatsApp group chats with colleagues in discussions which included market chatter, a person familiar with the situation told MarketWatch, confirming a report on Monday by Bloomberg.
The review hasn’t yet shown any improper activity, the person added. It is understood the U.S. bank has informed the relevant regulators about the matter.
JPM declined to comment.
In the past few years, investment banks and other financial services firms have barred employees from using encrypted messaging services like WhatsApp, and its rival Telegram Messenger, which use encryption systems that can’t be accessed without the permission of the user. Many institutions also forbid the use of personal mobile devices for work purposes.
The Securities and Exchange Commission (SEC) issued guidance in December 2018 reminding companies of their responsibility to monitor electronic messaging including instant messaging apps, personal emails and texting.
The U.K.’s Financial Conduct Authority (FCA) also warned in 2017 about the risks of using WhatsApp.
A number of financial services firms have been tripped up over the use of electronic messaging in recent years:
KPMG dismissed its head of financial services consulting in the U.K. following a probe linked to messages he sent using the popular messaging service WhatsApp.
Tim Howarth, who was in charge of one of the auditor’s core business units, left the company following a disciplinary panel meeting on August 9. At the time, a spokeswoman for KPMG said: “We can confirm conduct issues have been raised related to a partner and following an internal investigation and disciplinary panel, that partner has left the firm. Under our process the partner has appealed.”
A former Jefferies JEF, +0.11% managing director was fined £37,198 by the FCA, in 2017, for sharing clients’ confidential information and boasting about deals over WhatsApp.
The case marked the first example of the regulator cracking down on banker communication via social media.
According to the FCA, Christopher Niehaus circulated confidential information with a couple of his friends about two clients. These messages were in breach of the watchdog’s policy as one of his friends was a customer of Jefferies, while the other was a competitor of one of his clients.
Niehaus left the bank in November 2016, before the firm’s disciplinary process was officially completed. Two years later he set up Hampstead Advisory, an advisory boutique focused on deals in continental Europe and South Africa.
The FCA last year initiated the first ever prosecution for destruction of documents under the Financial Services and Markets Act 2000.
Konstantin Vishnyak, a former employee of Russian bank VTB Capital in London, was charged for allegedly obstructing an FCA investigation into suspected insider dealing by deleting relevant WhatsApp messages.
The U.K. regulator alleged that Vishnyak deleted the messaging app on his phone after it became clear he was required to provide it to investigators. Vishnyak entered a plea of not guilty at Westminster Magistrates’ Court in September before the case was transferred to Southwark Crown Court. Following the plea the FCA cautioned that “no assumption should be made at this stage.”